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[LOGO]
TENNANT COMPANY
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
MAY 2, 1996
TO OUR SHAREHOLDERS:
The Annual Meeting of Shareholders of Tennant Company will be held at the
corporate headquarters of Tennant Company, 701 North Lilac Drive, Minneapolis,
Minnesota, on Thursday, May 2, 1996, at 10:30 a.m., Central Daylight Time, for
the following purposes:
(1) To elect directors for a three-year term;
(2) To ratify the appointment of KPMG Peat Marwick LLP as independent
auditors of the Company;
(3) To act upon any other business that may properly come before the
meeting.
Only holders of Common Stock of record at the close of business on March 4,
1996, will be entitled to vote at the meeting or any adjournment thereof.
You are cordially invited to attend the meeting. Whether or not you plan to
come to the meeting, please sign, date and return your Proxy in the reply
envelope provided. Your cooperation in promptly signing and returning your Proxy
will help avoid further solicitation expense.
March 22, 1996 Bruce J. Borgerding, Secretary
TENNANT COMPANY
ESTBLISHED 1870
701 N. LILAC DRIVE, P.O. BOX 1452, MINNEAPOLIS, MINN. 55440
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[LOGO]
TENNANT COMPANY
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by
Tennant Company (the "Company"), on behalf of its Board of Directors, of Proxies
for the Annual Meeting of Shareholders to be held Thursday, May 2, 1996, and any
adjournment thereof. Stock represented by Proxies will be voted. Where
specification is made in the Proxy, the stock will be voted in accordance
therewith. Where no specification is made in the Proxy, the stock will be voted
for all proposals. Proxies may be revoked at any time before being voted by
giving written notice of revocation at the mailing address noted or at the
meeting, or by a later-dated Proxy delivered to an officer of the Company.
Personal attendance and voting in person does not revoke a written Proxy.
There were outstanding on March 4, 1996, the record date for shareholders
entitled to vote at the meeting, 9,988,450 shares of Common Stock, each share
being entitled to one vote.
Expenses in connection with the solicitation of Proxies will be paid by the
Company. Solicitation of Proxies will be principally by mail. In addition,
several of the officers or employees of the Company may solicit Proxies, either
personally or by telephone, or by special letter, from some of the shareholders.
The Company also will make arrangements with brokerage houses and other
custodians, nominees and fiduciaries to send Proxies and proxy material to their
principals, and will reimburse them for their expenses in so doing.
The mailing address of the principal executive office of the Company is 701
North Lilac Drive, P.O. Box 1452, Minneapolis, Minnesota 55440. This Proxy
Statement and form of Proxy enclosed are being mailed to shareholders commencing
March 22, 1996.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of February 29, 1996, certain
information with respect to all shareholders known to the Company to have been
beneficial owners of more than 5% of its Common Stock, and information with
respect to the Company's Common Stock beneficially owned by directors of the
Company, the executive officers of the Company included in the Summary
Compensation Table set forth under the caption "Executive Compensation" below
and all directors and executive officers of the Company as a group. Except as
otherwise indicated, the shareholders listed in the table have sole voting and
investment powers with respect to the Common Stock owned by them.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP COMMON STOCK
- ------------------- -------------------- ------------
<S> <C> <C>
First Bank System, Inc.(1) 1,088,444 shares(2) 10.9%
Minneapolis, MN
First Bank System, Inc. has sole investment
authority for 18,834 shares, shared investment
authority for 1,069,610(2) shares and shared
voting authority for 1,087,844(2) shares.
George T. Pennock Minneapolis, MN 896,840 shares(3)(4) 9.0%
Trimark Financial Corporation, Inc.(1) 600,000 shares 6.0%
Toronto, Ontario
David L. Babson & Co., Inc.(1). 558,900 shares 5.6%
Cambridge, MA
David L. Babson & Co., Inc., has sole investment
authority for 558,900 shares, sole voting authority
for 327,500 shares and shared voting authority
for 231,400 shares
Putnam Investments, Inc.(1) 539,200 5.4%
Boston, MA
Certain Putnam investment managers (together with
their parent corporations, Putnam Investments, Inc.,
and Marsh & McLennan Companies, Inc.) are considered
"beneficial owners" in the aggregate of 539,200
shares of the Company's Common Stock, which shares
were acquired for investment purposes by such
investment managers for certain of their advisory
clients. Putnam Investments, Inc., has shared
investment authority for 539,200 shares and shared
voting authority for 162,500 shares.
Roger L. Hale 376,419 shares(5)(6) 3.8%
Douglas R. Hoelscher 24,572 shares(6)(7) *
Richard A. Snyder 23,719 shares(6)(8) *
Janet M. Dolan 12,093 shares(6)(9) *
</TABLE>
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<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP COMMON STOCK
- ------------------- -------------------- ------------
<S> <C> <C>
Keith D. Payden 11,921 shares(6)(10) *
Andrew P. Czajkowski 3,376 shares *
David C. Cox 2,874 shares *
William A. Hodder 2,876 shares *
Arthur R. Schulze, Jr. 2,876 shares *
William I. Miller 2,224 shares *
Delbert W. Johnson 1,882 shares *
Arthur D. Collins, Jr. 859 shares *
All directors and executive 744,579 shares(6)(11) 7.5%
officers as a group (16 persons)
</TABLE>
* An asterisk in the column listing the percentage of shares beneficially
owned indicates the person owns less than 1% of total.
(1) The information set forth above as to the Amount and Nature of Beneficial
Ownership is based upon a Schedule 13G statement filed with the
Securities and Exchange Commission reflecting beneficial ownership as of
December 31, 1995.
(2) This number includes 741,942 shares held in the "unallocated" account, as
of December 31, 1995, of the Tennant Company Profit Sharing and Employee
Stock Ownership Plan and Trust, as to which an affiliate of First Bank
System, Inc. acts as trustee. The number of "allocated" shares held in
such trust (847,569 shares as of December 31, 1995) is not included in
this number. The Securities and Exchange Commission has taken the
position, with respect to similar plans, that the plan trustee is the
beneficial owner of shares held in an unallocated reserve pending
allocation to participants' accounts. The plan trustee disclaims that it
or the Trust is the beneficial owner of shares held in the unallocated
account.
(3) Included are 764,800 shares in a trust established by Mr. Pennock's
mother for the equal benefit of Mr. Pennock's children and his sister.
Mr. Pennock, co-trustee with First Bank, National Association of this
trust, has sole voting and investment authority for this trust.
(4) Not included are 8,920 shares owned by certain family members of Mr.
Pennock, as to which Mr. Pennock disclaims beneficial ownership.
(5) Of these shares, Mr. Hale has an interest in 144,074 shares in trusts
established under the will of his mother, of which he is a beneficiary.
Includes 9,200 shares covered by currently exercisable options granted to
Mr. Hale.
(6) Includes shares allocated to the individual or group under the Tennant
Company Profit Sharing and Employee Stock Ownership Plan.
(7) Includes 1,400 shares covered by currently exercisable options granted to
Mr. Hoelscher.
(8) Includes 1,400 shares covered by currently exercisable options granted to
Mr. Snyder.
(9) Includes 1,500 shares covered by currently exercisable options granted to
Ms. Dolan.
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(10) Includes 800 shares covered by currently exercisable options granted to
Mr. Payden.
(11) Includes 17,000 shares covered by currently exercisable options granted
to nine executive officers of the Company.
ELECTION OF DIRECTORS
Pursuant to the Restated Articles of Incorporation of the Company,
directors are elected for staggered terms of three years, with approximately
one-third of the directors to be elected each year.
At the meeting, two directors are to be elected. The Board of Directors
has designated Roger L. Hale and Delbert W. Johnson as nominees for election to
serve three-year terms ending at the time of the Annual Meeting in 1999 and
until their successors are elected and have qualified. Mr. Hale and Mr. Johnson
are currently directors of the Company and have previously been elected by the
shareholders. The nominees have indicated a willingness to serve, but in case
any of the nominees is not a candidate at the Annual Meeting, it is the
intention of the persons named in the enclosed form of Proxy to vote in favor of
the other nominees named and to vote for a substitute nominee in their
discretion.
The affirmative vote of a majority of the outstanding shares of Common
Stock present and entitled to vote in person or by proxy on the election of
directors is necessary to elect each nominee. For this purpose, a shareholder
voting through a Proxy who abstains with respect to the election of directors is
considered to be present and entitled to vote on the election of directors at
the meeting, and is in effect a negative vote; but a shareholder (including a
broker) who does not give authority to a Proxy to vote, or withholds authority
to vote, on the election of directors shall not be considered present and
entitled to vote on the election of directors.
The following information is furnished with respect to each nominee for
election as a director and for each director whose term of office will continue
after the meeting:
<TABLE>
<CAPTION>
NAME, AGE AND YEAR OTHER
FIRST ELECTED DIRECTOR PRINCIPAL OCCUPATION DIRECTORSHIPS
- ---------------------- -------------------- -------------
<S> <C> <C>
Nominees for election for terms expiring in 1999 (Class I Directors):
Roger L. Hale (1) Mr. Hale has been President of the Company Dayton Hudson
Age: 61 since January 1975 and Chief Executive Corporation
Director Since 1969 Officer since May 1976. He previously First Bank System,
served as Chief Operating Officer
from Inc.
January 1975 to May 1976 and as Vice
President from April 1969 to December 1974.
Delbert W. Johnson Chairman and Chief Executive Officer of Pioneer Ault, Inc.
Age: 57 Metal Finishing. Coherenet
Director since 1993 Minneapolis, MN. Communications
Specialist in metal finishing. Systems Corp.
Compucom
Mr. Johnson has been an executive officer Systems
of Pioneer Metal Finishing, a division First Bank System,
of Safeguard Scientifics, Inc., for more Inc.
than the past five years. Safeguard
Scientifics, Inc.
</TABLE>
(1) Roger L. Hale, a director and executive officer of the Company, is a first
cousin of Richard M. Adams, a Vice President of the Company.
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<TABLE>
<CAPTION>
NAME, AGE AND YEAR OTHER
FIRST ELECTED DIRECTOR PRINCIPAL OCCUPATION DIRECTORSHIPS
- ---------------------- -------------------- -------------
<S> <C> <C>
Directors whose terms expire in 1997 (Class II Directors):
David C. Cox President and Chief Executive Officer of Cowles National Computer
Age: 58 Media Company. Systems, Inc.
Director Since 1991 Minneapolis, MN. ReiaStar Financial
Publisher of newspapers,magazines and related Corp
ancillary products.
Mr. Cox has been an executive officer of Cowles
Media Company for more than the past five years.
William I. Miller Chairman of Irwin Financial Corporation. Cummins Engine
Age: 39 Columbus, IN. Company Inc.
Director Since 1994 Interrelated group of financial services EuroPacific Growth
companies. Fund
Irwin Financial
Mr. Miller has been Chairman of Irwin Financial Corporation
Corporation since 1990. Prior to that time, he New Perspective
served as President of Irwin Management Fund
Company, Inc., a family investment management
firm, for seven years.
Arthur R. Schulze, Jr. Retired Vice Chairman of the Board of General Inter-Regional
Age: 65 Mills, Inc. Financial
Director since 1982 Golden Valley, MN. Group, Inc.
A diversified consumer products company. Sealright Co., Inc.
Mr. Schulze was an executive officer of General
Mills, Inc. for more than five years prior to his
retirement in 1993.
Directors whose terms expire in 1998 (Class III Directors):
Andrew P. Czajkowski President and Chief Executive Officer of
Age: 60 Blue Cross Blue Shield of Minnesota.
Director since 1992 St. Paul, MN.
Minnesota health care company.
Mr. Czajkowski has been an executive officer of
Blue Cross Blue Shield of Minnesota for more
than the past five years.
William A. Hodder Chairman and Chief Executive Officer of Donaldson
Age: 64 Donaldson Company, Inc. Company, Inc.
Director Since 1975 Minneapolis, MN. Norwest
Manufacturer of filtration devices for heavy-duty Corporation
mobile diesel engines and industrial applications. ReliaStar Financial
Corp.
Mr. Hodder has been an executive officer of SUPERVALU, Inc.
Donaldson Company, Inc. for more than the past
five years.
</TABLE>
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<TABLE>
<CAPTION>
NAME, AGE AND YEAR OTHER
FIRST ELECTED DIRECTOR PRINCIPAL OCCUPATION DIRECTORSHIPS
- ---------------------- -------------------- -------------
<S> <C> <C>
Arthur D. Collins, Jr. President and Chief Operating Officer of Medtronic, Inc.
Age: 48 Medtronic, Inc.
Director since 1995 Minneapolis, MN
Manufacturer of therapeutic medical devices.
Mr. Collins was named Chief Operating Officer in
January 1994 after joining Medtronic, Inc. as
Executive Vice President and President of
Medtronic International in June 1992. For more
than five years prior to that, Mr. Collins held
various management positions with Abbott
Laboratories, a diversified healthcare products
and services company.
</TABLE>
During 1995, the Board of Directors met on four occasions. The Board of
Directors has an Audit Committee composed of Messrs. Czajkowski, Johnson and
Schulze, which met on three occasions during 1995. The primary function of the
Audit Committee is to assist the Board in fulfilling its fiduciary
responsibilities relating to the Company's internal control procedures and
accounting, financial and reporting practices. The Board has an Executive
Compensation Committee composed of Messrs. Hodder, Collins, Cox, and Miller,
which met on two occasions during 1995. The primary function of the Executive
Compensation Committee is to review and develop executive compensation plans of
the Company and determine the compensation of officers. The Board has designated
an Executive Committee composed of Messrs. Hale, Cox, Hodder and Schulze, which
met on two occasions during 1995. The primary function of the Executive
Committee is to exercise the authority of the Board of Directors and the
management of the business of the Company in the intervals between meetings of
the Board of Directors. The Board has designated a Board Affairs Committee
composed of Messrs. Cox, Hodder, Johnson and Collins, which did not meet in
1995. The primary function of the Board Affairs Committee are to set Board
compensation and recommend nominees for election to the Board. Shareholders who
wish to suggest qualified candidates to the Committee should write to Bruce J.
Borgerding, Secretary of the Company, at 701 North Lilac Drive, P.O. Box 1452,
Minneapolis, Minnesota 55440, stating in detail the candidate's qualifications
for consideration by the Committee. As noted in the last paragraph of this
section of the Proxy Statement, if a shareholder wishes to nominate a director
other than a person nominated by or on behalf of the Board of Directors, he or
she must comply with certain procedures set out in the Company's Restated
Articles of Incorporation. The Board also has designated a Special Litigation
Committee composed of Messrs. Czajkowski and Johnson, which did not meet during
1995. All incumbent directors attended more than 75% of the aggregate number of
meetings of the Board and committees on which they served during 1995.
Non-management directors of the Company received an annual retainer plus
$750 for each meeting or committee meeting of the Board of Directors during
1995. Pursuant to the Tennant Company Restricted Stock Plan for Nonemployee
Directors (the "Director Plan"), the annual retainer is paid in the form of
Restricted Stock. Restricted Stock for this purpose is generally issued once
every three Board Years (as defined in the Director Plan), in an amount equal to
the anticipated annual retainer for the Board Year then commencing and the next
two succeeding Board Years, based on the then Fair Market Value (as defined in
the Director Plan) of such Restricted Stock. On May 7, 1993 each non-management
director was issued 2,070 shares of Restricted Stock, based on a Fair Market
Value of $20.289 per share, in payment of the annual retainer for the three
Board Years commencing May 7, 1993. (These numbers have been adjusted to reflect
a two-for-one stock split effective April 26, 1995.) As a result of the
amendment to the Director Plan on January 1, 1995, each non-management director
was issued an additional 406 shares of Restricted Stock, based on a Fair Market
Value of $23.075 per share, in connection with the annual retainer for the three
Board Years commencing May 7, 1993. The Director Plan provides that the
restrictions on the Restricted Stock will lapse only upon the first to occur of
(a) the death of the director, (b) the disability of the director preventing
continued service on the Board, (c) retirement of the director from the Board in
accordance with any policy on retirement of Board members then in effect, (d)
the termination of service as a director by reason of resignation at the request
of the Board, the director's
6
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failure to have been nominated for re-election to the Board or to have been
re-elected by the shareholders, or the director's removal by the
shareholders, or (e) a change in control of the Company (as defined in the
Director Plan). In no event will the restrictions lapse prior to six months
after the date of issuance. Upon the occurrence of an event causing the
restrictions to lapse, Restricted Stock issued to the director in payment for
Board Years commencing following the occurrence of the event is forfeited and
returned to the Company.
Under the Company's Restated Articles of Incorporation, no person (other
than a person nominated by or on behalf of the Board of Directors) shall be
eligible for election as a director at any annual or special meeting of
shareholders unless a written request that his or her name be placed in
nomination is received from a shareholder of record by the Secretary of the
Company not less than 75 days prior to the date fixed for the meeting, together
with the written consent of such person to serve as a director.
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERVIEW AND PHILOSOPHY. The Executive Compensation Committee of the Board
of Directors is composed entirely of outside directors and is responsible for
reviewing and developing executive compensation plans of the Company. In
addition, the Executive Compensation Committee, pursuant to authority delegated
by the Board, determines on an annual basis the compensation to be paid to the
Chief Executive Officer and each of the other executive officers of the Company.
The Committee also is charged with periodically reviewing the Board of Directors
compensation and, when appropriate, recommending to the Board any changes.
The objectives of the Company's executive compensation program are to:
- Motivate executives to achieve corporate goals by placing a
significant portion of pay at risk.
- Provide a strong link between the Company's short- and long-term
goals and executive compensation.
- Provide competitive total compensation in order to attract and
retain high-caliber key executives critical to the long-term
success of the Company.
- Align the executives' interests with those of the shareholders by
providing a significant portion of compensation in Company Common
Stock.
The executive compensation program is intended to provide an overall level
of compensation opportunity that is competitive with other U.S. durable goods
manufacturing companies. To determine competitiveness, the Committee annually
uses sales volume adjusted data from a top-management compensation survey. This
data is verified every three to four years through the use of an outside
consultant which compares all aspects of the Company's executive compensation
with that of other similar companies. Actual compensation levels may be greater
or less than average competitive levels depending on annual and long-term
Company performance, individual performance against goals set at the beginning
of the year, and scope of responsibilities as compared to a similar position
within the surveys. The Executive Compensation Committee uses its discretion to
set executive compensation at levels warranted in its judgment by external,
internal or individual circumstances.
The Company does not have a policy with respect to the limit under the
Internal Revenue Code Section 162(m) on the deductibility of the qualifying
compensation paid to its executives, as it is likely for the near future that
all such compensation will be deductible by the Company.
EXECUTIVE COMPENSATION PROGRAM. The Company's executive compensation
program is comprised of base salary, annual cash incentive compensation and
long-term incentive compensation in the form of Performance Share grants,
Restricted Stock grants and stock options. All of the long-term plans have a
significant portion of their payout in Company Common Stock. In addition,
executives receive various benefits, including medical and retirement plans,
generally available to employees of the Company.
7
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BASE SALARY. Base salary levels for the Company's executives are
competitively set relative to the average of other U.S. durable goods
manufacturing companies of similar size. In determining salaries, the
Executive Compensation Committee also takes into account individual
experience, performance, and scope of responsibility, although no particular
weight is given to any one factor.
ANNUAL CASH INCENTIVE COMPENSATION. The purpose of the annual cash
incentive program is to provide a direct financial incentive in the form of an
annual cash bonus to executives to achieve their business units' and/or the
Company's annual goals. Target bonus awards are set at a level consistent
with the averages of other U.S. durable goods manufacturers, after adjusting
for sales volume. In fiscal 1995, the following performance measures and
weightings were generally used: Company sales growth (35%), Company return on
average invested capital (35%), Company or Business Unit expense control
(10%), and Company or Business Unit asset management (20%).
STOCK INCENTIVE PLANS. The stock incentive plans are the Company's long-
term incentive plans for executive officers and key managers. The objectives
of the program are to align executive and shareholder long-term interests by
creating a strong and direct link between executive pay and shareholder
return, and to enable executives to develop and maintain a significant, long-
term ownership position in the Company's Common Stock. In order to better
define for executives the minimum amount of stock that should be held, the
Executive Compensation Committee established in 1993 the following executive
stock holding guidelines: CEO - 6 x base salary; Vice Presidents - 4 x base
salary; Operating Management - 2 x base salary. Each year the Committee
reviews the progress of each executive towards those goals.
The Executive Compensation Committee annually grants a variety of
stockbased awards under the Company's stock incentive plans. The amounts of
the awards increase as a function of higher salary and position in the
Company. The award amounts, as a percent of base salary, are reviewed and
adjusted, as necessary, every three to four years to ensure their
competitiveness. The last review was performed by Hewitt Associates in late
1994. During 1995, the following types of awards were granted. (Note that
prior grants were not a factor in determining the size of these grants.)
- Performance Shares
Payout is based on Company performance measured by return on
average invested capital and sales growth during the four-year
performance period. Each of these measures is given
approximately equal weight. Payout is made in the form of
Company stock and cash.
- Restricted Stock
These grants vest 100% at the end of the restriction period.
- Stock Options
These options permit executives to purchase Company stock during
a ten-year period at the price in effect at the beginning of
that period.
CHIEF EXECUTIVE OFFICER COMPENSATION. Mr. Hale's fiscal 1995 base salary
and incentive award were determined by the Committee in accordance with the
methodology described above.
Base Salary - Mr. Hale's base salary for fiscal 1995 was $327,132 which
approximates the market average for durable goods
manufacturing companies of similar size.
Annual Incentive - Mr. Hale's cash incentive award for fiscal 1995 was
$201,681. This amount was based on sales growth of
13% (vs. 17% in 1994), return on average invested
capital of 19% (vs. 19% in 1994), inventory turnover
of 3.1 (vs. 3.2 in 1994), receivables of 58 days sales
outstanding (vs. 51 in 1994), and expense as a percent
of sales of 35% (vs. 35% in 1994).
8
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Long-Term Performance Grants - Mr. Hale received in 1995 a non-vested
Performance Share grant equal to 50% of
his base salary, a vested Performance
Share grant equal to 42% of his base
salary (in lieu of previous salary
increases), a Restricted Stock grant
equal to 10% of his base salary, and a
stock option grant equal to 2.7 times
his base salary.
William A. Hodder, Chairman David C. Cox
William I. Miller Arthur D. Collins
Members of the Executive Compensation Committee
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and noncash compensation for each
of the last three fiscal years awarded to or earned by the Chief Executive
Officer of the Company and the four other most highly compensated executive
officers of the Company (the "named executive officers").
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
- ----------------------------------------------------------------------------------------------------------------------------
RESTRICTED ALL OTHER
NAME AND STOCK LTIP COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS AWARD(S)(1) OPTIONS PAYOUTS(2) SATION(3)
($) ($) ($) (#) ($) ($)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Roger L. Hale 1995 327,132 201,681 31,951 37,000 218,940 21,444
President and 1994 327,132 260,097 53,156 0 101,400 25,426
Chief Executive Officer 1993 315,777 0 31,542 0 72,811 8,344
Douglas R. Hoelscher 1995 182,436 76,513 17,813 5,800 51,504 27,022
Senior Vice President 1994 182,436 84,614 18,818 0 34,394 30,417
1993 161,507 0 16,128 0 25,352 12,281
Janet M. Dolan 1995 182,820 76,089 17,860 6,000 37,551 9,475
Senior Vice President 1994 148,814 71,294 21,728 0 23,204 9,220
and General Counsel 1993 125,155 0 12,516 0 15,008 2,353
Richard A. Snyder 1995 173,880 65,533 16,965 5,800 51,504 26,282
Vice President, 1994 173,880 80,646 24,008 0 33,866 30,381
Treasurer and 1993 163,449 0 16,338 0 24,845 12,743
Chief Financial Officer
Keith D. Payden 1995 160,992 59,898 15,881 3,400 27,074 24,179
Vice President 1994 149,148 69,175 22,650 0 12,741 25,932
1993 131,416 0 9,828 0 9,177 10,149
</TABLE>
(1) The value of the Restricted Stock awards was determined by multiplying the
fair market value of the Company's Common Stock on the date of grant by
the number of shares awarded. As of December 31, 1995, and using the fair
market value of the Company's Common Stock as of that date, the number and
value of aggregate Restricted Stock award holdings were as follows: 1,356
shares ($32,375) by Mr. Hale, 756 shares ($18,050) by Mr. Hoelscher, 758
shares ($18,097) by Ms. Dolan, 720 shares ($17,190) by Mr. Snyder, and 674
shares ($16,092) by Mr. Payden. These shares of Restricted Stock have a
two-year vesting period, from respective dates of issuance. Dividends are
paid on Restricted Stock awards at the same time and rate as paid to all
shareholders.
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(2) Amounts represent the dollar value of Performance Shares paid out in each
fiscal year. Performance Shares were paid in Common Stock on a share-for-
share basis with respect to a minimum of 50% of the Performance Shares
earned (valued, for this purpose, as of December 31 of the respective
years of payment), and the balance was paid in cash. The Tennant Company
1992 Stock Incentive Plan allows participants to defer receipt of payments
of Performance Shares. Participants who elect such a deferral are
eventually paid entirely in Common Stock and will also receive
supplemental shares in amounts that roughly approximate dividends that
were not received as a result of the deferral. Payments thus deferred are
reported in the table for the year in which they would have been paid but
for such deferral election.
(3) Amounts represent payments under the Company's Profit Sharing and Employee
Stock Ownership Plan and the Company's Excess Benefit Plan as follows: (a)
Profit Sharing Contributions (up to 5% of certified earnings, the first 2%
of which are contributed to participants' accounts through the allocation
of Company Common Stock from the unallocated ESOP reserve, with the
remainder (if any) of such contributions paid to the participants in cash)
were paid as follows for 1993, 1994 and 1995, respectively: $2,111.48,
$12,100.87, and $6,464.78 to Mr. Hale, $1,445.98, $7,138.74 and $4,696.63
to Mr. Hoelscher, $1,120.52, $6,411.24, and $4,696.37 to Ms. Dolan,
$1,463.36, $6,944.64, and $4,568.24 to Mr. Snyder, and $1,176.57,
$6,383.57 and $4,447.27 to Mr. Payden; (b) employer Matching Contributions
relating to employee Individual Shelter Contributions (Internal Revenue
Code Section 401(k) contributions) were paid as follows for 1993, 1994 and
1995, respectively, through the allocation of Company Common Stock from
the unallocated ESOP reserve: $1,785.96, $3,234.00 and $3,234.00 to
Mr. Hale, $983.97, $1,094.62 and $1,386.00 to Mr. Hoelscher, $1,232.19,
$1,405.89 and $2,319.90 to Ms. Dolan, $1,799.84, $2,434.32 and $2,741.46
to Mr. Snyder, and $1,445.58, $1,959.84 and $2,454.28 to Mr. Payden; (c)
Profit Related Retirement Contributions were paid as follows for 1993,
1994 and 1995, respectively: $8,850.61, $11,145.00 and $10,770.00 to
Mr. Hoelscher, $8,957.02, $11,145.00 and $10,770.00 to Mr. Snyder, and
$7,201.60, $11,145.00 and $10,770.00 to Mr. Payden; and (d) Excess Benefit
Plan payments were made as follows for 1993, 1994 and 1995, respectively:
$4,446.60, $10,090.43 and $11,745.63 to Mr. Hale, $0.00, $11,037.80 and
$10,169.17 to Mr. Hoelscher, $0.00, $1,402.17 and $2,458.45 to Ms. Dolan,
$523.14, $9,856.76 and $8,202.60 to Mr. Snyder, and $325.67, $6,442.85 and
$6,507.70 to Mr. Payden.
STOCK OPTION AWARDS IN LAST FISCAL YEAR
The following table summarizes Stock Option awards made during the last
fiscal year under the Tennant Company 1995 Stock Incentive Plan (the "Plan")
for the named executive officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
% OF TOTAL AT ASSUMED ANNUAL RATES
OPTIONS OF STOCK PRICE APPRECIATION
GRANTED TO FOR THE OPTION TERM
----------------------------
NAME OPTIONS EMPLOYEES EXERCISE
GRANTED DURING PRICE EXPIRATION 5%(3) 10%(3)
(#)(1) FISCAL YEAR ($/SH)(2) DATE ($) ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Roger L. Hale 37,000 36.5 23.6875 2/10/05 551,187 1,396,816
Douglas R. Hoelscher 5,800 5.7 23.6875 2/10/05 86,402 218,960
Janet M. Dolan 6,000 5.9 23.6875 2/10/05 89,382 226,511
Richard A. Snyder 5,800 5.7 23.6875 2/10/05 86,402 218,960
Keith D. Payden 3,400 3.4 23.6875 2/10/05 50,650 128,356
</TABLE>
10
<PAGE>
(1) All such options granted under the Plan are non-qualified options, and are
exercisable 25% per year, on a cumulative basis, beginning one year after
the date of the grant. Such options become immediately exercisable,
however, upon (a) death, disability, or retirement of the holder, or (b) a
change of control (defined as certain changes in the Company's Board of
Directors, certain concentrations of voting power, certain mergers, sales
of corporate assets, statutory share exchanges or similar transactions, or
liquidation or dissolution of the Company). The holder is permitted to
pay the exercise price and withholding taxes due upon exercise with either
cash, shares of Common Stock, a reduction in the number of shares
delivered to the holder, or a combination of these alternatives.
(2) The exercise price of such options is not less than the fair market value
(as defined in the Plan) of a share of Common Stock at the time of grant.
(3) The hypothetical potential appreciation shown in these columns reflects
the required calculations at annual rates of 5% and 10% set by the
Securities and Exchange Commission, and therefore are not intended to
represent either historical appreciation or anticipated future
appreciation of the Company's Common Stock price.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED VALUE UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ON EXERCISE REALIZED OPTIONS AT FISCAL YEAR-END (#) FISCAL YEAR-END ($)(1)
------------------------------- -------------------------------
(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Roger L. Hale 0 0 0 37,000 0 6,938
Douglas R. Hoelscher 0 0 0 5,800 0 1,088
Janet M. Dolan 0 0 0 6,000 0 1,125
Richard A. Snyder 0 0 0 5,800 0 1,088
Keith D. Payden 0 0 0 3,400 0 638
</TABLE>
(1) Market value of underlying securities at fiscal year-end minus the exercise
price.
11
<PAGE>
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
The following table summarizes Performance Share awards made during the
last fiscal year under the Tennant Company 1992 Stock Incentive Plan for the
named executive officers.
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK PRICE-BASED PLANS(1)
-------------------------------------
NUMBER OF PERFORMANCE
SHARES, UNITS OR OTHER PERIOD
OR OTHER UNTIL MATURATION THRESHOLD TARGET MAXIMUM
NAME RIGHTS(#) OR PAYOUT ($) ($) ($)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Roger L. Hale 12,424 4 years 0 296,623 691,133
Douglas R. Hoelscher 4,410 4 years 0 105,289 245,316
Janet M. Dolan 3,518 4 years 0 83,992 195,704
Richard A. Snyder 3,682 4 years 0 87,908 204,824
Keith D. Payden 2,144 4 years 0 51,188 119,255
</TABLE>
(1) Payout of Performance Share awards is based on Company performance during a
four-year performance period. Payout can range from 0% to 233% of the
performance grant, which represents the threshold and maximum payouts,
respectively. Payout of 100% of the performance grant represents the
target payout. Awards are payable in Common Stock of the Company on a
share-for-share basis with respect to 50% of the Performance Shares earned
and in cash with respect to 50% of the Performance Shares earned, unless
the participant elects in advance to receive a greater portion in stock.
The value of the estimated future payouts was determined using the fair
market value of the Company's Common Stock on December 31, 1995.
The Executive Compensation Committee may provide at the time Performance
Share awards are made that all or a portion of the Performance Shares
awarded will be "Vested Performance Shares." Such Vested Performance
Shares will be earned upon termination of the participant's employment
prior to the end of the performance period, whether such termination of
employment occurs by reason of retirement, death, disability, or otherwise.
Of the total Performance Shares set forth in the table, the following
number of Performance Shares are Vested Performance Shares:
Mr. Hale, 5,644; Mr. Hoelscher, 2,142; Ms. Dolan, 1,244; Mr. Snyder, 2,024
and Mr. Payden, 610.
MANAGEMENT AGREEMENTS
The Company is a party to management agreements (the "Agreements") with
certain of the executive officers of the Company. The purpose of each of the
Agreements is to encourage the executive (a) to continue to carry out his or her
duties in the event of the possibility of a change in control of the Company,
and (b) to remain in the service of the Company in order to facilitate an
orderly transition in the event of an actual change in control of the Company.
Under the terms of each of the Agreements, if, between the occurrence of a
change in control of the Company and the three-year anniversary date of such
occurrence, an executive's employment is involuntarily terminated (for any
reason other than death, disability, or for cause), the executive will be
entitled to receive severance compensation. If an executive resigns after
certain changes in the executive's duties, compensation, benefits or work
location, the executive shall be deemed to have been involuntarily terminated.
Severance compensation is payable also if the termination occurs before the
change of control but after steps to change control have been taken. Severance
compensation consists of three times the executive's average annual taxable
compensation during the five taxable years preceding the change in control plus
the continuation of
12
<PAGE>
certain insurance benefits, minus $1.00, subject to reduction for payments under
employee benefit plans of the Company contingent upon a change in control of the
Company and for the amount of any other severance compensation paid by the
Company to the executive under any other agreement of the Company providing
compensation in the event of involuntary termination. As of the date of this
Proxy Statement, the total severance compensation for Mr. Hale would be
$1,583,261; Mr. Hoelscher, $725,723; Ms. Dolan, $526,760; Mr. Snyder, $707,174
and Mr. Payden, $521,492. The Company also will reimburse an executive for
legal fees and expenses incurred in resolving disputes under the Agreement.
TENNANT COMPANY DEFINED BENEFIT RETIREMENT PLAN
The Tennant Company Defined Benefit Retirement Plan provides fixed
retirement benefits for certain employees of the Company. Based upon certain
assumptions, including continuation of the Retirement Plan as of January 1,
1996, without amendment, the following table shows the annual retirement
benefits (including the additional retirement benefits described in the second
sentence under "Tennant Company Excess Benefit Plan" below) which would be
payable as a straight life annuity to persons at various salary levels after
specified years of service.
<TABLE>
<CAPTION>
YEARS OF CREDIT SERVICE
----------------------------------------------------------------------
ANNUAL
COMPENSATION 10 15 20 25 30
------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$ 50,000 $ 5,421 $ 8,132 $ 10,842 $ 13,553 $ 16,263
100,000 12,421 18,632 24,842 31,053 37,263
150,000 19,421 29,132 38,842 48,553 58,263
200,000 26,421 39,632 52,842 66,053 79,263
250,000 33,421 50,132 66,842 83,553 100,263
300,000 40,421 60,632 80,842 101,053 121,263
350,000 47,421 71,132 94,842 118,553 142,263
400,000 54,421 81,632 108,842 136,053 163,263
450,000 61,421 92,132 122,842 153,553 184,263
500,000 68,421 102,632 136,842 171,053 205,263
550,000 75,421 113,132 150,842 188,553 226,263
600,000 82,421 123,632 164,842 206,053 247,263
</TABLE>
Under the Retirement Plan, benefits are payable based upon a percentage of
a participant's final average pay excluding bonus, overtime or other special
forms of remuneration. Currently under ERISA, as amended, the maximum annual
amount that can be paid during 1996 to any individual is $120,000. Amounts in
excess of that maximum as well as amounts based on compensation that is excluded
from the Plan formula by ERISA or the terms of the Plan are covered under the
Tennant Company Excess Benefit Plan. The years of credited service under the
Retirement Plan for the named executive officers are: Mr. Hale 14 years and
Ms. Dolan 10 years. Were Mr. Hale or Ms. Dolan to retire currently, the final
average pay used by the Plan to determine benefits payable pursuant to the above
table as of December 31, 1995 would be $442,748 for Mr. Hale and $172,071 for
Ms. Dolan.
The figures above are not subject to deductions for Social Security or
other offset amounts.
13
<PAGE>
TENNANT COMPANY EXCESS BENEFIT PLAN
An Excess Benefit Plan provides additional retirement benefits for highly
compensated employees participating in the Tennant Company Profit Sharing and
Employee Stock Ownership Plan or the Retirement Plan. Employees participating
in the Excess Benefit Plan will receive a retirement benefit equal to the
additional benefits which would have been provided under the Retirement Plan if
(a) the limitations imposed by Sections 401(a)(17) and 415 of the Internal
Revenue Code were not applicable, and (b) management bonuses were included in
certified earnings for the year in which they were earned, and (c) deferred
salary increases were included in certified earnings for the plan year in which
such amounts would have been paid in the absence of the deferral. Employees
participating in the Excess Benefit Plan also receive cash payments of amounts
which would have been contributed by the Company to the Tennant Company Profit
Sharing and Employee Stock Ownership Plan as Profit Related Retirement
Contributions or Matching Contributions if various limitations imposed by the
Internal Revenue Code were not applicable.
COMPARATIVE STOCK PERFORMANCE
The graph below compares the cumulative total shareholder return on the
Common Stock of the Company for the last five fiscal years with the cumulative
total return over the same period on the following indexes:
- Overall Stock Market Performance (Media General Composite Index)
- Industry Index (CRSP Index for NASDAQ Stocks - Manufacturing
Machinery, Non-electrical, SIC Codes 3500 through 3599 provided by
Center for Research in Security Prices, University of Chicago Graduate
School of Business)
- Industry Index (Media General Industry Group Index 28 - Heavy
Machinery)
This assumes an investment of $100 in the Company's Common Stock, the Media
General Composite Index, the CRSP Industry Index and the Media General Industry
Index on December 31, 1990, with reinvestment of all dividends.
Media General Industry Group Index 28 - Heavy Machinery has been included
in this year's graph, and will be used in future graphs, because the Company
believes that it provides a better long-term comparison for cumulative total
shareholder return performance than the CRSP Industry Index used in previous
years. The Media General Industry Index includes only manufacturers of capital
goods, which is the Company's core business. The CRSP Index includes a
significant and expanding number of "technology" companies that have cumulative
total shareholder return performance characteristics quite different from those
of the Company.
14
<PAGE>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
[PERFORMANCE GRAPH]
ASSUMES $100 INVESTED ON DECEMBER 31, 1990, WITH DIVIDENDS REINVESTED.
<TABLE>
<CAPTION>
12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Tennant Company 100.00 106.36 130.23 146.88 155.31 157.90
Overall Stock Market 100.00 129.09 134.25 154.11 152.83 198.15
Performance Index (Media General)
Industry Index (CRSP) 100.00 139.10 183.40 187.70 200.40 302.40
Industry Index (Media General) 100.00 116.49 119.61 163.73 169.76 196.88
</TABLE>
SECTION 16(a) REPORTING
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange Commission.
Directors and executive officers are required by Commission regulations to
furnish the Company with copies of all Section 16(a) forms they file. Based
solely on a review of the copies of such forms furnished to the Company and
written representations from the Company's directors and executive officers, a
trust for which Mr. Hale's spouse acts as a trustee filed one late Form 4
relating to a sale of shares by the Trust; all other Section 16(a) filing
requirements were met for the year ended December 31, 1995.
15
<PAGE>
APPOINTMENT OF AUDITORS
At the meeting, a vote will be taken on a proposal to ratify the
appointment of KPMG Peat Marwick LLP as independent auditors of the Company for
the year ending December 31, 1996. KPMG Peat Marwick LLP are independent
accountants and auditors who have audited the accounts of the Company annually
since 1954. The Company has been advised that a representative of the firm will
attend the shareholders' meeting. The representative will be available to
respond to appropriate questions and will be given the opportunity to make a
statement if the firm desires to do so.
SHAREHOLDER PROPOSALS
Any shareholder proposal intended to be presented at the next Annual
Meeting should be sent to the Secretary of the Company at 701 North Lilac Drive,
P.O. Box 1452, Minneapolis, Minnesota 55440, and must be received on or before
November 25, 1996, to be eligible for inclusion in the Company's Proxy Statement
and form of Proxy relating to that meeting.
OTHER MATTERS
So far as the management is aware, no matters other than those described in
this Proxy Statement will be acted upon at the meeting. If, however, any other
matters properly come before the meeting, it is the intention of the persons
named in the enclosed Proxy to vote the same in accordance with their judgment
on such other matters.
March 22, 1996 By Order of the Board of Directors
Bruce J. Borgerding, Secretary
16
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR ALL PROPOSALS.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
____________________________________
Signature
Dated: _______________________, 1996
PLEASE MARK, SIGN, DATE AND
RETURN THE PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE.
[LOGO - TENNANT PROXY]
TENNANT COMPANY THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
701 NORTH LILAC DRIVE DIRECTORS
P.O. BOX 1452
MINNEAPOLIS, MN 55440 The undersigned hereby appoints Roger L.
Hale,William A. Hodder and Arthur R. Schulze, Jr.,
and each of them, as Proxies, each with the power
to appoint his substitute, and hereby authorizes
them or any of them to represent and to vote, as
designated below, all the shares of Common Stock
of Tennant Company held of record by the
undersigned on March 4, 1996, at the Annual
Meeting of Shareholders to be held on May 2, 1996,
or any adjournment thereof.
<TABLE>
<CAPTION>
<S> <C> <C>
1. ELECTION OF DIRECTORS FOR all nominees listed below WITHHOLD AUTHORITY
(EXCEPT AS MARKED TO THE CONTRARY BELOW) / / To vote for all nominees listed below / /
(INSTRUCTION: IF YOU DO NOT WISH TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK THE FOR BOX AND STRIKE A LINE THROUGH THE
NOMINEE'S NAME IN THE LIST BELOW.)
Roger L. Hale Delbert W. Johnson
If elected, the nominees will serve for a term of three years.
2. PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG PEAT MARWICK LLP as the independent public accountants of the corporation.
/ / FOR / / AGAINST / / ABSTAIN
3. IN THEIR DISCRETION, the PROXIES are authorized to vote upon such other business as may properly come before the meeting.
</TABLE>
