SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN
PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2))
TECUMSEH PRODUCTS COMPANY
(Name of registrant as specified in its charter)
[not applicable]
(Name of person(s) filing proxy statement, if other than registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: ______
______________________________________________________________________
(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 previsouly 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>
T E C U M S E H P R O D U C T S C O M P A N Y
100 EAST PATTERSON STREET
TECUMSEH, MICHIGAN 49286
[ LOGO ART ]
March 19, 1999
Dear Shareholder:
We cordially invite you to attend our 1999 annual meeting of shareholders
next month in Tecumseh, Michigan.
Only Class B shareholers will vote at the meeting. However, all
shareholders are most welcome to attend. Starting today, we are sending the
enclosed proxy statement to all our shareholders and a form of proxy to
Class B shareholders only.
If you are a Class B shareholder, your vote is very important. Even if
you attend in person, please complete and mail the enclosed proxy at your
earliest convenience. Thank you.
Sincerely,
/s/ Kenneth G. Herrick
--------------------------
Chairman of the Board of
Directors
/s/ Todd W. Herrick
--------------------------
President and Chief
Executive Officer
<PAGE>
T E C U M S E H P R O D U C T S C O M P A N Y
100 EAST PATTERSON STREET
TECUMSEH, MICHIGAN 49286
[ LOGO ART ]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Date: Wednesday, April 28, 1999
Time: 9:00 a.m.
Location: Tecumseh Country Club
Tecumseh, Michigan
From the center of Tecumseh, go north on the Tecumseh-Clinton
Road about one mile to Burt Street. Turn right. Tecumseh
Country Club is on the south side of Burt Street about one mile
east of the Tecumseh-Clinton Road.
The purposes of this year's annual meeting are:
* To elect directors for the following year.
* To consider any other matters properly presented at the meeting.
All shareholders are most welcome to attend the meeting, but only those
who held Class B shares at the close of business on March 5, 1999 will be
entitled to vote.
If you are a Class B shareholder, you will find enclosed a form of
proxy solicited by our Board of Directors. Whether or not you plan to attend
the meeting, please take the time to vote by completing and mailing the
enclosed proxy. Even if you sign a proxy, you may still attend the meeting
and vote in person. You may revoke your proxy any time before the voting
begins.
Your vote is very important.
Thank you.
TECUMSEH PRODUCTS COMPANY
Daryl P. McDonald
Corporate Counsel and Secretary
March 19, 1999
<PAGE>
PROXY STATEMENT
The Board of Directors of Tecumseh Products Company is soliciting
proxies to vote Class B shares at our 1999 annual meeting of shareholders.
This proxy statement contains information that may help you decide whether to
sign and return the enclosed proxy.
Please read this proxy statement carefully. The appendices contain
important information about share ownership, executive compensation, and
market performance. You can obtain more information about Tecumseh Products
Company from our 1998 annual report to shareholders and from the public
documents we file with the SEC.
VOTING
We have two classes of common stock: Class B, which has full voting
rights, and Class A, which generally has no voting rights. Nothing on the
agenda for this year's annual meeting will require a vote by Class A
shareholders so we are only soliciting proxies from Class B shareholders.
At the close of business on March 5, 1999 (the record date for the
meeting), 5,470,146 Class B shares and 15,138,838 Class A shares were
outstanding. To have a quorum, a majority of the Class B shares must be
present at the meeting -- either in person or by proxy. If you complete the
enclosed proxy and return it before the meeting, the persons named will vote
your shares as you specify in the proxy. You may revoke a proxy any time
before voting begins.
ELECTION OF DIRECTORS
Election Procedure
Our bylaws authorize the Board of Directors to determine the number of
directors that will make up the full board. We currently have nine directors.
The board has decided to keep the same number for the coming year and has
nominated all nine incumbent directors for reelection. If you return a proxy,
it will be voted for all of the board's nominees or, if you specify
otherwise, as you specify. If a nominee becomes unable to serve, which we do
not expect to happen, your proxy will be voted for a substitute determined in
the best judgment of the proxy holders.
From the persons duly nominated, directors will be elected by plurality
vote of the Class B shareholders present or represented at the meeting. This
means that this year, regardless of the number of Class B shares not voted
for a nominee, the nominees who receive the highest through ninth highest
numbers of votes will be elected.
Nominees for Director
Kenneth G. Herrick (director since 1951, age 77). Chairman of the Board
of Directors of Tecumseh Products Company. Mr. Herrick is a member of the
Boards of Trustees of Howe Military School and Herrick Foundation.
Todd W. Herrick (director since 1973, age 56). President and Chief
Executive Officer of Tecumseh Products Company. Mr. Herrick is a member of
the Board of Directors of Comerica Bank and a member of the Boards of
Trustees of Henry Ford Health System, Albion College, Howe Military School,
and Herrick Foundation. He is also a member of the Advisory Boards to the
School of Business of the University of Michigan and the School of Business
of the University of Notre Dame. He serves on our Pension and Investment
Committee and is a non-voting member of our Audit Committee. Mr. Herrick is
the son of Kenneth G. Herrick
John H. Foss (director since 1982, age 56). Vice President, Treasurer
and Chief Financial Officer of Tecumseh Products Company. Mr. Foss is a
member of the Boards of Directors of United Bancorp, Inc., United Bank &
Trust, and The Bartech Group, Inc. He serves on our Pension and Investment
Committee and is a non-voting member of our Audit Committee.
J. Russell Fowler (director since 1967, age 80). Retired since 1994;
Chairman Emeritus of Jacobson Stores, Inc. (mercantile business) from 1992 to
1994; Chairman of the Board of Directors and Chief Executive Officer of
Jacobson Stores, Inc. from 1982 to 1992. Mr. Fowler is a member of the Board
of Directors of Butterfield Investment Company. He serves on our Governance
and Executive Compensation Committee and our Audit Committee.
1
<PAGE>
John W. Gelder (director since 1989, age 65). Senior member of the law
firm of Miller, Canfield, Paddock and Stone, P.L.C. Mr. Gelder is a member of
the Board of Trustees of Herrick Foundation. He serves on our Pension and
Investment Committee and our Audit Committee.
Stephen L. Hickman (director since 1991, age 56). Chairman of the Board
of Directors, President, and Chief Executive Officer of Brazeway, Inc.
(manufacturer of aluminum extrusions and fabricator of aluminum products).
Mr. Hickman is a member of the Boards of Directors of MidAm Bank,
Kenmore-Brazeway Ltd., Spangler Candy Company, and Stonebridge Industries. He
also is a member of the Board of Trustees of Siena Heights University. He
serves on our Governance and Executive Compensation Committee.
Peter M. Banks (director since 1991, age 61). President, Chairman of
the Board, and Chief Executive Officer of ERIM International, Inc.
(government research and development services) since 1997; President and
Chief Executive Officer of Environmental Research Institute of Michigan
(government research and development services) from 1995 to 1997; Professor
and Dean of the College of Engineering of the University of Michigan from
1990 to 1994. Dr. Banks serves on our Governance and Executive Compensation
Committee and our Pension and Investment Committee.
Jon E. Barfield (director since 1993, age 47). Chairman, President, and
Chief Executive Officer of The Bartech Group, Inc. (contract employment and
related staffing services) since 1997; Chairman and Chief Executive Officer
of The Bartech Group, Inc. from 1995 to 1997; President of The Bartech Group,
Inc. from 1981 to 1995. Mr. Barfield is a member of the Board of Directors of
National City Corporation. He also is a Charter Trustee of Princeton
University, a member of the Boards of Trustees of Kettering University, Henry
Ford Museum and Greenfield Village, and a director of Blue Cross and Blue
Shield of Michigan and the Community Foundation for Southeastern Michigan. He
serves on our Pension and Investment Committee and our Audit Committee.
Ralph W. Babb, Jr. (director since 1998, age 50). Executive Vice
President and Chief Financial Officer of Comerica Incorporated and of its
principal subsidiary, Comerica Bank, since 1995; Vice Chairman of Mercantile
Bancorporation Inc. and of its subsidiary, Mercantile Bank of St. Louis, from
1987 to 1995. Mr. Babb is a member of the Boards of Directors of the Detroit
Symphony Orchestra, Oakland University Foundation, and Citizens Research
Council of Michigan, a member of the Finance Committee of The Detroit Medical
Center, a member of the Advisory Board for the St. Vincent & Sarah Fisher
Center, and a member of the United Way Community Services Community Leaders
Council. He serves on our Governance and Executive Compensation Committee and
our Audit Committee.
Director Compensation
We do not pay employees any separate compensation for serving as
directors. We pay all other directors a monthly retainer of $1,000, a $1,500
fee for each board meeting attended, and a $1,000 fee for each committee
meeting attended. We also reimburse those directors for travel expenses.
Directors' Meetings and Standing Committees
We held ten board meetings during 1998. The Audit Committee met three
times during the year, and the Governance and Executive Compensation
Committee met four times. Each director attended at least 75% of the total of
all board meetings and all meetings of board committees on which he served
that were held during his period of service, except that Kenneth G. Herrick
attended 70% of the meetings applicable to him.
We have no standing nominating committee or committee performing
similar functions.
Audit Committee
The Audit Committee selects and recommends to the board the employment
of independent public accountants and reviews the audit plans of our
independent public accountants and internal auditors, the scope and
effectiveness of their audits, the fees the independent public accountants
charge, and our annual financial statements before release. It
2
<PAGE>
also reviews and acts on comments and suggestions made by our independent
public accountants and internal auditors.
Governance and Executive Compensation Committee
The overall mission of the Governance and Executive Compensation
Committee is to assist the board in conducting our business successfully so
as to maximize long-term benefits to shareholders, including optimizing
long-term financial success. Its functions include:
* actively developing and recommending to the board strategies for
achieving those goals
* monitoring and reporting to the board on the effectiveness of
management policies and decisions
* annually reporting to the board the committee's assessment of the
board's performance in light of the objectives described above
* annually reviewing with the board the appropriate skills and
characteristics required of board members in the context of the
then current composition and needs of the board, including issues
of diversity, age, and skills
* reviewing our policies for compensating outside directors and, if
appropriate, making recommendations for changes
* annually fixing the salaries of our Chief Executive Officer and
other executive officers, considering, developing, reviewing, and
making recommendations about programs for annual and long-term
incentive compensation for those executives and for other key
employees, and administering those programs, including our
Management Incentive Plan.
No director on this committee can be an employee of Tecumseh Products
Company.
GOVERNANCE AND EXECUTIVE COMPENSATION COMMITTEE REPORT
This report is provided by the Governance and Executive Compensation
Committee.
Compensation Philosophy and Objectives
We follow a "pay for performance" philosophy designed to accomplish three
primary objectives:
* Encouraging teamwork among members of management and excellence in
the performance of individual responsibilities.
* Aligning the interests of key managers with the interests of
shareholders by offering an incentive compensation vehicle that is
based on growth in return on equity and shareholder value.
* Attracting, rewarding, and retaining strong management.
Our "pay for performance" strategy is intended to enhance shareholder
value:
* In the short term, by focusing management's attention on return on
equity, cash return on assets, and other measures of current
financial performance so as to challenge each business group to
achieve and maintain positions of market leadership, to reduce costs
where appropriate, and to continually seek to maintain and enhance
Tecumseh Products Company's reputation for excellence in product
quality and customer service.
* In the longer term, by causing a substantial portion of each
executive's potential compensation to be directly tied to market
performance of the Class A shares.
Management Incentive Plan Awards
The principal tool for implementing our "pay for performance"
philosophy is the Management Incentive Plan, a so-called "phantom stock" plan
which covers approximately 35 key executives, including all executive
officers. (We also have a plan for awarding annual cash bonuses based on
similar performance criteria, which covers approximately 100 lower level
management employees.) The Management Incentive Plan is structured to provide
both a short-term incentive tied to achievement of company-wide
<PAGE>
and business unit annual performance goals and a long-term incentive tied to
the market performance of the Class A shares.
All plan awards are maintained in phantom stock "units" considered for
record keeping purposes as equivalents to Class A shares and valued
accordingly. Except in cases of earlier employment termination due to death,
disability, or retirement, or in the event of a "change in control" (as
defined in the plan), the entire award granted an employee under the plan for
any year (including the 1998 awards reported in the Summary Compensation
Table) is subject to forfeiture if the grantee does not remain with us for at
least five full fiscal years. As cash dividends are paid on Class A shares,
additional phantom stock units (also subject to forfeiture), equal in value
to the dividends paid, are credited to employee accounts under the plan.
Thus, the potential payout on an award, although payable only in cash, is
tied directly to the market value performance of Class A shares over a
five-year period. For purposes of computations under the plan, units are
valued at the average of the closing prices for the Class A shares on the
first trading day of the month over the eleven months preceding the valuation
date rather than by the method required by the SEC for the Summary
Compensation Table.
The Management Incentive Plan affords us broad discretion to determine
the amounts of awards granted, subject only to a limitation setting the
maximum number of units awardable during a given year at 2% of the number of
Class A shares outstanding at the end of the year. We also have broad
discretion under the plan to establish criteria under which otherwise
eligible employees may receive awards. In general, however, as was true for
1998, before or early in each year, we expect to establish objective
company-wide and business group performance criteria and, after year-end, to
use actual performance -- measured against these criteria -- as the principal
basis for phantom stock grant decisions for that year.
For 1998, the company-wide criteria established for the Corporate
Office Group, which includes Todd W. Herrick and John H. Foss, related to
return on equity, both in absolute terms and in relation to historical
performance. The same company-wide return on equity criteria also were
established for each business unit, and additional group criteria relating to
cash return on assets (both absolute and relative to prior performance) also
were established for each business unit, including the Compressor Group
headed by Mr. McCloskey and the Engine and Power Train Group headed by Mr.
Martinco. Under the plan as implemented for 1998, depending on the extent to
which actual return on equity for that year (and, for employees in a business
unit, the extent to which the unit's actual cash return on assets for the
year) fell within or exceeded our pre-approved ranges, each covered employee
could receive an award of phantom stock units equal to up to 40% of 1998
salary based on these objective criteria. In addition, each covered employee
could receive an award of up to 10% of 1998 salary depending on our
evaluation of 1998 performance based on achievement of business plan goals,
completion of specified strategic plan actions, recommendations of the CEO,
and such other factors as we deem appropriate.
The 1998 awards based on return on equity were approximately the same
as last year. Awards based on cash return on assets increased slightly for
the Compressor Group and decreased somewhat for the Engine and Power Train
Group. The balance of each award, while necessarily determined in a more
subjective manner, was also based on 1998 performance. We believed that the
performance of each business group reflected a team effort on the part of the
executives in that group. In the interest of maintaining team spirit, we
concluded that all covered employees in a given group should receive awards
which were identical in terms of percentage of salary. In fixing this portion
of the awards for executives in the Corporate Office Group (which includes
the CEO and CFO), we considered the degree to which they had succeeded in
accomplishing strategic objectives established at the beginning of the year
by the CEO, including objectives relating to labor negotiations, year 2000
computer implementation, investor relations, market price of shares, the
scroll compressor, and other matters. The non-objective portions of the
awards for participating employees in other groups were based principally on
the CEO's recommendations, which were in turn based on the performance of
those groups in relation to their business plans for the year.
4
<PAGE>
Salaries
In keeping with our "pay for performance" philosophy, we believe
executive officers should receive salaries that are reasonable but modest in
light of their experience, skills, and responsibilities, and that the
opportunity to achieve significantly greater total compensation should be
tied to Tecumseh Product Company's short-- and long-term performance through
the potential for awards under the Management Incentive Plan. When we
considered 1998 executive salaries, it was our shared perception, based on
our general business knowledge and without review of any data specifically
collected by us for that purpose, that existing salary levels for the CEO and
CFO continued to be too low given their responsibilities. In our salary
deliberations with respect to executive officers other than the CEO, we
considered the CEO's recommendations. Fiscal 1997 performance also was a
factor, but not a controlling factor, in our decisions on 1998 salaries, due
to our belief that short-term performance generally is not appropriate for
consideration with respect to that form of compensation. Based on these
considerations, we decided to establish the 1998 salary for each executive
officer at the level reported in the Summary Compensation Table. Except for
the fact that we did not obtain a recommendation from the CEO concerning his
own salary, we made our salary determinations on the same basis for each
executive officer.
Concluding Observations
We expect to continue our "pay for performance" strategy for the
foreseeable future. For 1999, we have established new objective criteria for
awards under the Management Incentive Plan, eliminated the non-objective
portion of the awards, and increased the maximum possible award to 80% of
1999 salary. We believe these changes are appropriate to maintain the
incentive effects sought to be provided by the plan. We intend to continue to
closely monitor the impact of compensation philosophy on financial
performance and shareholder value and to consider additional ways in which
current plans and policies might be improved.
Section 162(m) of the Internal Revenue Code generally prohibits the
deduction of certain compensation in excess of $1 million per year paid by a
publicly-held corporation to any individual named in the corporation's
summary compensation table for the year. The compensation paid to each of our
executive officers was well below $1 million for 1998, and we expect the same
will be true for the current year. Therefore, we have decided to defer
consideration of any compensation policies related to Section 162(m) for the
present.
Presented by the members of the Governance and Executive Compensation
Committee of the Board of Directors
Ralph W. Babb, Jr., Chairman
Peter M. Banks
J. Russell Fowler
Stephen L. Hickman
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Babb and Mr. Fowler replaced Mr. Barfield and Mr. Richardson on the
Governance and Compensation Committee during 1998 and therefore did not take
part in its deliberations about 1998 salaries or establishing 1998 performance
criteria under the Management Incentive Plan. Dr. Banks and Mr. Hickman served
on the committee throughout the period covered by its report. No one who served
on the committee is or ever has been an officer or employee of Tecumseh
Products Company or any of its subsidiaries.
Mr. Babb is an executive officer of Comerica Bank. In the normal course
of its business, Comerica has various banking relationships (both credit and
non-credit) with Tecumseh Products Company and with some of our executive
officers.
Mr. Foss (a director and executive officer) served during 1998 and
continues to serve on the board and compensation committee of The Bartech
Group, Inc. Mr. Barfield is Chief Executive Officer of Bartech, and his
family owns a majority of its stock.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Ciulla, Smith & Dale, LLP, our independent accountants for the fiscal
year ended December 31, 1998 and for many years
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before, will continue to serve for the fiscal year ending December 31, 1999.
A representative of Ciulla, Smith & Dale, LLP will be present at the annual
meeting and available to respond to appropriate questions from shareholders.
He will have an opportunity to make a statement if he so desires.
OTHER MATTERS
We know of no business to be acted on at the annual meeting other than
the matters listed in the accompanying notice. If any other matter does
properly come before the meeting, the proxy holders will vote on it in
accordance with their judgment.
Form 10-K
If you were a record or beneficial owner of either class of our common
stock on March 5, 1999, you may request a copy of the annual report on Form
10-K we filed with the SEC for 1998 (including the financial statements,
schedules, and exhibits) by writing to Daryl P. McDonald, Corporate Counsel &
Secretary, Tecumseh Products Company, 100 E. Patterson Street, Tecumseh,
Michigan 49286. We will provide these copies without charge. Our Form 10-K
may also be obtained through our website at http://www.tecumseh.com.
Shareholder Proposals in Our 2000 Proxy Statement
In order for shareholder proposals for the 2000 annual meeting of
shareholders to be eligible to be included in our proxy statement, they must be
received at our principal office no later than November 16, 1999. We retain the
right to omit any proposal if it does not satisfy the requirements of SEC Rule
14a-8.
Advance Notice Requirements
Our bylaws contain advance notice procedures which a shareholder must
follow to nominate a person for election to our board or to present any other
proposal at an annual meeting of shareholders. In general, these provisions
require notice of a nomination or other proposal expected to be made at an
annual meeting to be in writing, to contain specified information about the
nominee or other proposal and the shareholder proponent, and to be delivered
or sent by first class U.S. mail to our Secretary and received at our
principal office.
Except when an annual meeting is called for a date that is not within
20 days before or after the first anniversary of the prior year's annual
meeting (in which case other time limits apply), we must receive the
nomination or proposal no later than 60 days nor earlier than 90 days before
the first anniversary of the prior year's annual meeting. This means that any
nomination or proposal for next year's annual meeting must be received no
later than February 28, 2000 and no earlier than January 29, 2000. Management
proxies for the 2000 annual meeting may confer discretionary authority to
vote on an untimely proposal without express direction from shareholders
giving the proxies.
Proxy Solicitation Expenses
We will pay the expenses of this solicitation. We have engaged
Georgeson & Company Inc. to assist in soliciting proxies, for which we will
pay approximately $9,500 plus out-of-pocket expenses. We also may pay
brokers, nominees, fiduciaries, custodians, and other organizations
performing similar functions their reasonable expenses for sending proxy
material to principals and obtaining their instructions. In addition to
solicitation by mail, our directors, officers, and employees may solicit
proxies in person or by telephone, fax, or similar means.
Your vote is very important.
If you are a Class B shareholder, please complete and return the
enclosed proxy as soon as possible, even if you currently plan to attend the
annual meeting in person.
By Order of the Board of Directors,
/s/ Daryl P. McDonald
- --------------------------------
Daryl P. McDonald
Corporate Counsel and Secretary
Tecumseh, Michigan
March 19, 1999
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Appendix A
SHARE OWNERSHIP
5% Class B Shareholders
This table shows the Class B shares held by persons we know to be
beneficial owners of more than 5% of the class. We obtained the information
about Comerica Bank (which is as of December 31, 1997) and EQSF Advisers,
Inc. (which is as of December 31, 1998) from Schedules 13G they filed with
the SEC. The other information is as of March 5, 1999.
<TABLE>
<CAPTION>
Amount and Nature of Beneficial Ownership
-----------------------------------------------------------------
Sole Sole Shared Shared Percent
Voting Power Investment Power Voting Power Investment Power Total of Class
------------ ---------------- ------------ ---------------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
Herrick Foundation
150 W. Jefferson
Suite 2500
Detroit, MI 48226 1,367,525 1,367,525 1,367,525 25.0%
Kenneth G. Herrick
Tecumseh Products Co.
100 E. Patterson St.
Tecumseh, MI 49286 888,113 888,113 888,113 16.2%
Comerica Bank
411 W. Fort St.
Detroit, MI 48226 2,700 2,700 1,292,195 1,292,195 1,294,895 23.7%
John W. Gelder
150 W. Jefferson
Suite 2500
Detroit, MI 48226 100 100 1,049,321 1,049,321 1,049,421 19.2%
EQSF Advisers, Inc.
767 Third Ave.
New York, NY 10017 424,200 424,200 424,200 7.8%
</TABLE>
Kenneth G. Herrick, Todd W. Herrick, and John W. Gelder, all of whom
are directors and nominees for director, are members of the Board of Trustees
of Herrick Foundation.
Kenneth G. Herrick's shares are held as a trustee of trusts for the
benefit of himself and his descendants. The shares for which Mr. Gelder is
shown as having shared voting and investment power are held as a trustee of
the Kenneth Herrick trusts and of other trusts holding a total of 161,208
shares. Comerica Bank's shares include shares it held on the date of its
Schedule 13G as a trustee of the Kenneth Herrick trusts and of other trusts,
including those of which Mr. Gelder is a trustee.
EQSF Advisers, Inc. filed its Schedule 13G jointly with M.J. Whitman
Advisers, Inc. and Martin J. Whitman, all of whom share the same address. In
addition to the shares shown in the table, the Schedule 13G discloses that
M.J. Whitman Advisers, Inc. beneficially owns 125,590 shares, all with sole
voting and investment power, and that Mr. Whitman, who is the chief executive
officer and controlling person of EQSF Advisers, Inc. and M.J. Whitman
Advisers, Inc., disclaims beneficial ownership of all shares they own.
A-1
<PAGE>
Management's Beneficial Ownership
<TABLE>
<CAPTION>
Shares Beneficially Owned as of March 5, 1999
----------------------------------------------------------------
Class of Sole Voting and Aggregate
Common Investment Aggregate Percent
Stock Power Other Total Owned
-------- --------------- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Ralph W. Babb, Jr. Class B .... -0- 500 500 *
Class A .... -0- -0- -0- -0-
Peter M. Banks Class B .... -0- -0- -0- -0-
Class A .... -0- -0- -0- -0-
Jon E. Barfield Class B .... -0- -0- -0- -0-
Class A .... 659 -0- 659 *
John H. Foss Class B .... 100 -0- 100 *
Class A .... 300 -0- 300 *
J. Russell Fowler Class B .... 1,300 -0- 1,300 *
Class A .... 900 -0- 900 *
John W. Gelder Class B .... 100 -0- 100 *
Class A .... 300 -0- 300 *
Kenneth G. Herrick Class B .... -0- 2,328,188 2,328,188 42.6%
Class A .... -0- 1,015,765 1,015,765 6.7%
Todd W. Herrick Class B .... 21,906 10,000 31,906 *
Class A .... -0- -0- -0- -0-
Stephen L. Hickman Class B .... 100 -0- 100 *
Class A .... 300 -0- 300 *
James E. Martinco Class B .... 10 -0- 10 *
Class A .... 30 -0- 30 *
Dennis E.McCloskey Class B .... 46 -0- 46 *
Class A .... -0- -0- -0- -0-
All directors and Class B .... 23,562 2,338,688 2,362,250 43.2%
executive officers Class A .... 2,489 1,015,765 1,018,254 6.7%
as a group (11
persons)
- ---------
* less than 1%
</TABLE>
Mr. Babb holds his shares jointly with his wife.
Herrick Foundation, of which Kenneth G. Herrick, Todd W. Herrick, and
John W. Gelder are co-trustees, owns 1,367,525 Class B shares and 458,347 Class
A shares. The shared voting and investment power column includes those shares
for Kenneth G. Herrick but not for Todd W. Herrick or Mr. Gelder. All three of
them disclaim beneficial ownership of the shares.
Kenneth G. Herrick and Mr. Gelder are trustees of trusts that hold
888,113 Class B shares and 454,441 Class A shares for the benefit of Kenneth G.
Herrick and his descendants. The shared voting and investment power column
includes the trusts' shares for Mr. Herrick but not for Mr. Gelder. Mr. Gelder
disclaims beneficial ownership of the shares. Todd W. Herrick is an income
beneficiary of the trusts.
Mr. Gelder is a trustee of other trusts that hold 161,208 Class B shares
not shown in the table. He disclaims beneficial ownership of them.
Kenneth G. Herrick and Todd W. Herrick are members of the Board of
Trustees of Howe Military School, which owns 72,550 Class B shares and
102,977 Class A shares. The shared voting and investment power column
includes those shares for Kenneth G. Herrick but not for Todd W. Herrick.
Both of them disclaim beneficial ownership of the shares.
Todd W. Herrick is a member of the Board of Trustees of Albion College,
which owns the 10,000 Class B shares shown for him in the shared voting and
investment power column. Mr. Herrick disclaims beneficial ownership of the
shares.
Section 16(a) Beneficial Ownership Reporting Compliance
Directors, certain officers, and beneficial owners of more than 10% of
the Class B shares are required to file reports about their ownership of our
equity securities under Section 16(a) of the Securities Exchange Act of 1934
and to provide copies of the reports to us. Based on the copies we received
and on written representations from the persons we know are subject to these
requirements, we believe all 1998 filing requirements were met.
A-2
<PAGE>
Appendix B
EXECUTIVE COMPENSATION
Summary Compensation Table
This table provides compensation information for our Chief Executive
Officer and each other person who served as an executive officer during 1998
and whose total salary for that year exceeded $100,000. Mr. McCloskey and Mr.
Martinco first became executive officers during 1998.
Annual Long-Term
Compensation Compensation
------------ ------------
Awards
------------
Restricted
Stock All Other
Name and Principal Position Year Salary Award Compensation
--------------------------- ---- ------ ----------- ------------
Todd W. Herrick 1998 $410,000 $46,763 $4,800
President, CEO 1997 395,000 53,700 4,800
1996 365,000 70,619 4,500
John H. Foss 1998 $290,000 $33,076 $4,800
Vice-President, 1997 262,000 35,619 4,800
Treasurer, CFO 1996 242,000 48,821 4,500
Dennis E. McCloskey 1998 $190,000 $15,643 $4,800
Group Vice President,
Compressors
James E. Martinco 1998 $150,000 $14,391 $4,500
Group Vice President,
Engine & Power Train
Components
Salary includes any amounts deferred at the officer's election and
contributed on his behalf to our Retirement Savings Plan (a 401(k) plan).
"Restricted Stock Awards" are restricted phantom stock units relating
to Class A shares that were awarded for achievement of performance goals
under the Management Incentive Plan. As more fully discussed in the
Governance and Executive Compensation Committee Report, awards under this
plan and any deemed dividend reinvestments that may be credited on those
awards generally are nontransferable and subject to forfeiture until five
years after the end of the year for which they were granted. As required by
SEC rules, for purposes of attributing a dollar value to the units reported,
values have been calculated by multiplying the number of units awarded by the
grant date closing price for a Class A share on the Nasdaq Stock Market.
Please note, however, that plan awards are denominated in share units, not
dollars, so that the potential payout on an award, when and if vested, is
tied directly to the market value performance of Class A shares after the
grant. Thus, the actual dollar amount ultimately realized will depend on our
future performance and on general market conditions prevailing in the future.
As cash dividends are paid on Class A shares, additional phantom stock
units, which correspond to the dividends paid, are credited to employees'
accounts.
As of December 31, 1998, before the 1998 awards reported in the table,
the named executives held phantom stock units under the plan (valued based on
the Class A share closing price on the Nasdaq Stock Market on the last
trading day of 1998) as follows:
* Todd W. Herrick -- 7,021.83 share units valued at $327,393
* John H. Foss -- 4,657.66 share units valued at $217,164
* Dennis E. McCloskey -- 1,720.06 share units valued at $80,198
* James E. Martinco -- 1,907.85 share units valued at $88,954
B-1
<PAGE>
Amounts shown under "All Other Compensation" are matching contributions
to the Retirement Savings Plan.
Retirement Plans
Our retirement plan, which is a broad-based defined benefit and (since
1985) noncontributory plan, and our supplemental retirement plan, which
covers certain executives, provide benefits in the event of normal (i.e., at
age 65), early, deferred, or disability retirement. Upon a participant's
death, these plans provide a surviving spouse pension and a refund of any
pre-1985 employee contributions. Participants are vested after five years of
credited service. As of January 1, 1999, the executives named in the Summary
Compensation Table had the following years of credited service:
* Todd W. Herrick -- 34.5 years
* John H. Foss -- 20.0 years
* Dennis E. McCloskey -- 4.9 years
* James E. Martinco -- 22.3 years
These plans provide retirement benefits to a vested participant in the
form of a life-time pension, the amount of which is equal to a percentage of
the participant's average base salary over the 60 months immediately before
his or her retirement date, multiplied by years of credited service (up to a
maximum of 35 years), and reduced in the case of some benefits payable under
the supplemental retirement plan by a percentage of Social Security benefits.
The table below shows the estimated annual pension benefit (which is
not subject to further deduction for Social Security benefits or other offset
amounts) payable under the plans on a straight life annuity basis to
executive officers retiring at age 65 in the earnings and years of service
classifications specified, without considering any benefits which in some
cases may be payable to a participant due to voluntary contributions made by
the participant before 1985.
Estimated Annual Benefit at Age 65
for Years of Service Indicated
Average -----------------------------------------------------
Annual 35 or
Base Salary 15 20 25 30 Longer
----------- -------- -------- -------- -------- --------
$ 90,000 ...... $ 16,875 $ 22,500 $ 28,125 $ 33,750 $ 39,375
100,000 ...... 18,750 25,000 31,250 37,500 43,750
125,000 ...... 23,437 31,250 39,062 46,875 54,687
150,000 ...... 28,125 37,500 46,875 56,250 65,625
175,000 ...... 35,348 47,131 58,914 70,696 83,821
200,000 ...... 41,973 54,631 68,289 81,946 96,946
225,000 ...... 46,598 62,131 77,664 93,196 110,071
250,000 ...... 52,223 69,631 87,039 104,446 123,196
275,000 ...... 57,848 77,131 96,414 115,696 136,321
300,000 ...... 63,473 84,631 105,789 126,946 149,446
400,000 ...... 85,973 114,631 143,289 171,946 201,946
450,000 ...... 97,223 129,631 162,039 194,446 228,196
500,000 ...... 108,473 144,631 180,789 216,946 254,446
B-2
<PAGE>
Appendix C
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
The graph which follows compares the performance over the last five
years of our Class B shares (trading symbol TECUB) to the Standard & Poor's
500 Stock Index and to a composite industry group index made up of the
Standard & Poor's Household Furnishing and Appliances Index (70%) and the
Standard & Poor's Diversified Machinery Index (30%). The graph assumes an
investment of $100 in the Class B shares and in each index on December 31,
1993 and reinvestment of all cash dividends in shares of the same class.
Comparison of Five-Year Cumulative Total Return
Among Tecumseh Products Company, S&P 500 Index,
and S&P Composite Industry Index
[PROFORMANCE GRAPH]
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Tecumseh Products Company $100.00 $ 99.53 118.25 132.81 116.71 110.61
S&P 500 Index 100.00 101.32 139.40 171.40 228.59 293.91
S&P Composite Industry Index 100.00 86.34 105.60 107.86 153.89 182.19
</TABLE>
* Per Tecumseh, used class B stock in calculation of returns.
** Comprised of the S&P Household Furnishing & Appliances Index (70%) and the
S&P Machinery- Diversified Index (30%)
C-1
