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<PAGE> 1
IMO INDUSTRIES INC.
----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 24, 1994
To the Stockholders of Imo Industries Inc.:
The Annual Meeting of Stockholders of Imo Industries Inc. (the
"Company") will be held at 10 a.m., local time, on Tuesday, May 24, 1994
at the offices of Duane, Morris & Heckscher, 1650 Market Street, 42nd
Floor, Philadelphia, Pennsylvania 19103, for the following purposes:
1. To elect two Class II directors to serve until the expiration
of their three-year terms and until their successors are elected;
2. To consider and vote upon the election of Ernst & Young as
auditors for the Company for its 1994 fiscal year; and
3. To consider such other matters as may properly come before the
Annual Meeting and any adjournment thereof.
The Board of Directors has fixed the close of business on April 6,
1994 as the record date for determining the stockholders entitled to
notice of and to vote at the Annual Meeting.
A copy of the Company's Annual Report for its fiscal year ended
December 31, 1993 is being mailed to stockholders together with this
Notice.
Whether or not you expect to attend the Annual Meeting in person,
please fill in, sign and return the enclosed form of proxy in the envelope
provided.
By Order of the Board of Directors,
/s/ THOMAS J. BIRD
------------------------------
THOMAS J. BIRD,
Senior Vice President,
General Counsel and Secretary
April 18, 1994
Lawrenceville, New Jersey
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IMO INDUSTRIES INC.
----------
This Proxy Statement and the accompanying form of proxy, which are
first being mailed to stockholders on or about April 18, 1994, are
furnished in connection with the solicitation by the Board of Directors of
Imo Industries Inc. (the "Company") of proxies to be voted at the Annual
Meeting of Stockholders (the "Annual Meeting") to be held at 10 a.m.,
local time, on Tuesday, May 24, 1994 and at any adjournment thereof, at
the offices of Duane, Morris & Heckscher, 1650 Market Street, 42nd Floor,
Philadelphia, Pennsylvania 19103. The Company's principal executive
offices are located at 3450 Princeton Pike, Lawrenceville, New Jersey
08648.
Shares represented by proxies in the accompanying form, if properly
signed and returned, will be voted in accordance with the specifications
made thereon by the stockholders. Any proxy not specifying to the contrary
will be voted for the election of the nominees for directors named below
and in favor of the adoption of proposal 2 referred to in the Notice of
Annual Meeting. A stockholder who signs and returns a proxy in the
accompanying form may revoke it at any time before it is voted by giving
written notice thereof to the Secretary of the Company.
As of the close of business on April 6, 1994, the Company had
outstanding 16,911,270 shares of Common Stock, $1.00 par value. A majority
of the outstanding shares of Common Stock will constitute a quorum at the
Annual Meeting.
Only holders of Common Stock of record at the close of business on
April 6, 1994 will be entitled to notice of and to vote at the Annual
Meeting. Each holder of shares of Common Stock will have the right to one
vote for each share standing in such holder's name on the books of the
Company as of the close of business on the record date. Cumulative voting
rights do not exist with respect to the election of directors. The two
nominees for Class II director receiving the highest number of votes cast
at the Annual Meeting will be elected. With respect to the election of
directors, shares held by brokers or nominees as to which instructions
have not been received from the beneficial owners or persons entitled to
vote and as to which the broker or nominee does not have discretionary
voting power, i.e., broker non-votes, and abstentions will not have any
effect inasmuch as they will not represent votes cast at the Annual
Meeting for the purpose of electing directors.
Participants in the Company's Employees Stock Savings Plan will
receive one proxy card with respect to all holdings registered in a
similar manner. Accordingly, the executed proxy card also will provide
instructions to the trustees of the Company's Employees Stock Savings Plan
as to the voting of shares held in such plan. Shares of such plan for
which voting instructions have not been received by the trustee will be
voted by the trustee in the same proportion as shares for which voting
instructions have been received.
The cost of solicitation of proxies in the accompanying form will be
borne by the Company, including expenses in connection with preparing and
mailing this Proxy Statement. Such solicitation will be made by mail and
may also be made on behalf of the Company by the Company's regular
officers and employees in person or by telephone or other means of
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communication. Georgeson & Company Inc. has been retained by the Company
to assist in the solicitation of proxies at a fee, including expenses, of
approximately $12,500. The Company, upon request therefor, will reimburse
brokers or persons holding shares in their names or in the names of
nominees for their reasonable expenses in sending proxies and proxy
material to beneficial owners.
BENEFICIAL OWNERSHIP OF COMMON STOCK
Certain Beneficial Owners
The following table sets forth, as of February 28, 1994, the amount
and percentage of the Company's Common Stock beneficially owned by each
person who is known to the Company to be the beneficial owner of more than
5% of the Company's outstanding Common Stock.
<TABLE>
<CAPTION>
Shares Percentage of
Name and Beneficially Outstanding
Address Owned Common Stock
---------------------------------------------------------------------------------------------
<S> <C> <C>
State of Wisconsin ......................................... 1,666,700 9.9%
Investment Board
P.O. Box 7842
Madison, Wisconsin 53707
The Prudential Insurance Company of America ................ 1,040,590(1) 6.1%
751 Broad Street
Newark, New Jersey 07102-3777
C.S. McKee & Co. ........................................... 898,500 5.3%
1 Gateway Center
Pittsburgh, Pennsylvania 15222
</TABLE>
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(1) Of these shares, 200,000 shares are purchasable upon exercise of a
currently exercisable warrant.
1
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Ownership by Directors and Executive Officers
The following table sets forth the amount and percentage of the
Company's outstanding Common Stock beneficially owned on February 28, 1994
by each director, nominee for director and executive officer named in the
Summary Compensation Table below and by all directors and executive
officers as a group.
<TABLE>
<CAPTION>
Shares Percentage of
Name of Individual Beneficially Outstanding
or Identity of Group Owned(1) Common Stock(2)
------------------------------------------------------------------------------------
<S> <C> <C>
William J. Holcombe............................... 256,844(3) 1.5%
Donald K. Farrar.................................. 150,623(4) -
Stephen F. Agocs.................................. 68,627(5) -
James B. Edwards.................................. 81,000(6) -
J. Spencer Gould.................................. 102,200(7) -
Richard J. Grosh.................................. 80,856(8) -
Carter P. Thacher................................. 105,000(6) -
Arthur E. Van Leuven.............................. 36,000(9) -
J. Dwayne Attaway................................. 25,040(10) -
William M. Brown.................................. 2,319(11) -
John J. Carr...................................... 55,692(12) -
All directors and executive officers as a group
(17 persons).................................... 974,210(13) 5.6%
</TABLE>
----------
(1) Information furnished by the directors and executive officers. Unless
otherwise indicated, such persons have sole voting and sole
investment power with respect to these shares.
(2) Less than 1% unless otherwise indicated.
(3) This total includes 150,000 shares as to which Mr. Holcombe holds
currently exercisable options to acquire under the Company's Equity
Incentive Plan for Key Employees.
(4) This total includes 30,000 shares owned by Mr. Farrar pursuant to a
restricted stock award under the Company's Equity Incentive Plan for
Key Employees and 623 shares owned by Mr. Farrar through the
Company's Employees Stock Savings Plan.
(5) This total includes 20,000 shares as to which Mr. Agocs holds
currently exercisable options to acquire under the Company's Equity
Incentive Plan for Key Employees.
(6) This total includes 80,000 shares as to which the named individual
holds currently exercisable options to acquire under the Company's
Equity Incentive Plan for Outside Directors.
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(7) This total includes 80,000 shares as to which Mr. Gould holds
currently exercisable options to acquire under the Company's Equity
Incentive Plan for Outside Directors. This total also includes 200
shares that are held by Mr. Gould's wife, and Mr. Gould disclaims
beneficial ownership of these shares.
(8) This total includes 80,000 shares as to which Dr. Grosh holds
currently exercisable options to acquire under the Company's Equity
Incentive Plan for Outside Directors. This total also includes 400
shares that are held by Dr. Grosh's wife, and Dr. Grosh disclaims
beneficial ownership of these shares.
(9) This total includes 30,000 shares as to which Mr. Van Leuven holds
currently exercisable options to acquire under the Company's Equity
Incentive Plan for Outside Directors and 6,000 shares held by a trust
of which Mr. Van Leuven is trustee and settlor.
(10) This total includes 4,540 shares owned by Mr. Attaway through the
Company's Employees Stock Savings Plan.
(11) This total includes 2,319 shares owned by Mr. Brown through the
Company's Employees Stock Savings Plan.
(12) This total includes 40,000 shares as to which Mr. Carr holds
currently exercisable options to acquire under the Company's Equity
Incentive Plan for Key Employees and 3,592 shares owned by Mr. Carr
through the Company's Employees Stock Savings Plan.
(13) This total includes the shares purchasable upon the exercise of the
options referred to in footnotes (3) through (9) and (12) above.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Based solely on its
review of the copies of such forms received by it, or written
representations from certain reporting persons that no year-end reports on
Forms 5 under Section 16(a) were required for those persons, the Company
believes that, during the period January 1, 1993 through December 31,
1993, all filing requirements applicable to its officers and directors
were complied with, except that Gary Walker, an executive officer, amended
his initial Form 3 report in order to report the holding of an option
grant that had been inadvertently omitted from the Form 3 report when it
was originally filed.
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ELECTION OF DIRECTORS
The Board of Directors currently consists of eight members. The Board
of Directors is divided into three classes, with one class of directors
elected each year for a three-year term. The current three-year terms of
the Class I, II and III directors expire in the years 1996, 1994 and 1995,
respectively.
Two Class II directors are to be elected at the Annual Meeting. The
Class II directors will serve for a term of three years and until their
successors have been duly elected. Unless otherwise instructed, the proxy
holders will vote the proxies received by them for the election of the
nominees named below.
Under the Company's By-Laws, no stockholder may nominate a candidate
for election as a director unless information concerning such candidate
equivalent to the information contained herein about the Board of
Directors' nominees has been submitted to the Board of Directors at least
45 days before the date of the meeting of stockholders for the election of
directors at which such nomination is proposed to be made. If any nominee
becomes unavailable for any reason, it is intended that the proxies will
be voted for a substitute nominee designated by the Board of Directors.
The Board of Directors has no reason to believe the nominees named will be
unable to serve if elected. Any vacancy occurring on the Board of
Directors for any reason may be filled by a majority of the directors then
in office until the expiration of the term of the class of directors in
which the vacancy exists.
The names of the nominees for Class II directors and the Class I and
Class III directors who will continue in office after the Annual Meeting
until the expiration of their respective terms, together with certain
information regarding them, are as follows:
<TABLE>
<CAPTION>
Principal Director Year Term
Name Age Occupation Since Will Expire
- ---------------------------------------------------------------------------------------------------------
Nominees for Class II Directors
<S> <C> <C> <C> <C>
James B. Edwards.............. 66 President of the Medical 1986 1997*
University of South Carolina
Carter P. Thacher............. 67 Chairman of Wilbur-Ellis Company 1986 1997*
----------
* If elected at the Annual Meeting.
</TABLE>
4
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<TABLE>
<CAPTION>
Principal Director Year Term
Name Age Occupation Since Will Expire
- ---------------------------------------------------------------------------------------------------------------
Directors Continuing in Office
<S> <C> <C> <C> <C>
Class I Directors
J. Spencer Gould.............. 71 Retired; formerly Vice President, 1986 1996
Finance and Chief Financial Officer of
The Stanley Works
Richard J. Grosh.............. 66 Independent consultant; formerly 1987 1996
Chairman and Chief Executive Officer of
Ranco, Inc.
Arthur E. Van Leuven.......... 68 Retired; formerly Chairman and Chief 1990 1996
Executive Officer of Transamerica
Finance Group, Inc. and Executive Vice
President of Transamerica Corporation
Class III Directors
William J. Holcombe........... 68 Chairman of the Board of Directors of 1986 1995
the Company
Stephen F. Agocs.............. 65 Retired; formerly Executive Vice 1986 1994*
President of the Company
Donald K. Farrar ............. 55 Chief Executive Officer and President of 1993 1995
the Company
</TABLE>
- ----------
* Pursuant to provisions of the Company's By-laws relating to directors
who are former employees of the Company, Mr. Agoc's term as director
will expire on December 31, 1994.
William J. Holcombe was appointed Chairman of the Board and Chief
Executive Officer of the Company in September 1986 and President in 1987.
Mr. Holcombe served as the Company's Chairman of the Board of Directors
and Chief Executive Officer from September 1986 until May 5, 1992 and as
an officer and Chairman of the Board of Directors until October 1, 1992,
when he retired. After his retirement, Mr. Holcombe continued as a
director of the Company and as Chairman of the Board of Directors. At the
request of the Board, he returned as the Chief Executive Officer and
President and as a full-time employee on December 15, 1992. Effective
September 13, 1993, he resigned from his positions as an officer of the
Company, and on November 1, 1993, he again retired. Mr. Holcombe also
served the Company from 1972 to 1975 as Chairman of the Board. From 1975
to August 1986, Mr. Holcombe served as chief executive officer and a
5
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director of Teton Inc., a manufacturer of machinery components
headquartered in Santa Fe Springs, California. Mr. Holcombe is a director
of Wilbur-Ellis Company, an export/import company based in San Francisco,
California, the principal business of which is the domestic sale and
distribution of agricultural chemical products. See "Executive
Compensation - Employment Agreements" with respect to consulting
agreement provisions relating to his position as director.
Donald K. Farrar has served as the Chief Executive Officer and
President of the Company since September 1993. From 1985 until December
1989, Mr. Farrar served as Senior Executive Vice President, Operations
and a director of Textron, Inc. Prior thereto, he served in various
positions, including President, Chief Operating Officer and a director of
the Avco Corporation group of companies until its 1985 acquisition by
Textron. From January 1990 until joining the Company, Mr. Farrar was a
private investor.
Stephen F. Agocs served the Company as Vice President, General Counsel
and Secretary from 1970 to 1987, when he became Executive Vice President,
General Counsel and Secretary of the Company. Mr. Agocs retired as an
employee of the Company on June 1, 1992. After his retirement, Mr. Agocs
continued as a director of the Company. At the request of the Board, he
returned as an Executive Vice President and as a full-time employee from
December 15, 1992 until January 1, 1994, when he again retired.
James B. Edwards is the President of the Medical University of South
Carolina located in Charleston, South Carolina. Prior to assuming this
position in November 1982, Dr. Edwards served as Governor of the State of
South Carolina from January 1975 through January 1979. From February 1979
through December 1981, Dr. Edwards was in private practice as a
maxiofacial surgeon. In January 1981, Dr. Edwards was named United States
Secretary of Energy and held that position until November 1982. Dr.
Edwards serves as a director of South Carolina National Bank, South
Carolina National Corporation, Phillips Petroleum Company, Brendle's Inc.,
SCANA Corporation, Encyclopaedia Britannica, Inc., Chemical Waste
Management, Inc., National Data Corporation and Communications Satellite
Corporation.
J. Spencer Gould is retired. From May 1982 to November 1987 Mr. Gould
was Vice President, Finance and Chief Financial Officer of The Stanley
Works, a manufacturer of tools, hardware and related products, based in
New Britain, Connecticut. From 1957 through April 1982, Mr. Gould was a
senior partner with Arthur Young & Company. Mr. Gould serves as a director
of Arrow Electronics, Inc.
Richard J. Grosh is an independent consultant. From 1976 to 1987 he
served as Chairman and Chief Executive Officer of Ranco, Inc., a
manufacturer of automated controls located in Columbus, Ohio.
Carter P. Thacher is the Chairman of Wilbur-Ellis Company, an
export/import company based in San Francisco, California, the principal
business of which is the domestic sale and distribution of agricultural
chemical products. Mr. Thacher has served in this position since January
1967, and from January 1967 to December 1988 he also served as Chief
Executive Officer.
6
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Arthur E. Van Leuven is retired. From 1977 to 1990 Mr. Van Leuven
served as Chairman and Chief Executive Officer of Transamerica Finance
Group, Inc., and from 1984 to 1990 he was additionally an Executive Vice
President and a director of Transamerica Corporation, an insurance and
financial service company based in San Francisco, California. From 1992 to
1993, Mr. Van Leuven served as the Chairman and President of IGYS Systems,
Inc., located in Los Alamitos, California.
During 1993, the Board of Directors held 19 meetings. None of the
directors attended fewer than 75% of the aggregate of the total number of
meetings of the Board of Directors plus the total number of meetings of
all committees of the Board of Directors on which he served that were held
during 1993, except that Dr. Edwards attended 69% of such meetings.
Director Compensation
In addition to expenses of attendance, which are paid to all
directors, directors of the Company who are not also employees of the
Company are paid an annual retainer of $18,000 for their services, a fee
of $850 for each Board of Directors meeting attended, and a fee of $850
for each committee meeting attended, except that directors who attend more
than one committee meeting in any one day are paid the fee for a single
committee meeting, and directors who attend Board or committee meetings by
telephone conference are entitled to receive $425 per meeting attended.
Chairmen of committees are paid an additional annual fee of $1,500. Dr.
Grosh received $2,100, Mr. Gould received $2,100 and Mr. Van Leuven
received $750 in fees for consulting work performed for the Company or its
subsidiaries during 1993. Mr. Agocs entered into a consulting agreement
with the Company for a term that commenced on January 1, 1994 and
terminated on March 31, 1994. The agreement provided for monthly
compensation of $10,000. Consulting fees paid to Mr. Holcombe during the
period of his retirement in 1993 have been reported in the Summary
Compensation Table. See "Executive Compensation - Employment Agreements"
for a description of Mr. Holcombe's consulting agreement.
The Company's Equity Incentive Plan for Outside Directors (the
"Director Option Plan") provides for the grant of non-qualified stock
options to directors of the Company who are not employees of the Company
for up to an aggregate of 600,000 shares. Each person who was an outside
director prior to July 1, 1990 was granted an option to purchase 80,000
shares of the Company's Common Stock under the Director Option Plan; each
person who became or becomes an outside director after that date is
entitled to be granted an option for 40,000 shares under the Director
Option Plan within six months after the date on which such person is
elected a director. The exercise price of each option granted under the
Director Option Plan will be equal to 100% of the fair market value of a
share of the Company's Common Stock on a date five business days after the
option is granted. A stock option is granted to each outside director
under the Director Option Plan only once, and the option vests in 25%
annual increments after a one-year waiting period. To date, options for
the purchase of 80,000 shares of the Company's Common Stock have been
granted to four of the Company's outside directors at an exercise price of
$16.1875 per share, and options for the purchase of 40,000 shares of the
Company's Common Stock have been granted to another outside director at an
exercise price of $10.375 per share.
7
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Committees of the Board of Directors
The Board of Directors has the following committees:
Audit Committee. The Audit Committee is comprised of not fewer than
three members of the Board of Directors, all of whom must be outside
directors. Its primary functions are to: (i) recommend the appointment of
independent auditors and review the fees charged by them; (ii) consult
with independent auditors with regard to the scope and timing of the
annual audit; (iii) review the audited financial statements, audit report
and management letter; (iv) consult with independent auditors and internal
audit management with regard to the adequacy of internal controls; (v)
consult with Company management regarding the performance and adequacy of
the internal auditing staff; and (vi) perform such collateral advisory and
consulting services as the Board of Directors may request or the Audit
Committee deems appropriate to the purpose of maintaining sound and
adequate financial reporting and auditing practices. The members of the
Audit Committee are Mr. Gould, Chairman, Mr. Thacher and Dr. Grosh. During
1993, the Audit Committee held four meetings.
Compensation Committee. The Compensation Committee is comprised of not
fewer than three members of the Board of Directors, all of whom must be
outside directors. Its primary functions are to: (i) recommend and approve
compensation philosophy and guidelines for the Company's executive and
managerial group, including the Company's chief executive officer and
chief operating officer; (ii) approve an appropriate compensation level
for the chief executive officer and the chief operating officer based on
personal performance and responsibilities as well as compensation
practices for like executives in competitive industries as well as other
industries, subject to final approval of the Board of Directors; (iii)
review and approve the chief executive's recommendations for the
compensation of individuals in the management group, subject to final
approval of the Board of Directors; (iv) perform all of the foregoing with
respect to the adoption and implementation of any bonus system or a stock
option plan applicable to the executive and managerial group; (v) review
and advise the Board of Directors on management succession planning; and
(vi) perform such collateral advisory and consulting services as the Board
of Directors may request or the Compensation Committee deems appropriate
to its stated purposes. The members of the Compensation Committee are Dr.
Grosh, Chairman, Dr. Edwards and Mr. Van Leuven. During 1993, the
Compensation Committee held nine meetings.
Executive Committee. The Executive Committee is comprised of not fewer
than three members of the Board of Directors, one of whom must be the
Chairman of the Board and the majority of whom must be outside directors.
Its function is to act on behalf of the full Board of Directors between
Board meetings, and it has commensurate authority to so act by majority
vote. The Executive Committee does not have the power to amend the
Certificate of Incorporation, amend the By-Laws, declare dividends, issue
stock, or authorize or recommend to the stockholders the merger or
dissolution of the Company. Likewise, the Executive Committee does not
have the power to sell, lease or exchange all or substantially all of the
property and assets of the Company or to recommend such action to the
stockholders. The members of the Executive Committee are Mr. Holcombe,
8
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<PAGE> 11
Chairman, Mr. Gould and Dr. Edwards. During 1993, the Executive Committee
held no meetings.
Nominating Committee. The Nominating Committee is comprised of not
fewer than three members, one of whom shall be the Chairman of the Board
of Directors. Its primary functions are to: (i) recommend to the Board of
Directors individuals to fill Board vacancies; (ii) develop specifications
and criteria for Board membership; (iii) consider and advise the Board of
Directors on matters relating to the composition and organization of the
Board of Directors, including the formation, composition and function of
committees of the Board; and (iv) perform such collateral advisory and
consulting services as the Board of Directors may request or the
Nominating Committee deems appropriate to its stated purposes. The members
of the Nominating Committee are Mr. Holcombe, Chairman, Dr. Edwards and
Mr. Thacher. During 1993, the Nominating Committee held no meetings.
Pension and Benefits Committee. The Pension and Benefits Committee is
comprised of not fewer than three members. Its primary functions are to:
(i) undertake studies with Company employees or outside consultants to
determine the competitiveness of Company benefit plans as to content and
cost; (ii) make recommendations to the Board of Directors and management,
as appropriate, as to amendments, discontinuations and initiations of
benefit plans; (iii) independently, or with the cooperation of the Audit
Committee, maintain an active level of knowledge as to the funding status
of the various pension plans of the Company as well as the performance of
the investment mediums for those plans; and (iv) perform such collateral
advisory and consulting services as the Board of Directors may request or
the Pension and Benefits Committee deems appropriate to its stated
purposes. The members of the Pension and Benefits Committee are Mr.
Thacher, Chairman, Mr. Van Leuven and Mr. Agocs. During 1993, the Pension
and Benefits Committee held one meeting.
The Board of Directors may from time to time by resolution create such
other committees for such purposes and with such powers and duties as the
Board of Directors prescribes by resolution.
EXECUTIVE COMPENSATION
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Company's Board of Directors (the
"Committee") has furnished the following report on compensation with
respect to executive officers as defined under the rules of the Securities
and Exchange Commission.
The Committee is comprised of non-employee directors of the Company
listed in this report. No member of the Committee has any insider or
interlocking relationship with the Company, as these terms are defined in
applicable rules and regulations of the Securities and Exchange
Commission. The Committee is responsible for developing and recommending
the Company's executive compensation principles, policies and programs to
the Board of Directors. In addition, the Committee recommends to the Board
of Directors on an annual basis the compensation to be paid to the Chief
Executive Officer (the "CEO") and, with advice from the CEO, to each of
the other executive officers of the Company, including the executive
9
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<PAGE> 12
officers named in the Summary Compensation Table of the proxy statement
(the "Named Executives").
The Committee works with an outside compensation consultant and
supports its compensation decisions by analysis of published surveys and
periodic special studies.
Compensation Philosophy
This report reflects the Company's compensation philosophy as adopted
by the Committee and endorsed by the Board of Directors. The Company's
compensation programs have been designed to provide its executive officers
with market competitive salaries and the opportunity to earn incentive
compensation related to performance expectations approved by the Board.
The objectives of the Company's executive compensation program, as
developed by the Committee and subject to periodic review, are to:
* Support an overall pay-for-performance policy based on corporate,
business unit and individual performance.
* Motivate executives to achieve short-and long-range business
objectives and reward them for their achievement.
* Establish benchmark salary ranges and incentive opportunities at the
median level based on a comparison framework of diversified
manufacturing companies and general industry.
* Significantly vary annual incentive compensation payments based on
performance in relation to the performance expectations identified
annually by the Board.
* Provide stock ownership opportunity based on competitive levels and
stock price performance to align the interests of executives with
the long-term interests of stockholders.
Recently enacted Section 162(m) of the Internal Revenue Code (the
"Code") precludes tax deductions for compensation paid in excess of $1
million to Named Executives unless certain conditions are met. Based on
current pay levels and the design of existing compensation plans, the
Committee believes that the Company's tax deductions for such compensation
will not be materially affected by this Code section.
Pay Positioning
The Committee's executive compensation program is constructed to
provide an opportunity for compensation, through the three components
described below, that varies with performance relative to a performance
index. The performance index is made up of diversified manufacturing and
general industry companies of comparable size, business characteristics,
markets and complexity. The "S&P Manufacturing (Diversified Industrials)
Index" is the peer performance index for stock price performance.
Competitive levels of pay for the compensation comparison framework are
provided by compensation consultants and published surveys. The
compensation comparison framework includes some, but not all, of the
companies in the performance index. The Committee believes the
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<PAGE> 13
compensation comparison framework appropriately provides a basis for
comparison of executive pay.
Total pay is sufficiently variable so that performance that is above
targeted performance, as approved annually by the Board, will result in
pay that is above median levels of total compensation and performance that
is below targeted levels will result in pay that is below median levels of
total compensation.
Pay Mix and Measurement For Executive Officers
The compensation of executives of the Company includes (i) base
salary, (ii) annual incentive cash bonuses ("Executive Incentive
Compensation"), and (iii) long-term incentive compensation in the form of
stock equity awards under the Company's 1987 Equity Incentive Plan for Key
Employees ("Equity Incentive Plan"). In general, the proportion of an
executive's compensation which is Executive Incentive Compensation
increases with the level of responsibility of the officer. Executive
officers also receive various benefits, including life, medical,
disability and pension plans, similar to those generally available to all
employees of the Company.
Base Salaries
The Committee seeks to set base salaries for the Company's executive
officers at levels that are competitive with median levels for executives
with comparable roles and responsibilities within the comparison
framework. The Company maintains an executive salary administration
program which uses external and internal comparisons to set salary ranges
around these median levels.
Individual executive officer salaries are reviewed annually by the
Committee, which may approve increases from time to time based on
individual performance and positioning within the salary range.
Base salary increases were last granted on January 1, 1993 to certain
executive officers reporting to the CEO. As part of the Company's cost
reduction program, each such executive officer thereafter took a voluntary
10% reduction in salary for six months in 1993, and further base salary
increases for this group have been deferred pending improvement in the
Company's financial condition.
Executive Incentive Compensation
The Committee administers an annual cash incentive program for
executive officers, as well as other management employees. Executive
officers are designated by the Company's Board of Directors and are
categorized as follows: (i) corporate executives, (ii) group executive
vice presidents who are each responsible for a major business segment and
(iii) group vice presidents responsible for a subgroup of related
divisions.
Each year the Committee recommends to the Company's Board of Directors
an aggregate target cash bonus amount for incentive-eligible executive
officers. Target bonus amounts are established for executive officers and
11
<PAGE>
<PAGE> 14
reflect approximate median levels of the comparison framework companies.
Actual awards vary from each target bonus amount for executive officers
based on financial performance of the Company or financial performance of
their respective operating group or subgroup, as applicable, when compared
to goals established by the Committee and approved by the Board of
Directors. For fiscal 1993, incentive bonus awards for corporate
executives were based 50% on achieving corporate operating income before
interest and taxes ("IBIT") levels and 50% on achieving corporate net
income levels compared to threshold, target, and maximum levels for each
measure as approved by the Board. Incentive bonus awards for group
executive vice presidents were based 60% on achieving applicable group
IBIT levels and 40% on achieving corporate IBIT and net income levels for
each measure as approved by the Company's Board of Directors. Threshold
performance levels are approximately 90% of target levels of performance
for both corporate and major group performance. Subgroup incentive bonus
awards were based 100% on achieving applicable division IBIT target
levels, with threshold performance generally set at 80%.
Based on actual 1993 results, no corporate executive officer received
an incentive bonus because the threshold level for corporate performance
was not achieved for either IBIT or net income. Incentive awards were paid
to one group executive vice president and to one group vice president
based on exceeding applicable performance thresholds. No amount of the
bonus award was based on corporate results because the corporate
thresholds were not exceeded. No other group executive vice president or
group vice president received incentive bonus awards based on applicable
group or subgroup performance.
Equity Incentive Plan
The Equity Incentive Plan authorizes the Committee to award stock
options (both non-qualified and incentive options), stock appreciation
rights, and restricted stock or restricted stock unit awards to key
executives.
Stock option and restricted stock grants are designed to align the
long-term interests of the Company's executives with those of its
stockholders by directly linking executive pay to stockholder return.
Since the adoption of the Equity Incentive Plan, non-qualified options
have been granted from time to time, including during 1993, at not less
than fair market value or repriced at fair market value on the date of
grant. Both the size of such grants and the proportion relative to the
total number of option shares granted are a function of the recipient's
level of responsibility within the Company, stock option (and/or long-term
incentive) grants provided to comparable executives within the comparison
framework companies, and the judgment of the Committee.
Repriced Options
During 1993, the Board of Directors also approved the repricing of
certain previously granted options under terms and conditions described
below in a separate report accompanying the Ten-Year Option Repricing
Table.
12
<PAGE>
<PAGE> 15
Chief Executive Officer Compensation
The principles guiding compensation for the CEO are the same as those
set forth for other executive officers.
Mr. Holcombe returned from retirement as CEO in December 1992 at his
previous annual salary rate of $550,000 to oversee the financial
restructuring program and recruit a successor. He did not receive any
incentive compensation or equity incentive awards in 1993. Mr. Holcombe
retired again in November 1993 following the election of Mr. Farrar as CEO
in September 1993.
Mr. Farrar's employment agreement includes a base salary rate of
$500,000 per year, which he received for the months of his employment in
1993. He was not eligible for incentive compensation in 1993. Consistent
with the Board's desire to link Mr. Farrar's compensation to the Company's
long-term performance and stockholder value, three different grants were
made under the Equity Incentive Plan, as follows:
1. A ten-year option for 100,000 shares, which vests in 25%
increments at the end of the first, second, third and fourth years of
employment.
2. A ten-year option for 50,000 shares, which vests five years
after the date of grant, i.e., September 1, 1998, but only if and when
the per share market price of the Company's Common Stock has reached
at least $10 on any one day during the period September 1, 1998
through October 30, 1998. Otherwise, Mr. Farrar must wait until 9.5
years after the date of grant before the options fully vest and become
exercisable.
3. A ten-year restricted stock award of 30,000 shares, under which
the restrictions will initially lapse five years after the initial
date of grant, but only if and when the per share market price of the
Company's Common Stock has reached at least $12 per share and remains
at or above that level for a period of at least 30 consecutive days
during the two years after the fifth anniversary of the grant.
Otherwise, Mr. Farrar must remain an employee of the Company and wait
until the tenth anniversary of the grant before the stock vests and
restrictions lapse.
Starting in 1994, Mr. Farrar will also be eligible for incentive
compensation and additional stock options in accordance with principles
set forth above with respect to other executive officers.
Submitted by the Compensation
Committee
of the Company's Board of Directors:
Richard J. Grosh, Chairman
James B. Edwards
Arthur B. Van Leuven
13
<PAGE>
<PAGE> 16
Performance Graph
The following graph sets forth a comparison of five-year cumulative
total return among the Company, the S&P 500 Index and the S&P
Manufacturing (Diversified Industrials) Index. The comparison of total
return on investment (change in year-end stock price plus reinvested
dividends) for each of the periods assumes that $100 was invested on
December 31, 1988 in each of the Company, the S&P 500 Index and the S&P
Manufacturing (Diversified Industrials) Index.
Comparison of Five-Year Cumulative Total Return
Among Imo Industries Inc.,
the S&P 500 Index, and the
S&P Manufacturing (Diversified Industrials) Index
$200 --------------------------------------------------------------------*|
-| |
-| * @|
-| * |
-| |
150 -|-------------------------------------------------------@-----------|
-| @ |
-| * |
-| * |
-| @ @ |
100 -|*@&----------------------------------------------------------------|
-| |
-| & |
-| |
-| & & &|
50 -|-------------------------------------------------------------------|
| & |
| |
| |
| |
0 -|-------------|-------------|-------------|-------------|-----------|
1988 1989 1990 1991 1992 1993
* = S&P 500 @ = S&P Manufacturing & = Imo Industries Inc.
14
<PAGE>
<PAGE> 17
The following table sets forth certain information with respect to
compensation paid or accrued by the Company during each of the three
fiscal years ended December 31, 1993, December 31, 1992 and December 31,
1991 to the chief executive officers of the Company and the other four
most highly compensated executive officers of the Company who served in
1993.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term Compensation
-------------------------------
Awards
-------------------------------
Securities
Annual Compensation Restricted Stock Underlying All Other
------------------------------------------------------------------------------------
Name and Principal Position ........... Year Salary($) Bonus($) Awards($) Options(#) Compensation($)(1)
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Donald K. Farrar(2) ................... 1993 $151,282 $ 0 $221,250(3) 150,000 $ 390
Chief Executive Officer
and President
William J. Holcombe(4) ................ 1993 430,833 0 - - 100,866
Chairman, Chief Executive Officer 1992 412,500 0 - - 156,996
and President 1991 550,000 400,000 - -
John J. Carr .......................... 1993 228,000 22,000 - 25,000 1,123
Executive Vice President 1992 225,000 53,200 - - 4,596
1991 210,000 35,000 - -
Stephen F. Agocs(5) ................... 1993 220,000 0 - - 686
Executive Vice President 1992 121,955 0 - - 92,589
1991 225,000 25,000 - -
William M. Brown(6) ................... 1993 218,500 0 - 39,570 51,076(8)
Executive Vice President 1992 105,000 40,000 - 30,000(7) 50,491(8)
and Chief Financial Officer
J. Dwayne Attaway ..................... 1993 213,750 0 - 37,049 1,053
Executive Vice President 1992 215,000 0 - 4,000(7) 5,138
1991 200,000 55,000 - -
</TABLE>
- ----------
(1) This column includes Company-paid life insurance premiums. Life
insurance premiums paid by the Company in 1993 on behalf of such
persons were as follows: Mr. Farrar, $390; Mr. Holcombe, $4,499; Mr.
Carr, $1,123; Mr. Agocs, $686; Mr. Brown, $1,076; and Mr. Attaway,
$1,053. The Company did not make matching contributions to the
Company's Employees Stock Savings Plan in 1993.
15
<PAGE>
<PAGE> 18
(2) Mr. Farrar joined the Company as Chief Executive Officer and President
in September 1993.
(3) Mr. Farrar's restricted stock award has a performance-based
acceleration of vesting feature designed to further align Mr. Farrar's
interests with those of the stockholders. The restrictions terminate
on September 13, 2003. If the per share price of the Company's Common
Stock reaches at least $12 and remains at or above that level for 30
consecutive days at any time during the period September 13, 1998
through September 13, 2000, the restricted stock would become vested
at such time. Any dividends paid on the shares of restricted stock
during the restriction period will be paid to Mr. Farrar. The 30,000
shares of restricted stock held by Mr. Farrar had a value of $277,500
at December 31, 1993 based on the closing price of $9.25 per share for
the Company's Common Stock on that date.
(4) Effective September 13, 1993, Mr. Holcombe resigned from his position
as an officer of the Company and retired on November 1, 1993. During
the period of his retirement in 1993 he received consulting fees of
$91,667 pursuant to his contract with the Company, and directors' fees
of $4,700, which amounts are shown above under "All Other
Compensation." Upon his retirement, Mr. Holcombe also received
payments accrued under the Company's defined benefit pension plan and
supplemental executive retirement plan.
(5) Mr. Agocs retired as an employee of the Company on January 1, 1994.
(6) Mr. Brown joined the Company as Executive Vice President and Chief
Financial Officer in June 1992.
(7) The options granted in 1992 were replaced in 1993 with repriced
options. The repriced options are included in the 1993 share amounts
set forth in this column. See "Ten-Year Option Repricings."
(8) These amounts include special payments made to Mr. Brown based on the
terms of his employment agreement, including $50,000 upon entry into
employment and an additional $50,000 one year later.
16
<PAGE>
<PAGE> 19
The following table sets forth information with respect to options
granted to the persons named in the Summary Compensation Table above
during the fiscal year ended December 31, 1993.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------------------------------------------------
Number of % of Total
Securities Options
Underlying Granted to Exercise or
Options Employees in Base Price Expiration Grant Date
Name Granted(#) Fiscal Year ($/Sh) Date Present Value($)(1)
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Donald K. Farrar ................... 100,000 13.0% $7.3750 9/13/03 $274,000
50,000(2) 6.5 7.3750 9/13/03 137,000
William J. Holcombe ................ 0 - - - -
John J. Carr ....................... 25,000 3.2 7.3750 11/16/03 68,500
Stephen F. Agocs ................... 0 - - - -
William M. Brown ................... 21,570(3) 2.8 7.3750 7/28/02 53,546
18,000 2.3 7.3750 11/16/03 49,320
J. Dwayne Attaway .................. 2,984(3) .4 7.3750 2/25/02 7,110
4,265(3) .6 7.3750 12/14/00 9,144
9,800(3) 1.3 7.3750 12/19/99 18,849
20,000 2.6 7.3750 11/16/03 54,800
</TABLE>
- ----------
(1) The Company hired an outside advisor to value its stock options based
upon the Black-Scholes model, a widely used and accepted formula for
valuing traded stock options. Actual increase in value will occur
directly with appreciation of the per share market price of the
Company's Common Stock as stockholders' return on investment
increases. There is no gain to the executives, however, if the per
share market price of the Company's Common Stock does not increase or
declines. The following assumptions were used to calculate the
Black-Scholes value: a ten-year option term, 39.37% stock price
volatility, 6.5% risk-free rate of return, annual dividend yield of
3.03% and an exercise price equal to stock price on the date of grant
of $7.375. The advisor has used the historical annual dividend yield
and stock price volatility rate as assumptions for the Black-Scholes
model. These are not projections, and therefore there is no guarantee
that these assumptions will be the actual annual dividend yield or
stock price volatility rate over the next 10 years.
(2) Mr. Farrar's option grant has a performance-based acceleration of
vesting feature designed to align Mr. Farrar's interests with those of
the stockholders. The option will become exercisable commencing on
March 13, 2003. If the per share market price of the Company's Common
Stock has reached at least $10 on any one day during the performance
period beginning on September 1, 1998 and ending on October 30, 1998,
however, the options will become exercisable immediately commencing on
such date. Due to the length of Mr. Farrar's vesting period, the
17
<PAGE>
<PAGE> 20
Black-Scholes value of this grant has been discounted by 10% to
reflect the increased risk of forfeiture. The risk-of-forfeiture
discount is related to a general industry rate of turnover in
executive management positions.
(3) Options granted represent options that were replaced. See "Ten-Year
Option Repricings" table below.
The following table sets forth information with respect to options
held at December 31, 1993 by the persons named in the Summary Compensation
Table above.
Fiscal Year End Option Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at FY-End(#) at FY-End($)
-------------------------------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Donald K. Farrar........................ - 150,000 - $281,250
William J. Holcombe .................... 150,000 - $225,000 -
John J. Carr ........................... 40,000 25,000 90,000 46,875
Stephen F. Agocs ....................... 20,000 - 45,000 -
William M. Brown ....................... - 39,570 - 74,194
J. Dwayne Attaway....................... - 37,049 - 69,467
</TABLE>
Compensation Committee Report on Repricing of Stock Options
On August 17, 1993, the Committee recommended and the Board approved a
replacement of certain stock options granted under the Equity Incentive
Plan. This program was authorized to help fulfill several important
objectives of the Company's executive compensation program - motivation to
achieve long-range objectives, retention of executives and alignment of
management/stockholder interests.
With respect to the three components of the executive compensation
program, the Committee believes that the base salary and annual incentive
components are fulfilling their intended roles. However, the long-term
portion of the pay package was viewed by the Committee as being deficient
in its intended role because the number of option shares held by
executives was well below competitive levels and most previously granted
options were priced significantly above current market value. The
Committee believed this condition was not in the Company's best interests.
To address this, the Board, in addition to granting new options to
executives, approved a repricing arrangement that offered all eligible
optionees the opportunity to surrender original options having an exercise
price of greater than $10.00 in return for a significantly lesser number
of replacement options at the August 17, 1993 market price of $7.375. The
expiration dates and vesting provisions of the replacement options
remained the same as the original options; however, in no event may a
18
<PAGE>
<PAGE> 21
replacement option be exercised until the market price of the underlying
shares reaches or exceeds $10 per share for a period of 30 consecutive
days.
Under the repricing program, 121 employees, including two of the named
executive officers, received options to purchase an aggregate of 267,257
shares of Common Stock in cancellation of options to purchase an aggregate
of 468,000 shares of Common Stock. A Black-Scholes ratio value was used to
determine the appropriate number of replacement shares offered to each
holder. The result was a replacement of approximately 57% of the 468,000
shares purchasable under the replaced options, with the balance of the
shares being surrendered and becoming available for reuse under the Equity
Incentive Plan.
The Committee believes the repricing has helped to restore the role of
the Equity Incentive Plan as a key component of the Company's executive
compensation program.
Submitted by the Compensation
Committee
of the Company's Board of
Directors:
Richard J. Grosh, Chairman
James B. Edwards
Arthur E. Van Leuven
19
<PAGE>
<PAGE> 22
Ten-Year Option Repricings (1)
<TABLE>
<CAPTION>
Length of
Number of Market Original
Securities Price Exercise Option Term
Underlying of Stock at Price at Remaining at
Options Time of Time of New Date of
Repriced or Repricing or Repricing or Exercise Repricing or
Name Date Amended(#)(2) Amendment($) Amendment($) Price($) Amendment
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
J. D. Attaway 8/17/93 4,000 $7.375 $11.625 $7.375 8 yrs 6 mos
Executive Vice 5,000 7.375 10.375 7.375 7 yrs 3 mos
President 20,000 7.375 15.875 7.375 6 yrs 4 mos
T. J. Bird 8/17/93 5,000 7.375 12.000 7.375 8 yrs 11 mos
Senior Vice 2,000 7.375 10.375 7.375 7 yrs 3 mos
President,
General Counsel
and Secretary
W. M. Brown 8/17/93 30,000 7.375 12.000 7.375 8 yrs 11 mos
Executive Vice
President
and Chief
Financial Officer
R. A. Derr, II 8/17/93 2,000 7.375 10.375 7.375 7 yrs 3 mos
Vice President 6,000 7.375 15.875 7.375 6 yrs 4 mos
and Corporate 4,000 7.375 19.625 7.375 5 yrs 8 mos
Controller
G. M. Dobson 8/17/93 1,000 7.375 11.875 7.375 8 yrs 1 mth
Vice President 1,000 7.375 10.375 7.375 7 yrs 8 mos
and Treasurer
B. Lewis 8/17/93 5,000 7.375 10.375 7.375 7 yrs 3 mos
Executive Vice 20,000 7.375 16.1875 7.375 4 yrs 6 mos
President
R. A. Pennycook 8/17/93 4,000 7.375 11.875 7.375 8 yrs 1 mth
Group Vice 4,000 7.375 10.375 7.375 7 yrs 3 mos
President 6,000 7.375 19.625 7.375 5 yrs 8 mos
4,000 7.375 20.375 7.375 4 yrs 11 mos
G. E. Walker 8/17/93 5,000 7.375 11.875 7.375 8 yrs 1 mth
Executive Vice 4,000 7.375 10.375 7.375 7 yrs 3 mos
President 10,000 7.375 19.625 7.375 5 yrs 8 mos
</TABLE>
- ----------
(1) The Board of Directors approved an offer to executives with
outstanding stock options that had exercise prices significantly above
20
<PAGE>
<PAGE> 23
the current market price, providing them with the opportunity to
receive a reduced number of new stock options in exchange for the
cancellation of outstanding options. To ensure the exchange ratio was
equitable and appropriate, an outside advisor was asked to establish
conversion ratios for this exchange. See "Compensation Committee
Report on Repricing of Stock Options" above. The outside advisor
recommended using the Black-Scholes model to establish the conversion
ratios. Pursuant to the foregoing, outstanding option grants of
executives who accepted the offer were converted to new grants. In
each case, the new grant will expire at the same time as the
outstanding grant that was converted. Further, the new stock options
may not be exercised unless the per share market price of the
Company's Common Stock equals or exceeds $10 per share for 30
consecutive days before the options expire. For this reason, the
conversion ratio takes into account both the Black-Scholes value of
each new grant in addition to the probability that the new grant will
not reach maturity before the stock price reaches or exceeds $10 per
share for 30 consecutive days. The following assumptions were used to
calculate the Black-Scholes value: 10-year option term, 39.37% stock
price volatility, 6.5% risk-free rate of return, annual dividend yield
of 3.03%, and an exercise price equal to market price on the date of
grant of $7.375. The Company has used the historical annual dividend
yield and stock price volatility rate as assumptions for the
Black-Scholes model. These are not projections, however, and therefore
there is no guarantee that these assumptions will represent the actual
annual dividend yield or stock price volatility rates during the next
8.7 years.
(2) The number of shares underlying the options for each person named in
the above table were also reduced as part of the repricings that
occurred in 1993. The number of shares resulting from the repriced
options are as follows: Mr. Attaway, 2,984 shares, 4,265 shares and
9,800 shares, respectively; Mr. Bird, 3,595 shares and 1,706 shares,
respectively; Mr. Brown, 21,570 shares; Mr. Derr, 1,706 shares, 2,940
shares and 1,288 shares, respectively; Mr. Dobson, 853 shares and 736
shares, respectively; Mr. Lewis, 4,265 shares and 7,740 shares,
respectively; Mr. Pennycook, 2,944 shares, 3,412 shares, 1,932 shares
and 1,044 shares, respectively; and Mr. Walker, 3,680 shares, 3,412
shares and 3,220 shares, respectively.
Employment Agreements
William J. Holcombe has an agreement with the Company for a term that
ends on September 1, 1994. The agreement, as amended, provides for annual
compensation of not less than $550,000 that was initially paid as
employment compensation until November 1, 1993 and thereafter as
consultant compensation. Mr. Holcombe consented to a voluntary 10% salary
reduction from January through June 1993. Under the agreement, Mr.
Holcombe became a consultant to the Company upon his retirement on
November 1, 1993, with compensation continuing at the rate provided in the
agreement until the expiration of its term. Furthermore, the agreement
provides that if the Company breaches its obligations under the agreement,
the Company will be obligated to pay an amount determined under the
agreement that in no event may be less than 2.99 multiplied by Mr.
Holcombe's then applicable basic annual compensation. The agreement also
21
<PAGE>
<PAGE> 24
provides that during the term of the agreement, the Company and the Board
of Directors will include Mr. Holcombe in any list of nominees for
election as directors that may be recommended to the stockholders and to
use their best efforts, consistent with their fiduciary responsibilities
to cause his election and retention as a member of the Company's Board of
Directors.
Donald K. Farrar has an employment agreement with the Company for a
term that ends on August 31, 1995. The agreement provides for annual
compensation of not less than $500,000. Pursuant to the agreement, Mr.
Farrar received grants of non-qualified options under the Equity Incentive
Plan for 100,000 shares and 50,000 shares, plus a 30,000-share restricted
stock award under this plan. The exercisability of 50,000 and 30,000 share
grants is subject to the attainment of a certain per share price levels by
the Company's Common Stock during defined periods. The employment
agreement further provides that if, during the term of the agreement, the
Company terminates Mr. Farrar's employment without good cause, the Company
will be obligated to pay monthly for the remaining period of the
agreement, a sum equal to the highest monthly salary rate paid to Mr.
Farrar under the agreement, provided such payments shall continue for not
less than twelve months.
William M. Brown has an employment agreement with the Company for a
term that ends on June 22, 1994. The agreement provides for annual
compensation of not less than $210,000, incentive compensation of not
less than $40,000 for 1992, and special payments of $50,000 in 1992 and
1993. The employment agreement further provides that if, during the term
of the agreement, the Company terminates Mr. Brown's employment without
good cause, the Company will be obligated to pay monthly for the remaining
period of the agreement, a sum equal to the highest monthly salary rate
paid to Mr. Brown under the agreement, provided such payments shall
continue for not less than twelve months.
The Company has termination agreements with various executive officers
of the Company, including Messrs. Farrar, Carr, Brown and Attaway, in
order to reinforce and encourage the continued dedication and attention of
such persons to their assigned duties without distractions arising from a
potential change in control. The termination agreements are operative upon
the occurrence of a "change in control" of the Company, which would be
deemed to occur if (i) any person is or becomes the beneficial owner,
directly or indirectly, of securities of the Company representing 35% or
more of the combined voting power of the Company's then outstanding
securities, (ii) individuals who constituted the Board of Directors of the
Company at the beginning of the term of such agreement, including any new
director whose election or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the
directors still in office who were directors at the beginning of the term
of such agreement or their successors cease, for any reason, to constitute
a majority thereof or (iii) more than 50% of the assets of the Company,
including the business for which such executive's services are principally
performed, are disposed of by the Company pursuant to a partial or
complete liquidation of the Company, a sale of assets or otherwise. As
part of the termination agreements, each executive has agreed that,
subject to the terms of his termination agreement, in the event of a
"potential change in control" of the Company the executive will remain
22
<PAGE>
<PAGE> 25
in the employ of the Company or its subsidiaries during the pendency of
any such "potential change in control" and for a period of one year
after the occurrence of an actual "change in control." A "potential
change in control" would be deemed to occur if (i) the Company enters
into an agreement, the consummation of which would result in a "change in
control" of the Company, (ii) any person, including the Company, publicly
announces an intention to take or to consider taking actions which if
consummated would constitute a "change in control" or (iii) the Board of
Directors adopts a resolution to the effect that a "potential change in
control" has occurred. If an executive's employment is terminated within
three years of a change in control (i) by the Company other than for
cause, retirement or disability or (ii) by the executive for "good
reason," the executive will be entitled to a lump sum payment equal to
2.99 times his average taxable compensation from the Company during the
five fiscal years of the Company immediately preceding the change in
control, as well as bonuses declared but not yet paid, amounts in
settlement of outstanding stock options, a lump sum payment of certain
retirement benefits and continuing life, disability, accident and health
insurance coverage for a three-year period after such termination. "Good
reason" is broadly defined in the agreements to include any change in
duties or responsibilities, reduction in compensation or benefits or
relocation. The agreements, however, provide that no amount is to be paid
to any person which would result in such a payment being subject to an
excise tax under the Code and being nondeductible by the Company for
federal income tax purposes. If the employment of all of the above-named
executive officers were to be terminated under circumstances requiring
payments under such agreements, such officers would currently be entitled
to receive approximately $3,822,100.
23
<PAGE>
<PAGE> 26
Pension Plans
The following table shows the estimated maximum annual retirement
benefits payable to a covered participant under the Imo Industries Inc.
U.S. Salaried Plan (the "Salaried Plan") and under a non-qualified
supplemental executive retirement plan (the "Supplemental Plan"), which
provides benefits that would otherwise be denied to participants by reason
of certain Code limitations on qualified plan benefits, upon normal
retirement at December 31, 1993 after selected periods of service
(collectively referred to hereinafter as the "Salaried Pension Plans").
Benefits were calculated assuming participants and their spouses elect a
straight-life annuity rather than a joint and survivor or other form of
annuity, in which case benefits would generally be lower than shown in the
table. Benefits are not subject to any deduction for Social Security or
other offset amounts.
Pension Plan Table
<TABLE>
<CAPTION>
Years of Service
Final -------------------------------------------------------------
Average
Earnings 10 Years 15 Years 20 Years 25 Years 30 Years 35 Years
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 100,000 $ 16,518 $ 24,777 $ 33,036 $ 41,295 $ 44,839 $ 48,383
150,000 25,518 38,277 51,036 63,795 69,339 74,883
200,000 34,518 51,777 69,036 86,295 93,839 101,383
250,000 43,518 65,277 87,036 108,795 118,339 127,883
300,000 52,518 78,777 105,036 131,295 142,839 154,383
350,000 61,518 92,277 123,036 153,795 167,339 180,883
400,000 70,518 105,777 141,036 176,295 191,839 207,383
450,000 79,518 119,277 159,036 198,795 216,339 233,883
500,000 88,518 132,777 177,036 221,295 240,839 260,383
600,000 106,518 159,777 213,036 266,295 289,839 313,383
700,000 124,518 186,777 249,036 311,295 338,839 366,383
800,000 142,518 213,777 285,036 356,295 387,839 419,383
900,000 160,518 240,777 321,036 401,295 436,839 472,383
1,000,000 178,518 267,777 357,036 446,295 485,839 525,383
1,100,000 196,518 294,777 393,036 491,295 534,839 578,383
</TABLE>
Final average earnings are based upon the highest five consecutive
years of compensation during the participant's last ten years of service.
The annual compensation taken into account under the Salaried Pension
Plans is the monthly salary in effect on January 1 of each year multiplied
by 12 (or, if fewer, the number of months of employment in that year),
plus the amount of any bonus earned during the previous year. This
compensation differs from the annual compensation set forth in the Summary
Compensation Table, which includes bonuses earned in the same salary year.
With respect to the year ended December 31, 1993, covered compensation
under the Salaried Plan for the persons named in the Summary Compensation
Table did not differ by more than 10% from their respective annual
compensation shown in such table except for the following persons: Mr.
Brown, $320,000; and Mr. Carr, $293,200.
24
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As of December 31, 1993, the persons named in the Summary Compensation
Table had the following years of benefit service as defined under the
Salaried Pension Plans: Mr. Agocs, 28 years; Mr. Carr, 26.1 years; Mr.
Brown, 1.4 years; and Mr. Attaway, 16.8 years. Upon Mr. Holcombe's
retirement in November 1993, he received a distribution under the
Company's Supplemental Plan.
While the Company was a wholly owned subsidiary of Transamerica
Corporation, the Company's employees participated in the Pension Plan for
Salaried U.S. Employees of Transamerica Corporation and Affiliates (the
"Transamerica Pension Plan"). The Transamerica Pension Plan provides
that employees of the Company will continue to vest in their benefits
accrued prior to December 31, 1986, as calculated under the Transamerica
Pension Plan, taking into account only benefit service credited and
compensation earned prior to December 31, 1986, and will continue to
receive credit toward the service requirement for subsidized early
retirement benefits and pre-retirement death benefits, based upon their
service with the Company after December 31, 1986. Accrued benefits under
the Salaried Plan will be offset by any vested benefits under the
Transamerica Pension Plan.
The benefits shown in the Pension Plan Table do not reflect the
applicable limitations imposed by Sections 415 and 401(a)(17) of the Code.
Benefits payable pursuant to the Salaried Pension Plans are restricted in
accordance with the limitations of Sections 415 and 401(a)(17) of the
Code; however, the Company maintains the Supplemental Plan under which the
Company makes supplemental pension payments to employees whose benefits
under the Salaried Plan are reduced by the limitations imposed under
Section 415 and 401(a)(17) of the Code. The Company is responsible for all
liabilities with respect to supplemental benefit payments accrued by
employees of the Company. In July 1991, the Company's Board of Directors
approved the establishment of a grantor trust (the "Trust") under
Section 671 of the Code. The purpose of the Trust is to meet the Company's
obligations to pay benefits to those entitled thereto under the
Supplemental Plan. Pursuant to the terms of the Trust, the Company will
from time to time irrevocably transfer to the Trust assets that will be
held in the Trust, subject to the claims of the Company's creditors, until
paid to participants and beneficiaries of the Supplemental Plan in
accordance with the terms of the Supplemental Plan. During fiscal 1993,
the Company transferred $47,917 to the Trust.
ELECTION OF INDEPENDENT AUDITORS
Unless instructed to the contrary, it is intended that votes will be
cast pursuant to the proxies for the election of Ernst & Young as the
Company's independent auditors for its 1994 fiscal year. Election of Ernst
& Young will require the affirmative vote of a majority of the shares of
Common Stock represented in person or by proxy at the Annual Meeting.
Representatives of Ernst & Young will attend the Annual Meeting and
will have the opportunity to make a statement, if they desire to do so,
and will be available to respond to any appropriate questions presented by
stockholders at the Annual Meeting.
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ANNUAL REPORT
A copy of the Company's Annual Report for its fiscal year ended
December 31, 1993 is being mailed to the Company's stockholders with this
Proxy Statement.
STOCKHOLDER PROPOSALS
FOR 1995 ANNUAL MEETING
Any stockholder who, in accordance with and subject to the provisions
of the proxy rules of the Securities and Exchange Commission, wishes to
submit a proposal for inclusion in the Company's proxy statement for its
1995 Annual Meeting of Stockholders must deliver such proposal in writing
to the Secretary of the Company at the Company's principal executive
offices at 3450 Princeton Pike, Lawrenceville, New Jersey 08648, not later
than December 19, 1994.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented
for consideration other than the matters described in the Notice of Annual
Meeting, but if any matters are properly presented, it is the intention of
the persons named in the accompanying proxy to vote on such matters in
accordance with their judgment.
By Order of the Board of Directors,
/s/ THOMAS J. BIRD
-------------------------------
THOMAS J. BIRD,
Senior Vice President,
General Counsel and Secretary
Date: April 18, 1994
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IMO INDUSTRIES INC.
PROXY
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 24, 1994
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby constitutes and appoints Thomas J. Bird and
David C. Christensen and each or either of them, proxies of the undersigned,
with full power of substitution, to vote all of the shares of Imo Industries
Inc. (the "Company") which the undersigned may be entitled to vote at the
Annual Meeting of Stockholders of the Company to be held at the offices of
Duane, Morris & Heckscher, 1650 Market Street, 42nd Floor, Philadelphia,
Pennsylvania, on Tuesday, May 24, 1994 at 10 a.m. and at any adjournment
thereof, as shown on the voting side of this card.
__________________
SEE REVERSE
SIDE
__________________
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<PAGE> 30
/ X / Please mark your votes as in this example
This proxy will be voted as specified. If a choice is not specified, this
proxy will be voted FOR the nominees for Class II Directors and FOR
Proposal 2.
1. Election of all Nominees for Class II Directors listed hereon
FOR WITHHELD
/ / / /
For all nominees listed hereon, except vote withheld from the following
Nominee(s):
________________________________________________________________________
Nominees: James B. Edwards
Carter P. Thacher
2. PROPOSAL TO ELECT ERNST & YOUNG as the independent public accountants for
the Company's 1994 fiscal year. The Board of Directors recommends a vote
FOR this Proposal.
FOR AGAINST ABSTAIN
/ / / / / /
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting and any adjournment
thereof.
This proxy should be dated, signed by the stockholder
exactly as his name appears hereon and returned promptly
in the enclosed envelope. Persons signing in a fiduciary
capacity should so indicate.
Please sign exactly as name(s) appear hereon. Joint
owners should each sign. When signing as attorney,
executor, administrator, trustee or guardian,
please give full title as such.
________________________________________________________
________________________________________________________
SIGNATURE(S) DATE
<PAGE>
