SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
IMO INDUSTRIES INC.
------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
[INSERT NAME OF FILER WHEN APPLICABLE]
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item
22(a)(2) of Schedule 14A
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE>
IMO INDUSTRIES INC.
---------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 21, 1996
---------------------------
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 21, 1996 at the Sheraton
New York Hotel and Towers, 811 Seventh Avenue at 53rd Street, New York, New
York, 10019, for the following purposes:
1. To elect two Class I 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 LLP as
auditors for the Company for its 1996 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 March 25, 1996 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, 1995 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
Executive Vice President,
General Counsel and Secretary
April 4, 1996
Lawrenceville, New Jersey
<PAGE>
IMO INDUSTRIES INC.
---------------------------
This Proxy Statement and the accompanying form of proxy, which are first
being mailed to stockholders on or about April 4, 1996, 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 21, 1996 and at any adjournment thereof, at the Sheraton New York
Hotel and Towers, 811 Seventh Avenue at 53rd Street, New York, New York, 10019.
The Company's principal executive offices are located at 1009 Lenox Drive,
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 March 25, 1996, the Company had outstanding
17,085,109 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 March
25, 1996 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.
If a stockholder is a participant in the Company's Employees Stock Savings
Plan and the accounts are registered in the same name, the proxy card will also
serve as voting instructions to the trustees of the plan as to the voting of
shares held in the plan. With respect to shares held in the plan for which proxy
cards are not returned, those shares 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 communication. Georgeson & Company Inc. has
been retained by the Company to assist in the solicitation of proxies at a fee,
plus 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.
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of March 1, 1996, 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
BENEFICIALLY OUTSTANDING
NAME AND ADDRESS OWNED COMMON STOCK
- -------------------------------------------------------------------- ----------- ---------------
<S> <C> <C>
The Prudential Insurance........................................... 1,705,480(1) 9.9%
Company of America
Prudential Plaza
Newark, NJ 07102-3777
State of Wisconsin Investment Board................................ 1,657,000(2) 9.7%
P.O. Box 7842
Madison, WI 53707
C.S. McKee & Co.................................................... 1,244,720 7.3%
1 Gateway Center
Pittsburgh, PA 15222
The TCW Group, Inc.
865 South Figueroa Street
Los Angeles, CA 90017
Robert Day ........................................................ 965,400(3) 5.7%
200 Park Avenue, Suite 2200
New York, NY 10166
</TABLE>
- ------------------
(1) As reported by The Prudential Insurance Company of America ('Prudential') as
of December 31, 1995 in a filing made with the Securities and Exchange
Commission. Of these shares, 200,000 shares are purchasable upon exercise of
a currently exercisable warrant and 1,505,480 shares are shares over which
Prudential may have direct or indirect voting and/or investment discretion
held for the benefit of its clients by its separate accounts, externally
managed accounts, registered investment companies, subsidiaries and/or other
affiliates.
(2) As reported as beneficially owned by State of Wisconsin Investment Board as
of December 31, 1995 in a filing made with the Securities and Exchange
Commission.
(3) As reported as beneficially owned by The TCW Group, Inc. and Robert Day as
of December 31, 1995 in a filing made with the Securities and Exchange
Commission. According to such filing, Mr. Day may be deemed a controlling
person of The TCW Group, Inc.
2
<PAGE>
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 March 1, 1996 by each director,
nominee for director and executive officer named in the Summary Compensation
Table set forth below under 'Executive Compensation' and by all directors and
executive officers as a group.
<TABLE>
<CAPTION>
SHARES PERCENT OF
NAME OF INDIVIDUAL BENEFICIALLY OUTSTANDING
OR IDENTITY OF GROUP OWNED (1) COMMON STOCK (2)
- ------------------------------------------------------------------ ----------- -----------------
<S> <C> <C>
Donald K. Farrar................................................. 297,112(3) 1.7%
James B. Edwards................................................. 81,750(4) --
J. Spencer Gould................................................. 95,950(5) --
Richard J. Grosh................................................. 81,606(6) --
Carter P. Thacher................................................ 110,750(4) --
Donald C. Trauscht............................................... 1,250 --
Arthur E. Van Leuven............................................. 56,750(7) --
William M. Brown................................................. 47,865(8) --
John J. Carr..................................................... 74,833(9) --
Brian Lewis...................................................... 31,755(10) --
Thomas J. Bird................................................... 25,034(11) --
All directors and executive officers as a group (14 persons)..... 946,721(12) 5.4%
</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. The number of shares reported as owned
through the Company's Employees Stock Savings Plan has been calculated
based upon such person's percentage interest in the total number of units
outstanding in the Company's Common Stock fund under such plan.
(2) Less than 1% unless otherwise indicated.
(3) This total includes 62,000 shares owned by Mr. Farrar pursuant to
restricted stock awards under the Company's Equity Incentive Plan for Key
Employees (the 'Equity Incentive Plan'), 60,000 shares as to which Mr.
Farrar holds currently exercisable options to acquire under the Equity
Incentive Plan and 2,112 shares owned by Mr. Farrar through the Company's
Employees Stock Savings Plan.
(4) 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 (the '1988 Director Plan') and 750
shares owned by such person pursuant to restricted stock awards under the
Company's 1995 Equity Incentive Plan for Outside Directors (the '1995
Director Plan').
(5) This total includes 80,000 shares as to which Mr. Gould holds currently
exercisable options to acquire under the 1988 Director Plan, 15,000 shares
held by a trust of which Mr. Gould is a trustee and settlor and 750 shares
owned by Mr. Gould pursuant to restricted stock awards under the 1995
Director Plan. This total also includes 200 shares that are held by Mr.
Gould's wife, and Mr. Gould disclaims beneficial ownership of these shares.
(6) This total includes 80,000 shares as to which Dr. Grosh holds currently
exercisable options to acquire under the 1988 Director Plan and 750 shares
owned by Dr. Grosh pursuant to restricted stock awards under the 1995
Director Plan. This total also includes 400 shares that are held by Dr.
Grosh's wife, and Dr. Grosh disclaims beneficial ownership of these shares.
3
<PAGE>
(7) This total includes 40,000 shares as to which Mr. Van Leuven holds
currently exercisable options to acquire under the 1988 Director Plan,
16,000 shares held by a trust of which Mr. Van Leuven is trustee and
settlor and 750 shares owned by Mr. Van Leuven pursuant to restricted stock
awards under the 1995 Director Plan.
(8) This total includes 31,429 shares as to which Mr. Brown holds currently
exercisable options to acquire under the Equity Incentive Plan and 3,936
shares owned by Mr. Brown through the Company's Employees Stock Savings
Plan.
(9) This total includes 58,750 shares as to which Mr. Carr holds currently
exercisable options to acquire under the Equity Incentive Plan and 3,983
shares owned by Mr. Carr through the Company's Employees Stock Savings
Plan.
(10) This total includes 30,755 shares as to which Mr. Lewis holds currently
exercisable options to acquire under the Equity Incentive Plan.
(11) This total includes 19,903 shares as to which Mr. Bird holds currently
exercisable options to acquire under the Equity Incentive Plan and 5,131
shares owned by Mr. Bird through the Company's Employees Stock Savings
Plan.
(12) This total includes the shares purchasable upon the exercise of the options
referred to in footnotes (3) through (11) above and an additional 30,662
shares purchasable upon the exercise of options by other executive officers
included in this group. This total also includes 2,000 shares that one of
the other executive officers included in this group holds jointly with his
wife.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (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, and
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, 1995 through December 31, 1995, all
filing requirements applicable to its officers and directors were complied with,
except that Frederick W. Wojtowicz, Vice President and Director, Taxes, amended
his initial report of beneficial ownership on Form 3 to report holdings of an
additional 100 shares of the Company's Common Stock purchasable upon exercise of
stock options and J. Spencer Gould corrected prior Section 16(a) reports to
reflect that shares previously reported as held by him directly were held in a
revocable trust of which he and his wife are the trustees.
4
<PAGE>
ELECTION OF DIRECTORS
The Company's By-Laws provide that the directors of the Company shall be
divided into three classes, designated as Class I, Class II and Class III, and
that at each annual meeting of stockholders of the Company successors to the
class of directors whose term expires at that annual meeting will be elected for
a three-year term. The classes are staggered so that the term of one class
expires each year. The terms of the Class I directors expire in 1996, and each
third year thereafter; the terms of the Class II directors expire in 1997 and
each third year thereafter; and the terms of the Class III directors expire in
1998 and each third year thereafter. Accordingly, the Class I directors are to
be elected at the Annual Meeting.
The number of directors constituting the entire Board of Directors is
determined by the vote of a majority of the members of the Board of Directors
and is currently fixed at seven members. J. Spencer Gould, a director of the
Company since 1986, will complete his final term as a Class I director on the
date of the Annual Meeting. Effective as of the date of the Annual Meeting, the
Board of Directors has reduced the number of members of the Board of Directors
to six members. Two Class I directors are to be elected at the Annual Meeting.
The Class I directors will serve for a term of three years and until their
successors have been duly elected.
The Board of Directors has nominated Richard J. Grosh and Arthur E. Van
Leuven for election as Class I directors, both of whom are incumbent directors.
All proxies will be voted for the election of these nominees unless authority to
vote for the election of a nominee is withheld. 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 that either nominee will be unable or unwilling to
serve as a director if elected and does not intend to nominate any person in
addition to or in lieu of these nominees.
The two candidates for Class I directors receiving the highest number of
votes cast at the Annual Meeting will be elected. Stockholders are not entitled
to cumulate votes in 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 on the election of directors inasmuch as they will not
represent votes cast at the Annual Meeting for the purpose of electing
directors.
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. 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.
5
<PAGE>
The names of the nominees for Class I directors and the Class II 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>
DIRECTOR YEAR TERM
NAME AGE PRINCIPAL OCCUPATION SINCE WILL
EXPIRE
- --------------------- --- --------------------------------------------- ------- -------
NOMINEES FOR CLASS I DIRECTORS
<S> <C> <C> <C> <C>
Richard J. Grosh....... 68 Independent consultant; formerly Chairman and 1987 1999*
Chief Executive Officer of Ranco, Inc.
Arthur E. Van Leuven... 70 Retired; formerly Chairman and Chief 1990 1999*
Executive Officer of Transamerica Finance
Group, Inc. and Executive Vice President of
Transamerica Corporation
</TABLE>
- ------------------
* If elected at the Annual Meeting.
DIRECTORS CONTINUING IN OFFICE
CLASS II DIRECTORS
<TABLE>
<S> <C> <C> <C> <C>
James B. Edwards..... 68 President of the Medical University of South 1986 1997
Carolina
Carter P. Thacher.... 69 Chairman of Wilbur-Ellis Company 1986 1997
</TABLE>
CLASS III DIRECTORS
<TABLE>
<S> <C> <C> <C> <C>
Donald K. Farrar..... 57 Chairman of the Board of Directors, President 1993 1998
and Chief Executive Officer of the Company
Donald C. Trauscht... 62 Chairman of BW Capital Corporation; formerly 1995 1998
Chairman and Chief Executive Officer of
Borg-Warner Security Corporation
</TABLE>
Donald K. Farrar has served as the Chief Executive Officer and President of
the Company since September 1993 and as the Company's Chairman of the Board
since June 1994. 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.
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
6
<PAGE>
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 Phillips
Petroleum Company, SCANA Corporation, WMX Technologies, Inc., National Data
Corporation, G.S. Industries, Inc. and General Engineering Laboratories, 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.
Donald C. Trauscht is currently the Chairman of BW Capital Corporation, an
investment company. From 1967 to 1995, Mr. Trauscht held various positions with
Borg-Warner Corporation, including director, and various positions with
Borg-Warner Security Corporation, including Chairman and Chief Executive Officer
and other executive positions in finance and strategy. Prior to joining
Borg-Warner Corporation, he served as President of Langevin Company, a
California electronics manufacturer. Mr. Trauscht is also a director of
Borg-Warner Security Corp., Baker Hughes Incorporated, Esco Electronics
Corporation, Borg-Warner Automotive, Inc., Thiokol Corporation and Blue Bird
Corporation.
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 1995, the Board of Directors held ten 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
1995.
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 currently
paid an annual retainer of $12,000 for their services, a fee of $1,000 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 one-half of the respective fee per meeting attended.
Chairmen of committees are paid an additional annual fee of $2,000. Under the
1995 Director Plan, each outside director also receives, on an annual basis,
restricted stock awards of 1,000 shares of the Company's Common Stock and
non-qualified stock options exercisable for the purchase of 4,000 shares of the
Company's Common Stock. Directors who are also employees of the Company are not
separately compensated for services rendered as directors. In 1995, Messrs.
Edwards, Gould, Grosh, Thacher, Trauscht and Van Leuven were each granted
options to purchase 4,000 shares of the
7
<PAGE>
Company's Common Stock at an exercise price of $7.875 per share and restricted
stock awards of 500 shares of the Company's Common Stock under the 1995 Director
Plan.
Under the 1988 Director Plan, 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, and each person who became an outside director after that date and
prior to March 23, 1995 was granted an option to purchase 40,000 shares. The
exercise price of each option granted under the 1988 Director Plan was 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 was granted. 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. Outside directors who join the Board after March 22, 1995 are not
entitled to receive stock options under the 1988 Director Plan.
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 for the purpose of maintaining
sound and adequate financial reporting and auditing practices. The members of
the Audit Committee are Mr. Thacher, Chairman, Dr. Grosh and Mr. Trauscht.
During 1995, the Audit Committee held three 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; (ii) approve an appropriate
compensation level for the chief executive officer based on personal performance
and responsibilities as well as compensation practices for like executives in
competitive industries and 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; (vi)
undertake studies with Company employees or outside consultants to determine the
competitiveness of Company benefit plans as to content and cost; (vii) make
recommendations to the Board of Directors and management, as appropriate, as to
amendments, discontinuations and initiations of benefit plans; (viii)
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 (ix) perform such collateral advisory and
8
<PAGE>
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, Mr. Gould and Mr.
Van Leuven. During 1995, the Compensation Committee held three 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. Van
Leuven, Chairman, Mr. Farrar and Mr. Gould. During 1995, the Executive Committee
did not hold any meetings.
Nominating Committee. The Nominating Committee is comprised of not fewer
than three members. 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 Dr. Edwards,
Chairman, Mr. Thacher and Mr. Trauscht. During 1995, the Nominating 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
the executive officers of the Company, as defined under the rules of the
Securities and Exchange Commission.
The Committee is comprised of the non-employee directors of the Company
listed at the end of this report. No member of the Committee has any insider or
interlocking relationship with the Company, as these terms are defined under
rules 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') other than compensation
established pursuant to provisions of his employment contract and, with advice
from the CEO, to each of the other executive officers of the Company, including
the executive officers named below in the Summary Compensation Table.
The Committee works with an outside compensation consultant and supports
its compensation decisions by analysis of published surveys and periodic special
studies.
9
<PAGE>
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 support and reinforce its long-term business
strategy and link pay to stockholder value. The programs provide executive
officers and other key employees with the opportunity to earn market competitive
salaries and 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:
o Attract and retain high-quality executives with experience in the
Company's markets.
o Align compensation with the goals and expectations of the Company and
each business unit.
o Vary individual compensation based on performance as measured by
corporate and business unit financial results, strategic achievements and
individual contributions.
o Align executives' interests with the long-term interests of stockholders
by enabling significant Company stock ownership.
The Company achieves these goals through a compensation strategy of
competitive salaries, annual incentive and stock ownership opportunities.
Section 162(m) of the Internal Revenue Code (the 'Code') precludes tax
deductions for compensation paid in excess of $1 million to certain executive
officers unless specified conditions are met. Based on current pay levels and
the design of existing compensation plans, the Committee believes that any tax
deductions that may be lost by reason of Section 162(m) for such compensation
would not be material for the foreseeable future. The Equity Incentive Plan
conforms to Section 162(m) conditions that permit tax deductions.
PAY POSITIONING
The Committee's executive compensation program is designed to provide an
opportunity for compensation, through the three components described below, that
varies with performance relative to a peer group of 36 companies. The peer group
serves as the comparison group for pay and includes most of the companies that
are in the performance comparison reflected in the performance graph shown
below. Companies were selected for the peer group based on five criteria, which
are: (i) the company's stock is publicly traded, (ii) the company operates with
multiple lines of business, (iii) the company manufactures engineered industrial
products, (iv) the company operates globally, with a mix of domestic and
international businesses, and (v) the company has overall revenues within a
range of $160 million to $10 billion. The pay levels determined from these 36
companies are adjusted to reflect the Company's revenue size. Of the 36
companies in the peer group, nine are included in the S&P Manufacturing
(Diversified Industrials) Index, which is reflected in the performance graph
shown below. The Committee believes that comparison to these pay and performance
groups is appropriate. Competitive levels of pay for purposes of compensation
comparison are obtained from compensation consultants.
Total cash compensation (base salary plus annual incentive) is targeted at
the median of the peer group total cash compensation for comparable executive
position responsibilities and company and business unit size. Total cash
compensation is sufficiently variable so that performance that is above
10
<PAGE>
targeted performance, as approved annually by the Board, will result in pay that
is above median levels of total cash compensation, and performance that is below
targeted levels will result in pay that is below median levels of total cash
compensation. Long-term incentive compensation has been targeted to be
comparable to the median of the peer group, after adjustment for the Company's
revenue size.
PAY MIX AND MEASUREMENT FOR EXECUTIVE OFFICERS
The compensation of executive officers 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 Equity Incentive Plan. In general, the proportion of an executive's
compensation that is Executive Incentive Compensation increases with the level
of responsibility of the officer. Executive officers also receive various
benefits, including life, medical and disability insurance, 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, including revenue size, within the peer
group. The Company maintains an executive salary administration program which
uses external and internal comparisons to set salary grades and ranges based on
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 granted during 1995 to four executive officers.
Overall, base salaries of executive officers are consistent with the Company's
pay level policy.
Executive Incentive Compensation
The Committee administers an annual cash incentive program for executive
officers, as well as other management employees. Executive officers are either
corporate executives or group executives designated by the Company's Board of
Directors who are responsible for a significant business segment.
Each year the Committee recommends to the Company's Board of Directors an
individual and aggregate target cash bonus amount for executive officers that
reflects approximate median levels of the peer group companies. Actual awards
vary from each target bonus amount for executive officers based on the financial
performance of the Company and, for group executives, on the financial and
strategic performance of the group business segment, as compared to goals
established by the Committee and approved by the Board of Directors. Awards also
vary based on individual performance related to non-financial performance
objectives.
For 1995, an incentive award program was established at the beginning of
the year by the Board of Directors, which was based on corporate net income
excluding extraordinary items and divestiture gains and losses. It was
anticipated that incentive awards at competitive target levels would be paid if
the Company achieved its planned financial objectives. A threshold performance
level was established below which no incentive awards would be paid. Awards for
performance above the threshold but below planned results would be as determined
by the Committee and the Board. At year end, the Committee determined that,
after adjusting for extraordinary items and divestiture gains and losses, net
income exceeded the threshold but fell short of planned objectives. Individual
incentive awards were
11
<PAGE>
approved for the two group executives based on group financial performance
compared to the business plan, improvements in revenue, earnings and return on
investment and achievement of strategic and non-financial objectives. Those
factors were considered as a whole without assigning specific relative
importance to any such factors. Incentive awards for corporate staff executive
officers were approved based on individual performance. Actual awards approved
for executive officers, excluding the CEO, expressed as a percentage of target
award, ranged from 42% to 68%, with an average of 51% of target award.
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.
Awards under the Equity Incentive Plan are designed to strengthen the
alignment of 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 1995, at not less than 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 peer
group companies and the judgment of the Committee.
The total number of option shares granted to all employees in 1995 was
approximately 1.5% of the total number of shares outstanding, a grant rate which
is within the median range for manufacturing companies. The average number of
option shares granted to executive officers, excluding the CEO, in 1995 was
13,750 shares.
CHIEF EXECUTIVE OFFICER COMPENSATION
The principles guiding compensation for the CEO are the same as those set
forth for other executive officers.
In 1994 Mr. Farrar's compensation was restructured in order to base a
higher portion of his compensation on incentive and equity awards. In keeping
with this, no change was made in his base salary in 1995. For 1995, the
Committee and the Board awarded Mr. Farrar a cash incentive of $90,000, which is
40% of his median target award. This reduction reflects the overall financial
performance of the Company but acknowledged Mr. Farrar's leadership and
individual performance relative to restructuring and other corporate objectives.
As with other executive officers, no specific relative importance was assigned
to any one factor. In addition, Mr. Farrar received an annual grant of 70,000
option shares under the Equity Incentive Plan.
Submitted by the Compensation Committee
of the Company's Board of Directors:
Richard J. Grosh, Chairman
James B. Edwards
J. Spencer Gould
Arthur E. Van Leuven
12
<PAGE>
PERFORMANCE GRAPH
The following graph sets forth a comparison of five-year cumulative total
return among the Company, the S&P 500 Index, the S&P SmallCap 600 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, 1990 in
each of the Company, the S&P 500 Index, the S&P Manufacturing (Diversified
Industrials) Index and the S&P SmallCap 600 Index.
CUMULATIVE TOTAL RETURN
Based on reinvestment of $100 beginning December 31, 1990
$300 |------------------------------------------------------------------|
| |
| |
| |
| X |
$250 |------------------------------------------------------------------|
| # |
| |
| & |
| X |
200 |-------------------------------------------------X----------------|
| |
| X |
| # |
| &# & |
150 |---------------X--------------------------------------------------|
| & |
| & # |
| # * |
| |
100 |----*----------*--------------------------------------------------|
| * |
| |
| * |
| * |
50 |------------------------------------------------------------------|
| |
| |
| |
| |
0 |----|----------|---------|-----------|-----------|-----------|----|
1990 1991 1992 1993 1994 1995
1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ----
* = Imo Industries Inc. 100 100 63 89 118 66
& = S&P 500 100 130 140 155 157 215
# = S&P Manufacturing
(Diversified Ind)Index 100 123 133 161 167 235
X = S&P 600 SmallCap Index 100 148 180 213 203 264
13
<PAGE>
The following table sets forth certain information with respect to
compensation paid or accrued by the Company during each of the three fiscal
years ended December 31, 1995, December 31, 1994 and December 31, 1993 to the
chief executive officer of the Company and the other four most highly
compensated executive officers of the Company who served in 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------
AWARDS
------------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES ALL
-------------------- STOCK UNDERLYING OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) AWARDS($) OPTIONS(#) COMPENSATION
($)(1)
- ------------------------------------- --------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Donald K. Farrar(2)........... 1995 $ 450,000 $ 90,000 $ -- 70,000 $ 8,359
Chairman, President and 1994 450,000 210,000 390,000(3) 150,000 9,000
Chief Executive Officer 1993 151,282 0 221,250(3) 150,000 390
John J. Carr.................. 1995 240,000 65,000 -- 25,000 7,245
Executive Vice President 1994 240,000 85,000 -- 25,000 6,480
1993 228,000(4) 22,000 -- 25,000 1,123
William M. Brown.............. 1995 230,000 55,000 -- 20,000 7,105
Executive Vice President, 1994 230,000 85,000 -- 25,000 6,210
Chief Financial Officer 1993 218,500(4) 0 -- 39,570 51,076(5)
and Corporate Controller
Brian Lewis(6)................ 1995 216,000 35,000 -- 20,000 3,800
Executive Vice President...... 1994 198,900 70,000 -- 25,000 3,167
1993 185,250(4) 0 -- 37,005 2,947
Thomas J. Bird.................1995 200,000 40,000 -- 20,000 5,796
Executive Vice President, 1994 179,167 70,000 -- 22,000 4,876
General Counsel and Secretary 1993 166,250(4) 0 -- 25,301 959
</TABLE>
- ------------------
(1) For 1995, the amounts set forth in this column consist of life insurance
premiums paid by the Company on behalf of such persons.
(2) Mr. Farrar joined the Company as Chief Executive Officer and President in
September 1993. As an employee director, Mr. Farrar is not paid any director
fees in connection with his service as a member of the Board.
(3) Mr. Farrar's 1993 restricted stock award for 30,000 shares of Common Stock
has a performance-based acceleration-of-vesting feature designed to align
Mr. Farrar's interests with those of the stockholders. The restrictions
terminate in all events on September 13, 2003; however, this restricted
stock will vest prior to that date 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. Mr. Farrar's 1994 restricted stock award for 40,000
shares vested as to 20% of the shares, or 8,000 shares, on December 31,
1995, and will vest in increments of 10% of the shares, or 4,000 shares,
each December 31 thereafter commencing December 31, 1996 and ending December
31, 2003, except that all shares covered by such award will vest in any
event on the first day of the month preceding Mr. Farrar's 65th birthday
(i.e., on May 1, 2003) if he remains an employee of the Company or one of
its affiliates until that date. Any dividends paid on the shares of
restricted stock during the respective restriction periods will be paid to
Mr. Farrar. As of December 31, 1995, the 62,000 shares of restricted stock
14
<PAGE>
held by Mr. Farrar had a value of $426,250 based upon the $6.875 closing
price of the Company's Common Stock on December 31, 1995.
(4) Salaries paid in 1993 to Messrs. Carr, Brown, Lewis and Bird reflect a
voluntary 10% salary reduction for six months as part of the Company's cost
reduction program.
(5) This amount includes a special payment made to Mr. Brown pursuant to his
employment agreement.
(6) Mr. Lewis is paid by Imo Industries (UK) Limited, a United Kingdom
subsidiary of the Company, locally in pounds sterling, translated to U.S.
dollars in this table at an exchange rate of 1.54 for 1995, 1.53 for 1994
and 1.49 for 1993.
The following table sets forth information with respect to options granted
to the persons named in the Summary Compensation Table above during the fiscal
year ended December 31, 1995.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- -----------------------------------------------------------------------------------------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS
OPTIONS GRANTED TO EXERCISE OR GRANT DATE
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME (#)(1) FISCAL YEAR ($/SH) DATE VALUE($)(2)
- ------------------------ ---------- -------------- ----------- ---------- ------------------
<S> <C> <C> <C> <C> <C>
Donald K. Farrar............70,000 28% $ 6.00 10/26/05 169,260
John J. Carr................25,000 10% 6.00 10/26/05 60,450
William M. Brown............20,000 8% 6.00 10/26/05 48,360
Brian Lewis................ 20,000 8% 6.00 10/26/05 48,360
Thomas J. Bird..............20,000 8% 6.00 10/26/05 48,360
</TABLE>
- ------------------
(1) Each option becomes exercisable in increments of 25% of the shares
underlying such options commencing on the first, second, third and fourth
anniversaries of the date of the option grant. All unvested options will
vest in full upon the determination by the committee administering the
Equity Incentive Plan that a change in control of the Company has occurred
or upon the liquidation or dissolution of the Company.
(2) 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. Under this model, the value of stock options will
increase directly with the 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, 35.59% stock price volatility, 5.96% risk-free rate of return,
annual dividend yield of 2.52% and an exercise price equal to stock price on
the date of grant of $6.00. The advisor has used the historical annual
dividend yield and stock price volatility rate as assumptions for the
Black-Scholes model. These are not projections, and therefore there is no
guarantee that these assumptions will be the actual annual dividend yield or
stock price volatility rate over the next 10 years.
15
<PAGE>
The following table sets forth information with respect to options held at
December 31, 1995 by the persons named in the Summary Compensation Table above.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FY-END(#) AT FY-END ($)(2)
------------------------- -------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------- ----------- ------------ ----------------- ------------
<S> <C> <C> <C> <C>
Donald K. Farrar..........................60,000 285,000 0 $ 61,250
John J. Carr..............................58,750 56,250 0 21,875
William M. Brown..........................31,429 53,141 0 17,500
Brian Lewis...............................30,755 51,250 0 17,500
Thomas J. Bird............................19,903 47,398 0 17,500
</TABLE>
- ------------------
(1) No options were exercised by the named executive officers during the year
ended December 31, 1995.
(2) Represents the difference between the aggregate exercise price and the
aggregate market value as of December 31, 1995.
TERMINATION AGREEMENTS
The Company has termination agreements with various executive officers of
the Company, including Messrs. Farrar, Carr, Brown, Lewis and Bird, 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 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
16
<PAGE>
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 $4,484,000.
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, 1995 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>
FINAL YEARS OF SERVICE
AVERAGE ----------------------------------------------------------------------------
EARNINGS 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- ------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
$ 100,000 $ 16,323 $ 24,485 $ 32,646 $ 40,808 $ 44,292 $ 47,776
150,000 25,323 37,985 50,646 63,308 68,792 74,276
200,000 34,323 51,485 68,646 85,808 93,292 100,776
250,000 43,323 64,985 86,646 108,308 117,792 127,276
300,000 52,323 78,485 104,646 130,808 142,292 153,776
350,000 61,323 91,985 122,646 153,308 166,792 180,276
400,000 70,323 105,485 140,646 175,808 191,292 206,776
450,000 79,323 118,985 158,646 198,308 215,792 233,276
500,000 88,323 132,485 176,646 220,808 240,292 259,776
550,000 97,323 145,985 194,646 243,308 264,792 286,276
600,000 106,323 159,485 212,646 265,808 289,292 312,776
700,000 124,323 186,485 248,646 310,808 338,292 365,776
800,000 142,323 213,485 284,646 355,808 387,292 418,776
900,000 160,323 240,485 320,646 400,808 436,292 471,776
1,000,000 178,323 267,485 356,646 445,808 485,292 524,776
1,100,000 196,323 294,485 392,646 490,808 534,292 577,776
</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
17
<PAGE>
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,
1995, covered compensation under the Salaried Pension Plans 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, whose covered compensation under the Salaried Pension Plans
would be as follows: Mr. Farrar, $660,000; Mr. Brown, $315,000; and Mr. Bird,
$270,000.
As of December 31, 1995, the persons named in the Summary Compensation
Table had the following years of benefit service as defined under the Salaried
Pension Plans: Mr. Farrar, 2.3 years; Mr. Brown, 3.6 years; Mr. Carr, 29.3
years; and Mr. Bird, 5.5 years. Effective January 1, 1992, Mr. Lewis was
transferred to the Morse Controls Limited Pension and Life Assurance Plan (the
'Morse Controls Plan'), a United Kingdom pension plan. The Morse Controls Plan,
to which both IMO Industries (UK) Limited and Mr. Lewis contribute, provides a
normal retirement pension of 1/45th of the final average salary, which includes
his executive incentive bonus, for each year of pensionable service. Based upon
his years of benefit service at December 31, 1995 of 23.9 years, Mr. Lewis's
estimated annual benefit under this plan together with vested benefits under the
Salaried Plan is $142,300, assuming translation of such amount from pounds
sterling into U.S. dollars at an exchange rate of 1.54.
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 1995, the Company transferred $246,053 to the
Trust.
18
<PAGE>
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 LLP as the Company's
independent auditors for its 1996 fiscal year. Election of Ernst & Young LLP
will require the affirmative vote of the holders of a majority of the shares of
Common Stock represented in person or by proxy at the Annual Meeting. The Board
of Directors recommends a vote FOR the approval of the election of Ernst & Young
LLP as the Company's auditors for its 1996 fiscal year.
Representatives of Ernst & Young LLP 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.
ANNUAL REPORT
A copy of the Company's Annual Report for its fiscal year ended December
31, 1995 is being mailed to the Company's stockholders with this Proxy
Statement.
STOCKHOLDER PROPOSALS FOR 1996 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 1997 Annual
Meeting of Stockholders must deliver such proposal in writing to the Secretary
of the Company at the Company's principal executive offices at 1009 Lenox Drive,
Lawrenceville, New Jersey 08648, not later than December 5, 1996.
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
Executive Vice President,
General Counsel and Secretary
Date: April 4, 1996
19
<PAGE>
IMO INDUSTRIES INC.
PROXY
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 21, 1996
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 Sheraton New York Hotel and
Towers, 811 Seventh Avenue at 53rd Street, New York, New York 10019, on Tuesday,
May 21, 1996 at 10 a.m. and at any adjournment thereof, as shown on the voting
side of this card.
SEE REVERSE
SIDE
<PAGE>
| 2327
|-------
/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 I DIRECTORS AND FOR PROPOSAL 2.
FOR WITHHELD
1. Elections of All / / / /
Nominees for NOMINEES:
Class I Directors Richard J. Grosh
Listed Hereon. Arthur E. Van Leuven
FOR ALL NOMINEES LISTED HEREON, EXCEPT VOTE WITHHELD FROM THE
FOLLOWING NOMINEE(S):
- --------------------------------------------------
FOR AGAINST ABSTAIN
2. ELECTION OF ERNST & YOUNG LLP as the
independent auditors for the Company's 1996 / / / / / /
fiscal year. The Board of Directors
recommends a vote FOR this proposal.
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
the stockholder's 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
