<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
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 Section 240.14a-11(c) or Section
240.14a-12
Tennant Company
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / 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 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>
[LOGO]
TENNANT COMPANY
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 1, 1997
------------------------
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 1, 1997, at 10:30 a.m., Central Daylight Time, for
the following purposes:
(1) To elect directors for a three-year term;
(2) To approve and ratify the Non-Employee Director Stock Option Plan;
(3) To ratify the appointment of KPMG Peat Marwick LLP as independent
auditors of the Company;
(4) 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 10,
1997, 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.
Bruce J. Borgerding, Secretary
March 25, 1997
<PAGE>
[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 1, 1997, 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 10, 1997, the record date for shareholders
entitled to vote at the meeting, 10,000,229 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 25, 1997.
1
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of February 28, 1997, 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 PERCENT OF
OF BENEFICIAL OWNER AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP COMMON STOCK
- ------------------------------------------------ ------------------------------------------------ -----------------
<S> <C> <C>
First Bank System, Inc.(1) 1,029,072 shares(2) 10.3%
Minneapolis, MN First Bank System, Inc. has sole investment
authority for 16,308 shares, shared investment
authority for 1,012,764(2) shares and shared
voting authority for 1,028,072(2) shares.
George T. Pennock 840,260 shares(3)(4) 8.4%
Minneapolis, MN
Trimark Financial Corporation, Inc.(1) 818,100 shares 8.2%
Toronto, Ontario
Roger L. Hale 387,752 shares(5)(6) 3.9%
Douglas R. Hoelscher 29,900 shares(6)(7) *
Richard A. Snyder 29,579 shares(6)(8) *
Janet M. Dolan 18,020 shares(6)(9) *
Keith D. Payden 15,587 shares(6)(10) *
Andrew P. Czajkowski 5,940 shares *
William A. Hodder 5,476 shares *
David C. Cox 5,473 shares *
William I. Miller 4,788 shares *
Delbert W. Johnson 4,446 shares *
Arthur D. Collins, Jr. 3,445 shares *
Edwin L. Russell 1,646 shares *
All directors and executive officers as a group 613,179 shares(6)(11) 6.1%
(17 persons)
</TABLE>
- ------------------------
* An asterisk in the column listing the percentage of shares beneficially
owned indicates the person owns less than 1% of total.
2
<PAGE>
(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,
1996.
(2) This number includes 690,736 shares held in the "unallocated" account, as
of December 31, 1996, 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 (952,948 shares as of December 31, 1996) 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 714,300 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 23,007 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 4,069 shares covered by currently exercisable options granted to
Mr. Hoelscher.
(8) Includes 3,446 shares covered by currently exercisable options granted to
Mr. Snyder.
(9) Includes 4,246 shares covered by currently exercisable options granted to
Ms. Dolan.
(10) Includes 2,173 shares covered by currently exercisable options granted to
Mr. Payden.
(11) Includes 45,044 shares covered by currently exercisable options granted to
ten 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, three directors are to be elected. The Board of Directors
has designated David C. Cox, William I. Miller, and Edwin L. Russell as nominees
for election to serve three-year terms ending at the time of the Annual Meeting
in 2000 and until their successors are elected and have qualified. Mr. Cox and
Mr. Miller are currently directors of the Company and have previously been
elected by the shareholders. Mr. Russell is being nominated for his first term
as a director of the Company. 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.
3
<PAGE>
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
FIRST ELECTED DIRECTOR PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS
- ------------------------------ --------------------------------------------------- -----------------------------
<S> <C> <C>
Nominees for election for terms expiring in 2000 (Class II Directors):
David C. Cox President and Chief Executive Officer of Cowles National Computer Systems,
Age: 59 Media Company. Inc.
Director Since 1991 Minneapolis, MN. ReliaStar Financial Corp.
Publisher of newspapers, magazines and related
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 Company, Inc.
Age: 40 Columbus, IN. EuroPacific Growth Fund
Director Since 1994 Interrelated group of financial services companies. Irwin Financial Corporation
New Perspective Fund
Mr. Miller has been Chairman of Irwin Financial
Corporation since 1990. Prior to that time, he
served as President of Irwin Management Company,
Inc., a family investment management firm, for
seven years.
Edwin L. Russell Chairman, President and Chief Executive Officer of American Paging, Inc.
Age: 52 Minnesota Power & Light Company. Capital Re Corporation
Duluth, MN. Minnesota Power & Light
A diversified utility company. Company
Mr. Russell was named Chairman, President and Chief
Executive Officer in 1996 after joining Minnesota
Power & Light Company as President in 1995. For
more than 5 years prior to that, Mr. Russell served
as an executive officer of J. M. Huber Corporation,
a diversified manufacturing and natural resources
company.
Directors whose terms expire in 1998 (Class III Directors):
Andrew P. Czajkowski President and Chief Executive Officer of Blue Cross Blue Cross and Blue Shield
Age: 61 and Blue Shield of Minnesota. Association
Director Since 1992 St. Paul, MN.
Minnesota health care company.
Mr. Czajkowski has been an executive officer of
Blue Cross and Blue Shield of Minnesota for more
than the past five years.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE AND YEAR
FIRST ELECTED DIRECTOR PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS
- ------------------------------ --------------------------------------------------- -----------------------------
<S> <C> <C>
William A. Hodder Retired Chairman and Chief Executive Officer of Cowles Media Company
Age: 65 Donaldson Company, Inc. Musicland Group, Inc.
Director Since 1975 Minneapolis, MN. Norwest Corporation
Manufacturer of filtration devices for heavy-duty ReliaStar Financial Corp.
mobile diesel engines and industrial applications. SUPERVALU, Inc.
Mr. Hodder was an executive officer of Donaldson
Company, Inc. for more than five years prior to his
retirement in 1996.
Arthur D. Collins, Jr. President and Chief Operating Officer of Medtronic, First Bank System, Inc.
Age: 49 Inc. GalaGen Inc.
Director since 1995 Minneapolis, MN Medtronic, Inc.
Manufacturer of therapeutic medical devices.
Mr. Collins was named President in 1996 and Chief
Operating Officer in 1994 after joining Medtronic,
Inc. as Executive Vice President and President of
Medtronic International in 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.
Directors whose terms expire in 1999 (Class I Directors):
Roger L. Hale (1) Mr. Hale has been President of the Company since Dayton Hudson Corporation
Age: 62 January 1975 and Chief Executive Officer since May First Bank System, Inc.
Director Since 1969 1976.He previously served as Chief Operating
Officer from 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: 58 Metal Finishing. Coherenet Communications
Director Since 1993 Minneapolis, MN. Systems Corp.
Specialist in metal finishing. Compucom Systems
First Bank System, Inc.
Mr. Johnson has been an executive officer of Safeguard Scientifics, Inc.
Pioneer Metal Finishing, a division of Safeguard
Scientifics, Inc., for more than the past five
years.
</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.
During 1996, the Board of Directors met on four occasions. The Board of
Directors has an Audit Committee composed of Messrs. Czajkowski and Johnson,
which met on three occasions during 1996. 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
three occasions during 1996. 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
5
<PAGE>
designated an Executive Committee composed of Messrs. Hale, Cox, and Hodder,
which did not meet during 1996. 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 met once in
1996. The primary function of the Board Affairs Committee is 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. 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. The Board also has designated a Special
Litigation Committee composed of Messrs. Czajkowski and Johnson, which did
not meet during 1996. All incumbent directors attended more than 75% of the
aggregate number of meetings of the Board and committees on which they served
during 1996.
Non-management directors of the Company received an annual retainer plus
$750 for each meeting or committee meeting of the Board of Directors during
1996. 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
1.5 times 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 3, 1996, each
non-management director was issued 2,564 shares of Restricted Stock, based on a
Fair Market Value of $24.57 per share, in payment of the annual retainer for the
three Board years commencing May 3, 1996. 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 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.
The Board has approved, and recommends shareholder approval of, a
"Non-Employee Director Stock Option Plan" (see summary on page 16). Under this
Plan, non-employee directors will receive an option grant for 1,000 shares at
Fair Market Value on January 1, 1997 and an option grant for 2,000 shares at
Fair Market Value on the day following each annual meeting of the shareholders
of the Company, beginning May 2, 1997.
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.
6
<PAGE>
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.
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 1996, 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
stock-based 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, conducted in 1996 by an outside consultant, showed that our executive
pay was below market average for similar sized companies. In reaction to
7
<PAGE>
this, and in keeping with the Committee's goal of more closely aligning
executive pay with shareholder returns, the Committee changed the mix of the
executive compensation package. Going forward, the Committee reduced cash
compensation, i.e., base and bonus, and increased the size of stock option
grants.
During 1996, 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 1996 base salary
and incentive award were determined by the Committee in accordance with the
methodology described above.
Base Salary-- Mr. Hale's total base salary for fiscal 1996 was $415,520,
with $88,388 of this being deferred, yielding $327,132 in
actual salary paid (see note 1 on page 9). This total amount
approximates the market average for durable goods manufacturing
companies of similar size.
Annual Incentive-- Mr. Hale's cash incentive award for fiscal 1996 was
$187,025. This amount was based on sales growth of 6% (vs.
13% in 1995) and a return on average invested capital of
19% (vs. 19% in 1995).
Long-Term Performance Grants-- Mr. Hale received in 1996 a non-vested
Performance Share grant equal to 39% of his
total base salary, a vested Performance Share
grant equal to 55% of his total base salary
(in lieu of previous salary increases), a
Restricted Stock grant equal to 8% of his
total base salary, and a stock option grant
equal to 1.4 times his total base salary.
William A. Hodder, Chairman David C. Cox
William I. Miller Arthur D. Collins
Members of the Executive Compensation Committee
8
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and noncash compensation for each of
the last three fiscal years awarded to or earned by the Chief Executive Officer
of the Company and the four other most highly compensated executive officers of
the Company (the "named executive officers").
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------------------
AWARDS
ANNUAL COMPENSATION -------------------------- PAYOUTS
RESTRICTED ----------- ALL OTHER
-------------------- STOCK LTIP COMPEN-
NAME AND SALARY(1) BONUS AWARD(S)(2) OPTIONS PAYOUTS(3) SATION(4)
PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($) ($)
- --------------------------------- --------- --------- --------- ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Roger L. Hale 1996 327,132 187,025 31,853 26,100 308,603 18,222
President and Chief Executive 1995 327,132 201,681 31,951 37,000 218,940 21,444
Officer 1994 327,132 260,097 53,156 0 101,400 25,426
Janet M. Dolan 1996 223,248 71,731 20,111 11,460 66,013 10,397
Executive Vice President 1995 182,820 76,089 17,860 6,000 37,551 9,475
1994 148,814 71,294 21,728 0 23,204 9,220
Douglas R. Hoelscher 1996 182,436 62,842 17,763 6,520 85,191 24,129
Senior Vice President 1995 182,436 76,513 17,813 5,800 51,504 27,022
1994 182,436 84,614 18,818 0 34,394 30,417
Keith D. Payden 1996 176,856 56,180 17,228 3,080 58,120 24,763
Vice President 1995 160,992 59,898 15,881 3,400 27,074 24,179
1994 149,148 69,175 22,650 0 12,741 25,932
Richard A. Snyder 1996 173,880 57,235 16,926 3,780 86,234 24,624
Vice President, Treasurer and 1995 173,880 65,533 16,965 5,800 51,504 26,282
Chief Financial Officer 1994 173,880 80,646 24,008 0 33,866 30,381
</TABLE>
- ------------------------
(1) Executives may elect to receive vested performance share grants in lieu of
base pay increases. Payout of these grants can range from 0 to 2.33 times
the grant size depending on company performance over the following four-year
period. Thus, this deferral election puts a portion of base pay at risk if
the company does poorly, but pays higher if the company does well. On an
accumulated basis, through the end of 1996, Mr. Hale has elected to defer
base pay increases totaling $88,388.
(2) 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, 1996, 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: 1,370 shares
($37,675) by Mr. Hale; 865 shares ($23,788) by Ms. Dolan; 764 shares
($21,010) by Mr. Hoelscher; 741 shares ($20,378) by Mr. Payden; and 728
shares ($20,020) by Mr. Snyder. 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.
(3) 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.
9
<PAGE>
(4) 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 1994, 1995, and 1996, respectively: $12,100.87, $6,464.78,
and $3,535.24 to Mr. Hale; $6,411.24, $4,696.37, and $3,307.07 to Ms. Dolan;
$7,138.74, $4,696.63, and $3,255.33 to Mr. Hoelscher; $6,383.57, $4,447.27,
and $3,242.59 to Mr. Payden; and $6,944.64, $4,568.24, and $3,240.59 to Mr.
Snyder; (b) employer Matching Contributions relating to employee Individual
Shelter Contributions (Internal Revenue Code Section 401(k) contributions)
were paid as follows for 1994, 1995, and 1996, respectively, through the
allocation of Company Common Stock from the unallocated ESOP reserve:
$3,234.00, $3,234.00, and $2,100.00 to Mr. Hale; $1,405.89, $2,319.90, and
$2,100.00 to Ms. Dolan; $1,094.62, $1,386.00, and $900.00 to Mr. Hoelscher;
$1,959.84, $2,454.28, and $2,100.00 to Mr. Payden; and $2,434.32, $2,741.46,
and $2,100.00 to Mr. Snyder; (c) Profit Related Retirement Contributions
were paid as follows for 1994, 1995, and 1996, respectively: $11,145.00,
$10,770.00, and $10,650.00 to Mr. Hoelscher; $11,145.00, $10,770.00, and
$10,650.00 to Mr. Payden; and $11,145.00, $10,770.00, and $10,650.00 to Mr.
Snyder; and (d) Excess Benefit Plan payments were made as follows for 1994,
1995, and 1996, respectively: $10,090.43, $11,745.63, and $12,586.53 to Mr.
Hale; $1,402.17, $2,458.45, and $4,990.29 to Ms. Dolan; $10,037.80,
$10,169.17, and $9,324.03 to Mr. Hoelscher; $6,442.85, $6,507.70, and
$8,770.83 to Mr. Payden; and $9,856.76, $8,202.60, and $8,633.20 to Mr.
Snyder.
STOCK OPTION AWARDS IN LAST FISCAL YEAR
The following table summarizes Stock Option awards made during the last
fiscal year under the Tennant Company 1995 Stock Incentive Plan (the "Plan") for
the named executive officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
% OF TOTAL STOCK PRICE
OPTIONS APPRECIATION FOR THE
GRANTED TO OPTION TERM
OPTIONS EMPLOYEES EXERCISE --------------------
GRANTED DURING FISCAL PRICE EXPIRATION 5%(3) 10%(3)
NAME (#)(1) YEAR ($/SH)(2) DATE ($) ($)
- ----------------------------------------------- ----------- ------------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Roger L. Hale.................................. 26,100 31.7 22.75 2/21/06 373,422 946,324
Janet M. Dolan................................. 6,460 7.8 22.75 2/21/06 92,425 234,224
5,000 6.1 22.00 8/26/06 69,178 175,312
Douglas R. Hoelscher........................... 6,520 7.9 22.75 2/21/06 93,284 236,400
Keith D. Payden................................ 3,080 3.7 22.75 2/21/06 44,067 111,674
Richard A. Snyder.............................. 3,780 4.6 22.75 2/21/06 54,082 137,054
</TABLE>
- ------------------------
(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.
10
<PAGE>
(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(1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS AT FISCAL YEAR- END THE-MONEY OPTIONS AT
SHARES ACQUIRED (#) FISCAL YEAR-END ($)(2)
ON EXERCISE VALUE REALIZED ---------------------------- --------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------- ----------------- --------------- ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Roger L. Hale...................... 0 0 9,200 53,900 35,075 229,963
Janet M. Dolan..................... 0 0 1,500 15,960 5,719 75,341
Douglas R. Hoelscher............... 0 0 1,400 10,920 5,338 47,745
Keith D. Payden.................... 0 0 800 5,680 3,050 24,543
Richard A. Snyder.................. 0 0 1,400 8,180 5,338 34,730
</TABLE>
- ------------------------
(1) Last fiscal year ended December 31, 1996.
(2) Market value of underlying securities at fiscal year-end minus the exercise
price.
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 or 1995 Stock Incentive Plan for the
named executive officers.
<TABLE>
<CAPTION>
NUMBER OF ESTIMATED FUTURE PAYOUTS UNDER
SHARES, UNITS PERFORMANCE OR NON-STOCK PRICE-BASED PLANS(1)
OR OTHER OTHER PERIOD --------------------------------------
RIGHTS UNTIL MATURATION THRESHOLD TARGET MAXIMUM
NAME (#) OR PAYOUT ($) ($) ($)
- ---------------------------------------------- ------------- ---------------- --------------- --------- ----------
<S> <C> <C> <C> <C> <C>
Roger L. Hale................................. 16,476 4 years 0 634,316 1,055,698
Janet M. Dolan................................ 3,854 4 years 0 148,363 246,950
Douglas R. Hoelscher.......................... 5,970 4 years 0 229,846 382,525
Keith D. Payden............................... 2,321 4 years 0 89,375 148,720
Richard A. Snyder............................. 6,469 4 years 0 249,068 414,508
</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 140% 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 market value
of the Company's Common Stock on December 31, 1996.
11
<PAGE>
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, 9,625; Ms.
Dolan, 1,258; Mr. Hoelscher, 3,678; Mr. Payden, 617; and Mr. Snyder, 4,794.
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 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 $1,878,536; Ms. Dolan, $676,211; Mr.
Hoelscher, $830,669; Mr. Payden, $604,034; and Mr. Snyder, $802,790. 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,
1997, 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 commencing at age 65 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............................................... $ 5,321 $ 7,981 $ 10,641 $ 13,302 $ 15,962
100,000............................................... 12,321 18,481 24,641 30,802 36,962
150,000............................................... 19,321 28,981 38,641 48,302 57,962
200,000............................................... 26,321 39,481 52,641 65,802 78,962
250,000............................................... 33,321 49,981 66,641 83,302 99,962
300,000............................................... 40,321 60,481 80,641 100,802 120,962
350,000............................................... 47,321 70,981 94,641 118,302 141,962
400,000............................................... 54,321 81,481 108,641 135,802 162,962
450,000............................................... 61,321 91,981 122,641 153,302 183,962
500,000............................................... 68,321 102,481 136,641 170,802 204,962
550,000............................................... 75,321 112,981 150,641 188,302 225,962
600,000............................................... 82,321 123,481 164,641 205,802 246,962
</TABLE>
12
<PAGE>
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 1997 to any individual is $125,000. 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 15 years and Ms. Dolan 11
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, 1996 would be $499,944 for Mr. Hale and $212,514 for Ms. Dolan.
The figures above are not subject to deductions for Social Security or other
offset amounts.
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 (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 and the Media General Industry Index on December 31,
1991, with reinvestment of all dividends.
13
<PAGE>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
[GRAPH]
ASSUMES $100 INVESTED ON DECEMBER 31, 1991, WITH DIVIDENDS REINVESTED.
<TABLE>
<CAPTION>
12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Tennant Company....................................... 100.00 122.44 138.09 146.02 148.45 175.87
Overall Stock Market Performance Index (Media
General)............................................ 100.00 104.00 119.39 118.39 153.50 185.38
Industry Index (Media General)........................ 100.00 102.68 140.56 145.74 169.02 198.16
</TABLE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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, all
Section 16(a) filing requirements were met for the year ended December 31, 1996.
14
<PAGE>
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN SUMMARY
Effective January 1, 1997, the Board of Directors of the Company approved,
subject to shareholder approval, the Tennant Company Non-Employee Director Stock
Option Plan (the "Plan"). Options may be granted pursuant to the Plan prior to
approval by the shareholders of the Company; but if the Plan is not approved by
the shareholders of the Company no later than May 31, 1997, any awards granted
under the Plan will be null and void.
The full text of the Plan is contained in Appendix A to this Proxy
Statement. Reference is made to such appendix for a complete statement of the
terms of the Plan. The following summary description of the Plan is qualified by
reference to the Plan.
PURPOSE
The purpose of the Plan is to promote the interests of the Company and its
shareholders by providing non-employee directors of the Company with an
opportunity to acquire a proprietary interest in the Company. The Plan provides
for the granting of stock options that are not incentive stock options and do
not meet the requirements of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code").
ADMINISTRATION
The Plan is administered by the Company's Board of Directors (the "Board").
Subject to the provisions of the Plan, the Board may from time to time establish
such rules for the administration of the Plan as it deems appropriate and may
fix any other terms and conditions for the grant or exercise of any option under
the Plan. The decision of the Board on any matter affecting the Plan or the
rights and obligations arising under the Plan or any option granted thereunder
shall be final, conclusive, and binding upon all persons, including the Company,
shareholders, and optionees. No member of the Board will be liable for any
action or determination taken or made in good faith with respect to the Plan or
any option granted thereunder, and the members of the Board shall be entitled to
indemnification by the Company against and from any loss incurred by such
members by reason of any such action or determination.
SHARES AVAILABLE
Not more than 150,000 shares of Common Stock of the Company may be made
subject to options granted under the Plan (subject to adjustment, at the
discretion of the Board, in the event of a merger, reorganization or other
relevant change). If an option lapses or terminates before such option has been
completely exercised, the shares covered by the unexercised portion of such
option may again be made subject to options granted under the Plan. Shares
issued upon exercise of options granted under the Plan will be authorized but
unissued shares of Common Stock of the Company.
ELIGIBLE PARTICIPANTS
Options may be granted under the Plan to any director of the Company who is
not an employee of the Company or any parent or subsidiary of the Company (a
"non-employee director"). For purposes of the Plan, the terms "employed,"
"employment," and similar terms (except "employee") include the providing of
services as a director. There are currently seven non-employee directors who are
eligible to participate in the Plan.
WRITTEN AGREEMENTS
Options granted under the Plan shall be evidenced by a written agreement in
such form or forms as the Board may from time to time determine.
TERM OF PLAN
The Plan shall remain in effect until all shares subject to the Plan are
distributed or the Plan is terminated by the Board.
15
<PAGE>
STOCK OPTIONS
DISCRETIONARY GRANTS. The Board may grant to non-employee directors options
to purchase such number of shares of Common Stock of the Company on such terms
and conditions as the Board may determine. In determining the non-employee
directors to whom options shall be granted and the number of shares to be
covered by each option, the Board may take into account the nature of the
services rendered by the respective non-employee directors, their present and
potential contributions to the success of the Company, and such other factors as
the Board in its sole discretion may deem relevant. The maximum number of shares
subject to options that may be granted to any one non-employee director under
the Plan in any fiscal year of the Company (including discretionary grants and
scheduled grants discussed in the following paragraph) shall not exceed 10,000
shares (subject to adjustment, at the discretion of the Board, in the event of a
merger, reorganization or other relevant change).
SCHEDULED GRANTS. Pursuant to the Plan, on January 1, 1997, the Company
granted to each non-employee director who was then serving in such capacity an
option to purchase 1,000 shares, at a purchase price of $27.50 per share and
with a term of ten years. On the day following each annual meeting of the
shareholders of the Company (commencing with the annual meeting to be held in
1997 and to which this Proxy Statement relates), the Company will grant to each
then incumbent non-employee director an option to purchase 2,000 shares. A
non-employee director who is elected or appointed to the Board on a date other
than the date of an annual meeting of shareholders will be granted an option to
purchase a number of shares equal to the product (rounded up to the next 100
shares) obtained by multiplying 2,000 by a fraction (x) the numerator of which
is the number of days from the date such non-employee director is first elected
or appointed to the Board to the date of the next scheduled annual meeting of
shareholders and (y) the denominator of which is 365. Subject to the limitation
described in the preceding paragraph as to the maximum annual aggregate grant to
any one individual, the Board may increase or decrease the number of shares to
be granted to non-employee directors pursuant to scheduled grants.
PURCHASE PRICE. The purchase price of each share subject to an option shall
be 100% of the Fair Market Value (as defined in the Plan) of a share on the date
of grant. The purchase price of the shares with respect to which an option is
exercised must be paid in full in cash or, at the discretion of the person
exercising the option, by delivery to the Company of unencumbered shares of
Common Stock of the Company, by a reduction in the number of shares delivered
upon exercise of the option, or by a combination of cash and such shares;
provided that no person will be permitted to pay any portion of the purchase
price with shares if the Board, in its sole discretion, determines that payment
in such manner is undesirable. On March 10, 1997, the closing sale price of a
share of Common Stock of the Company on the NASDAQ National Market System was
$28.75.
NON-TRANSFERABILITY. During the lifetime of an optionee, only such optionee
or his or her guardian or legal representative may exercise options granted
under the Plan, and no option granted under the Plan is assignable or
transferable by the optionee other than by will or the laws of descent and
distribution or pursuant to a domestic relations order as defined in the Code;
provided that the Board may in any option agreement or by an amendment to an
outstanding option agreement permit an optionee to transfer, without
consideration, a stock option to a member or members of his or her immediate
family or to one or more trusts for the benefit of such family members or
partnerships in which such family members are the only partners. Any option held
by any such transferee continues to be subject to the same terms and conditions
that were applicable to such option immediately prior to its transfer, and the
option may be exercised by such transferee only as and to the extent that such
option has become exercisable and has not terminated in accordance with the
provisions of the Plan and the applicable option agreement.
VESTING. Each option agreement relating to a discretionary option grant
shall specify when such option shall be exercisable. Each option that is granted
pursuant to a scheduled option grant shall become exercisable cumulatively as to
25% of the shares subject thereto on the date of each of the first through the
fourth annual meetings of shareholders of the Company following the date of
grant thereof or, with respect to options granted on any date other than the day
following an annual meeting of shareholders, on each of the first through the
fourth anniversaries of the date of grant. Notwithstanding, the provisions of
any option agreement, the Board may, in its sole discretion, declare at any time
that any option granted under the Plan shall be immediately exercisable. In the
event that an optionee ceases to be employed as a non-employee director of the
Company by reason of (i) death, (ii) disability preventing continued service,
(iii) retirement from the Board in accordance with the policy of the
16
<PAGE>
Company, if any, on retirement of non-employee directors then in effect, (iv)
termination of service as a non-employee director by reason of (a)
resignation at the request of the Board (other than for gross misconduct, as
determined by the Board), (b) the director's failure to have been nominated
for re-election to the Board (unless such failure results from the
non-employee director's unwillingness to continue to service) or (c) the
non-employee director's failure to have been re-elected by the shareholders
of the Company), or (v) the director's removal by the shareholders of the
Company, then any option granted to such optionee that was not previously
exercisable shall become immediately exercisable in full if the optionee
shall have been continuously employed by the Company between the date such
option was granted and the date of such termination of service, and such
option shall continue to be exercisable for five years after termination of
such optionee's employment. If an optionee's employment terminates in any
manner other than as provided for in the preceding sentence, any option
granted to such optionee shall terminate immediately upon such termination of
employment. Upon the occurrence of a change in control of the Company (as
defined in the Plan), then each option granted under the Plan and not already
exercised in full or otherwise terminated, expired or canceled shall become
immediately exercisable in full. In the event of a "paragraph 11 declaration"
(discussed below), each option that has not previously been exercised in
full, expired or been canceled shall immediately become exercisable in full.
Notwithstanding the foregoing, no option granted under the Plan may be
exercised before the Plan is approved by the shareholders of the Company and
a registration statement covering the shares of Common Stock of the Company
for which the option may be exercised has become effective under the
Securities Act of 1933, as amended.
TERMINATION OF OPTIONS. Each option granted under the Plan shall expire and
all rights to purchase shares thereunder shall terminate ten years after the
date such option is granted or on such date prior thereto as may be fixed by the
Board on or before the date such option is granted. During the lifetime of an
optionee, an option granted to such optionee may be exercised only while the
optionee is employed by the Company, and only if such optionee has been
continuously so employed since the date the option was granted, except that: (i)
as described in the preceding paragraph relating to vesting, an option shall
continue to be exercisable for five years after termination of an optionee's
employment if such employment is terminated in certain manners; and (ii) as to
any optionee whose termination of employment occurs following a paragraph 11
declaration, an option may be exercised at any time permitted by such
declaration. Any option that is not exercised within the periods provided in the
preceding sentence shall terminate; provided that the Board has the power to
extend such periods. In the event of a change in control of the Company, then,
under certain circumstances as set forth in the Plan, the Board, in its sole
discretion and without the consent of the holder of any option affected thereby,
may determine that some or all outstanding options shall be canceled as of the
effective date of any such change in control and that the holder or holders of
such canceled options shall receive certain cash payments; and options granted
pursuant to the Plan as to which such determination is made shall expire as of
the effective date of such change in control. In the event of a paragraph 11
declaration (described below), each outstanding option, whether or not
exercisable, shall be canceled at the time of the occurrence of the event giving
rise to the paragraph 11 declaration.
PARAGRAPH 11 DECLARATION. In the event of (a) the proposed dissolution
or liquidation of the Company, (b) a proposed sale of substantially all of
the assets of the Company, or (c) a proposed merger, consolidation of the
Company with or into any other entity, regardless of whether the Company is a
surviving corporation, or a proposed statutory share exchange with any other
entity, the Board may, but shall not be obligated to, either (i) in the event
of a merger, consolidation, or statutory share exchange, make appropriate
provision for the protection of outstanding options granted under the Plan by
the substitution, in lieu of such options, of options to purchase appropriate
voting Common Stock (the "Survivor's Stock") of the corporation surviving any
such merger or consolidation (or the parent corporation of the Company or
such surviving corporation, if appropriate) or by the delivery of shares of
Survivor's Stock as provided in the Plan or (ii) declare pursuant to
paragraph 11 of the Plan (a "paragraph 11 declaration") that each outstanding
option, whether or not then exercisable, shall be canceled at the time of the
event giving rise of the paragraph 11 declaration (unless it shall have been
exercised prior to the occurrence of such event). In connection with any
paragraph 11 declaration, the Board may, but shall not be obligated to, cause
a cash payment to be made in exchange for each canceled option in an amount
provided in the Plan. In the event of a paragraph 11 declaration, each
outstanding option granted under the Plan that shall not have been exercised
prior to the event giving rise to such paragraph 11 declaration shall be
canceled at the time of such event.
17
<PAGE>
ADJUSTMENTS. In the event of any reorganization, merger, consolidation,
recapitalization, liquidation, reclassification, stock dividend, stock split,
combination of shares, rights offering, or extraordinary dividend or divestiture
(including a spin-off), or any other change in the corporate structure or the
shares of the Company, the Board (or the Board of Directors of the Company
surviving any such transaction) may, without the consent of any holder of an
option, make such adjustment as it determines in its discretion to be
appropriate as to the number and kind of securities subject to and reserved
under the Plan and the number and kind of securities issuable upon exercise of
outstanding options and the exercise price thereof.
AMENDMENT AND DISCONTINUANCE OF PLAN
The Board may at any time suspend or discontinue the Plan; provided that no
amendment may, without the consent of the holder of an option, alter or impair
an option previously granted under the Plan. To the extent necessary to comply
with applicable provisions of the Code, any such amendments to the Plan may be
made subject to approval by the shareholders of the Company.
FEDERAL TAX CONSIDERATIONS
No taxable income to an optionee will be realized, and the Company will not
be entitled to any related deduction, at the time any option is granted under
the Plan. Generally, at the time shares are issued pursuant to the exercise of a
stock option, the optionee will realize ordinary income equal to the excess of
the Fair Market Value of the stock on the date of exercise over the option
price. The Company will be entitled to a deduction at the same time and in the
same amount as the optionee is considered to have realized ordinary income as a
result of exercise of a stock option. Upon disposition of the shares, any
additional gain or loss realized by the optionee will be taxed as a capital gain
or loss. The Company will not be entitled to a deduction with respect to the
disposition of shares by an optionee.
VOTING REQUIREMENTS AND RECOMMENDATION
The affirmative vote of holders of at least a majority of the outstanding
shares of Common Stock of the Company entitled to vote and represented at the
meeting is required for approval of the Plan. Proxies solicited by the Board of
Directors will be voted for approval of the Plan, unless shareholders specify
otherwise in their Proxies.
For this purpose, a shareholder voting through a Proxy who abstains with
respect to approval of the Plan is considered to be present and entitled to vote
on the approval of the Plan at the Annual 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 approval of the Plan shall
not be considered present and entitled to vote on the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE NON-EMPLOYEE
DIRECTOR STOCK OPTION PLAN.
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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, 1997. 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 24, 1997, 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.
By Order of the Board of Directors
Bruce J. Borgerding, SECRETARY
March 25, 1997
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APPENDIX A
TENNANT COMPANY
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. PURPOSE. The purpose of this Non-Employee Director Stock Option Plan
(the "Plan") is to promote the interests of Tennant Company, a Minnesota
corporation (the "Company"), and its shareholders by providing non-employee
directors of the Company with an opportunity to acquire a proprietary interest
in the Company and thereby provide an additional incentive to put forth maximum
effort for the continued success and growth of the Company. In addition, the
opportunity to acquire a proprietary interest in the Company will aid in
attracting and retaining non-employee directors of outstanding ability.
2. ADMINISTRATION.
(a) GENERAL. This Plan shall be administered by a the Company's Board
of Directors (the "Board"). The Board shall have the power, subject
to the limitations contained in this Plan, to fix any terms and
conditions for the grant or exercise of any award under this Plan.
Subject to the provisions of this Plan, the Board may from time to
time adopt such rules for the administration of this Plan as it
deems appropriate. The decision of the Board on any matter
affecting this Plan or the rights and obligations arising under
this Plan or any award granted hereunder, shall be final,
conclusive and binding upon all persons, including without
limitation the Company, shareholders and optionees.
(b) INDEMNIFICATION. To the full extent permitted by law, (i) no
member of the Board shall be liable for any action or determination
taken or made in good faith with respect to this Plan or any award
granted hereunder and (ii) the members of the Board shall be
entitled to indemnification by the Company against and from any
loss incurred by such member or person by reason of any such
actions and determinations.
3. SHARES. The shares that may be made subject to options granted under
this Plan shall be authorized and unissued shares of Common Stock of the
Company, par value $.375 per share ("Shares," and each individually a "Share"),
and they shall not exceed 150,000 Shares in the aggregate, subject to adjustment
as provided in paragraph 12, below, except that, if any option lapses or
terminates for any reason before such option has been completely exercised, the
Shares covered by the unexercised portion of such option may again be made
subject to options granted under this Plan.
4. ELIGIBLE PARTICIPANTS. Stock options may be granted under this Plan to
any director of the Company who is not an employee of the Company or any parent
or subsidiary thereof (a "non-employee director"). References herein to
"employed," "employment" and similar terms (except "employee") shall refer to
the providing of services as a director.
5. TERMS AND CONDITIONS OF DIRECTOR OPTIONS.
(a) DISCRETIONARY GRANTS. Subject to the terms and conditions of this
Plan, the Board may, from time to time during the term of this
Plan, grant to any non-employee director options to purchase such
number of Shares of the Company on such terms and conditions as the
Board may determine. In determining the non-employee directors to
whom options shall be granted and the number of Shares to be
covered by each option, the Board may take into account the nature
of the services rendered by the respective non-employee directors,
their present and potential contributions to the success of the
Company, and such other factors as the Board in its sole discretion
may deem relevant. The date and time of approval by the Board of
the granting of an option shall be considered the date and the time
of the grant of such option. The maximum number of Shares subject
to options that may be granted to any one non-employee director
under the Plan in any fiscal year of the Company (including
options granted under subparagraph 5(b)) may not exceed 10,000
Shares (subject to adjustment pursuant to paragraph 12 hereof).
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(b) SCHEDULED GRANTS. Effective January 1, 1997, the Company shall
grant to each non-employee director who is serving in such capacity
on January 1, 1997, an option to purchase 1,000 Shares. On the day
following each annual meeting of the shareholders of the Company
(commencing with the annual meeting to be held in 1997), the
Company shall grant to each then incumbent non-employee director an
option to purchase 2,000 Shares. With respect to any non-employee
director who is elected or appointed to the Board on a date other
than the date of an annual meeting of shareholders, the Company
shall grant to such non-employee director on the day following his
or her first being so elected or appointed to the Board an option
to purchase a number of shares equal to the product (rounded up to
the next 100 shares) obtained by multiplying 2,000 by a fraction
(x) the numerator of which is the number of days from the date such
non-employee director is first elected or appointed to the Board to
the date of the next scheduled annual meeting of shareholders and
(y) the denominator of which is 365. Subject to the limitation
contained in subparagraph 5(a) as to the maximum annual aggregate
grant to any one individual, the Board may increase or decrease the
number of shares to be granted to non-employee directors on any
date pursuant to this said paragraph 5(b).
(c) PURCHASE PRICE. The purchase price of each Share subject to an
option granted pursuant to this paragraph 5 shall be 100% of the
Fair Market Value of a Share on the date of grant.
(d) VESTING. With respect to any option granted under subparagraph
5(a), the option agreement provided for in paragraph 6 relating to
such option shall specify when such option shall become
exercisable. With respect to any option granted under subparagraph
5(b), such option shall become exercisable cumulatively as to 25%
of the shares subject thereto on the date of each of the first
through the fourth annual meetings of shareholders of the Company
following the date of grant thereof or, with respect to options
granted on any date other than the day following an annual meeting
of shareholders, on each of the first through the fourth
anniversaries of the date of grant. Notwithstanding the foregoing
or the provisions of any option agreement, the Board may, in its
sole discretion, declare at any time that any option granted under
this Plan shall be immediately exercisable.
(e) TERMINATION. Each option granted pursuant to this paragraph 5
shall expire, and all rights to purchase Shares thereunder shall
terminate, on the earliest of:
(i) ten years after the date such option is granted or on such
date prior thereto as may be fixed by the Board on or before
the date such option is granted;
(ii) the expiration of the period after the termination of the
optionee's service as a non-employee director within which
the option is exercisable as specified in paragraph 9(b)
(provided that the Board may, in any option agreement
provided for in paragraph 6 or by Board action with respect
to any outstanding option, extend the periods specified in
paragraph 9(b)); or
(iii) the date, if any, fixed for cancellation pursuant to
paragraph 10(c) or 11 below.
6. OPTION AGREEMENTS. All options granted under this Plan shall be
evidenced by a written agreement in such form or forms as the Board may from
time to time determine.
7. FAIR MARKET VALUE. For purposes of this Plan, the "Fair Market
Value" of a Share at a specified date shall, unless otherwise expressly
provided in this Plan, mean the closing sale price of a Share on the date
immediately preceding such date or, if no sale of Shares shall have occurred
on that date, on the next preceding day on which a sale of Shares occurred,
on the Composite Tape for New York Stock Exchange listed shares or, if Shares
are not quoted on the Composite Tape for New York Stock Exchange listed
shares, on the NASDAQ National Market or any similar system then in use or,
if Shares are not included in the NASDAQ National Market or any similar
system then in use, the mean between the closing "bid" and the closing
"asked" quotation of a Share on the date immediately preceding the date as of
which such Fair Market Value is being determined, or, if no closing bid or
asked quotation is made on that date, on the next preceding day on which a
quotation is made, on the NASDAQ SmallCap Market or any similar system then
in use, provided that if the Shares in question are not quoted on any such
system, Fair Market Value shall be what the Board determines in good faith to
be 100% of the market value of a Share as of the
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date in question. Notwithstanding anything stated in this paragraph 7, if the
applicable securities exchange or system has closed for the day by the time
the determination is being made, all references in this paragraph to the date
immediately preceding the date in question shall be deemed to be references
to the date in question.
8. MANNER OF EXERCISE OF OPTIONS. A person entitled to exercise an option
granted under this Plan may, subject to its terms and conditions and the terms
and conditions of this Plan, exercise it in whole at any time, or in part from
time to time, by delivery to the Company at its principal executive office, to
the attention of its Vice President, Personnel Resources, of written notice of
exercise, specifying the number of Shares with respect to which the option is
being exercised. The purchase price of the Shares with respect to which an
option is being exercised shall be payable in full at the time of exercise,
provided that, to the extent permitted by law, the holder of an option may
simultaneously exercise an option and sell all or a portion of the Shares
thereby acquired pursuant to a brokerage or similar relationship and use the
proceeds from such sale to pay the purchase price of such Shares. The purchase
price of each Share on the exercise of any option shall be paid in full in cash
(including check, bank draft or money order) or, at the discretion of the person
exercising the option, by delivery to the Company of unencumbered Shares, by a
reduction in the number of Shares delivered upon exercise of the option, or by a
combination of cash and such Shares (in each case such Shares having an
aggregate Fair Market Value on the date of exercise equal to the amount of the
purchase price being paid through such delivery or reduction of Shares);
provided, however, that no person shall be permitted to pay any portion of the
purchase price with Shares if the Board, in its sole discretion, determines that
payment in such manner is undesirable. The granting of an option to a person
shall give such person no rights as a shareholder except as to Shares issued to
such person.
9. TRANSFERABILITY AND TERMINATION OF EMPLOYMENT.
(a) TRANSFERABILITY. During the lifetime of an optionee, only such
optionee or his or her guardian or legal representative may
exercise options granted under this Plan, and no option granted
under this Plan shall be assignable or transferable by the optionee
otherwise than by will or the laws of descent and distribution or
pursuant to a domestic relations order as defined by the Code or
Title I of the Employee Retirement Income Security Act, or the
rules thereunder; provided, however, that any optionee may transfer
a non-statutory stock option granted under this Plan to a member or
members of his or her immediate family (i.e., his or her children,
grandchildren and spouse) or to one or more trusts for the benefit
of such family members or partnerships in which such family members
are the only partners, if (i) the option agreement with respect to
such options expressly so provides either at the time of initial
grant or by amendment to an outstanding option agreement and (ii)
the optionee does not receive any consideration for the transfer.
Any options held by any such transferee shall continue to be
subject to the same terms and conditions that were applicable to
such options immediately prior to their transfer and may be
exercised by such transferee only as and to the extent that such
option has become exercisable and has not terminated in accordance
with the provisions of the Plan and the applicable option
agreement. For purposes of any provision of this Plan relating to
notice to an optionee or to vesting or termination of an option
upon the death, disability or termination of employment
of an optionee, the references to "optionee" shall mean the
original grantee of an option and not any transferee.
(b) TERMINATION OF EMPLOYMENT. In the event that an optionee ceases to
be employed as a non-employee director by reason of
(i) death,
(ii) disability preventing continued service,
(iii) retirement from the Board in accordance with the policy of the
Company, if any, on retirement of non-employee directors then
in effect, or
(iv) termination of service as a non-employee director by reason of
(x) resignation at the request of the Board (other than for
gross misconduct, as determined by the Board) (y) the
director's failure to have been nominated for re-election to
the Board (unless such failure results from the non-employee
director's unwillingness to continue to serve) or to have been
re-elected by the shareholders of the Company, or
(v) the director's removal by the shareholders of the Company
then any option granted to such optionee that was not previously
exercisable shall become immediately exercisable in full if the
optionee shall have been continuously employed by the
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Company or a parent or subsidiary thereof between the date such
option was granted and the date of such termination of service
and such option shall continue to be exercisable for five years
after termination of such optionee's employment. If an optionee's
employment terminates in any manner other than as provided for in
the preceding sentence, any option granted to such optionee shall
terminate immediately upon such termination of employment.
(c) RIGHT TO TERMINATE EMPLOYMENT. Nothing contained in this Plan, or
in any option granted pursuant to this Plan, shall confer upon any
optionee any right to continued employment by the Company or limit
in any way the right of the Company to terminate such optionee's
employment at any time.
(d) EXPIRATION DATE. In no event shall any option be exercisable at
any time after the time it shall have expired in accordance with
paragraph 5(e) of this Plan. When an option is no longer
exercisable, it shall be deemed to have lapsed or terminated and
will no longer be outstanding.
10. CHANGE IN CONTROL.
(a) For purposes of this Plan, a "Change in Control" of the Company
shall be deemed to occur if any of the following occur:
(i) Any "person" (as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) acquires or becomes a "beneficial owner" (as
defined in Rule 13d-3 or any successor rule under the Exchange
Act), directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of the
Company's then outstanding securities entitled to vote generally
in the election of directors ("Voting Securities"), provided,
however, that the following shall not constitute a Change in
Control pursuant to this paragraph (a)(1):
(A) any acquisition or beneficial ownership by the Company or a
Subsidiary;
(B) any acquisition or beneficial ownership by any employee
benefit plan (or related trust) sponsored or maintained by
the Company or one or more of its Subsidiaries;
(C) any acquisition or beneficial ownership by any corporation
with respect to which, immediately following such
acquisition, more than 70% of both the combined voting power
of the Company's then outstanding Voting Securities and the
Shares of the Company is then beneficially owned, directly or
indirectly, by all or substantially all of the persons who
beneficially owned Voting Securities and Shares of the
Company immediately prior to such acquisition in
substantially the same proportions as their ownership of such
Voting Securities and Shares, as the case may be, immediately
prior to such acquisition;
(ii) A majority of the members of the Board of Directors of the
Company shall not be Continuing Directors. "Continuing
Directors" shall mean: (A) individuals who, on the date hereof,
are directors of the Company, (B) individuals elected as
directors of the Company subsequent to the date hereof for
whose election proxies shall have been solicited by the Board
of Directors of the Company or (C) any individual elected or
appointed by the Board of Directors of the Company to fill
vacancies on the Board of Directors of the Company caused by
death or resignation (but not by removal) or to fill
newly-created directorships;
(iii) Approval by the shareholders of the Company of a
reorganization, merger, or consolidation of the Company or a
statutory exchange of outstanding Voting Securities of the
Company, unless immediately following such reorganization,
merger, consolidation, or exchange, all or substantially all of
the persons who were the beneficial owners, respectively, of
Voting Securities and Shares of the Company immediately prior
to such reorganization, merger, consolidation, or exchange
beneficially own, directly or indirectly, more than 70% of,
respectively, the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of
directors and the then outstanding shares of common stock, as
the case may be, of the corporation resulting from such
reorganization, merger, consolidation,
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or exchange in substantially the same proportions as their
ownership, immediately prior to such reorganization, merger,
consolidation, or exchange, of the Voting Securities and Stock
of the Company, as the case may be; or
(iv) Approval by the shareholders of the Company of (x) a complete
liquidation or dissolution of the Company or (y) the sale or
other disposition of all or substantially all of the assets of
the Company (in one or a series of transactions), other than to
a corporation with respect to which, immediately following such
sale or other disposition, more than 70% of, respectively, the
combined voting power of the then outstanding voting securities
of such corporation entitled to vote generally in the election
of directors and the then outstanding shares of common stock of
such corporation is then beneficially owned, directly or
indirectly, by all or substantially all of the persons who were
the beneficial owners, respectively, of the Voting Securities
and Shares of the Company immediately prior to such sale or
other disposition in substantially the same proportions as
their ownership, immediately prior to such sale or other
disposition, of the Voting Securities and Shares of the
Company, as the case may be.
(b) ACCELERATION OF VESTING. Notwithstanding anything in subparagraph
5(d) above to the contrary, if a Change of Control of the Company
shall occur, then, without any action by the Board, each option
granted under this Plan and not already exercised in full or
otherwise terminated, expired or canceled shall become immediately
exercisable in full.
(c) CASH PAYMENT. If a Change in Control of the Company shall
occur, then, so long as a majority of the members of the Board
are Continuing Directors, the Board, in its sole discretion, and
without the consent of the holder of any option affected thereby,
may determine that some or all outstanding options shall be
canceled as of the effective date of any such Change in Control
and that the holder or holders of such canceled options shall
receive, with respect to some or all of the Common Shares subject
to such options, as of the date of such cancellation, cash in an
amount, for each Share subject to an option, equal to the excess
of the per Share Fair Market Value of such Shares immediately
prior to such Change in Control of the Company over the exercise
price per Share of such options.
(d) LIMITATION ON CHANGE IN CONTROL PAYMENTS. Notwithstanding anything
in subparagraph 10(b) or 10(c) above or paragraph 11 below to the
contrary, if, with respect to an optionee, the acceleration of the
exercisability of an option or the payment of cash in exchange for
all or part of an option as provided in subparagraph 10(b) or 10(c)
above or paragraph 11 (which acceleration or payment could be
deemed a "payment" within the meaning of Section 280G(b)(2) of the
Code), together with any other payments which such optionee has the
right to receive from the Company or any corporation which is a
member of an "affiliated group" (as defined in Section 1504(a) of
the Code without regard to Section 1504(b) of the Code) of which
the Company is a member, would constitute a "parachute payment" (as
defined in Section 280G(b)(2) of the Code), then such acceleration
of exercisability and payments pursuant to subparagraph 10(b) or
10(c) above or paragraph 11 shall be reduced to the largest amount
as, in the sole judgment of the Board, will result in no portion of
such payments being subject to the excise tax imposed by Section
4999 of the Code.
11. DISSOLUTION, LIQUIDATION, MERGER. In the event of (a) the proposed
dissolution or liquidation of the Company; (b) a proposed sale of substantially
all of the assets of the Company; or (c) a proposed merger, consolidation of the
Company with or into any other entity, regardless of whether the Company is the
surviving corporation, or a proposed statutory share exchange with any other
entity (the actual effective date of the dissolution, liquidation, sale, merger,
consolidation or exchange being herein called an "Event"), the Board may, but
shall not be obligated to, either (i) if the Event is a merger, consolidation or
statutory share exchange, make appropriate provision for the protection of
outstanding options granted under this Plan by the substitution, in lieu of such
options, of options to purchase appropriate voting common stock (the "Survivor's
Stock") of the corporation surviving any such merger or consolidation or, if
appropriate, the parent corporation of the Company or such surviving
corporation, or, alternatively, by the delivery of a number of shares of the
Survivor's Stock which has a Fair Market Value as of the effective date of such
merger, consolidation or statutory share exchange equal to the product of (x)
the excess of (A) the Event Proceeds per Share (as hereinafter defined) covered
by the option as of such effective date over (B) the exercise
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price per Share of the Shares subject to such option, times (y) the number of
Shares covered by such option or (ii) declare, at least twenty days prior to
the Event, and provide written notice to each optionee of the declaration,
that each outstanding option, whether or not then exercisable, shall be
canceled at the time of, or immediately prior to the occurrence of, the Event
(unless it shall have been exercised prior to the occurrence of the Event).
In connection with any declaration pursuant to clause (ii) of the preceding
sentence, the Board may, but shall not be obligated to, cause payment to be
made, within twenty days after the Event, in exchange for each canceled
option to each holder of an option that is canceled, of cash equal to the
amount (if any), for each Share covered by the canceled option, by which the
Event Proceeds per Share (as hereinafter defined) exceeds the exercise price
per Share covered by such option. At the time of any declaration pursuant to
clause (ii) of the first sentence of this paragraph 11, each option that has
not previously expired pursuant to paragraph 10(c) of this Plan shall
immediately become exercisable in full and each holder of an option shall
have the right, during the period preceding the time of cancellation of this
option, to exercise his or her option as to all or any part of the Shares
covered thereby. In the event of a declaration pursuant to clause (ii) of the
first sentence of this paragraph 11, each outstanding option granted pursuant
to this Plan that shall not have been exercised prior to the Event shall be
canceled at the time of, or immediately prior to, the Event, as provided in
the declaration, and this Plan shall terminate at the time of such
cancellation, subject to the payment obligations of the Company provided in
this paragraph 11. Notwithstanding the foregoing, no person holding an option
shall be entitled to the payment provided in this paragraph 11 if such option
shall have expired pursuant to subparagraph 5(e)(i) or 5(e)(ii) of this Plan
or been cancelled pursuant to paragraph 10(c) of this Plan. For purposes of
this paragraph 11, "Event Proceeds per Share" shall mean the cash plus the
market value, as determined in good faith by the Board, of the non-cash
consideration to be received per Share by the shareholders of the Company
upon the occurrence of the Event.
12. ADJUSTMENTS. In the event of any reorganization, merger,
consolidation, recapitalization, liquidation, reclassification, stock dividend,
stock split, combination of shares, rights offering, or extraordinary dividend
or divestiture (including a spin-off), or any other change in the corporate
structure or Shares of the Company, the Board (or if the Company does not
survive any such transaction, the Board of Directors of the surviving
corporation) may, without the consent of any holder of an option, make such
adjustment as it determines in its discretion to be appropriate as to the number
and kind of securities subject to and reserved under this Plan and, in order to
prevent dilution or enlargement of rights of participants in this Plan, the
number and kind of securities issuable upon exercise of outstanding options and
the exercise price thereof.
13. COMPLIANCE WITH LEGAL REQUIREMENTS. No certificate for Shares
distributable under this Plan shall be issued and delivered unless the issuance
of such certificate complies with all applicable legal requirements including,
without limitation, compliance with the provisions of applicable state
securities laws, the Securities Act of 1933, as amended, and the Exchange Act.
14. GOVERNING LAW. To the extent that federal laws do not otherwise
control, this Plan and all determinations made and actions taken under this Plan
shall be governed by the laws of the State of Minnesota, without regard to the
conflicts of law provisions thereof, and construed accordingly.
15. AMENDMENT AND DISCONTINUANCE OF PLAN. The Board may at any time amend,
suspend or discontinue this Plan; provided, however, that no amendment to this
Plan shall, without the consent of the holder of the option, alter or impair any
option previously granted under this Plan. To the extent considered necessary to
comply with applicable provisions of the Code, any such amendments to this Plan
may be made subject to approval by the shareholders of the Company.
16. TERM.
(a) EFFECTIVE DATE. This Plan shall be effective as of January 1,
1997, provided that this Plan is approved and ratified by the
affirmative vote of the holders of a majority of the outstanding
Shares present or represented and entitled to vote in person or by
proxy at a meeting of the shareholders of the Company no later than
May 31, 1997. Any options granted hereunder prior to such
shareholder approval shall be subject to such shareholder approval.
If this Plan is not so approved by such holders, any options
granted under this Plan subject to such approval shall be null and
void and this Plan shall not take effect.
(b) TERMINATION. This Plan shall remain in effect until all Shares
subject to it are distributed or this Plan is terminated under
paragraph 15 above.
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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: _______________________, 1997
PLEASE MARK, SIGN, DATE AND
RETURN THE PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE.
TENNANT COMPANY
[LOGO] 701 NORTH LILAC DRIVE
PROXY P.O. BOX 1452
MINNEAPOLIS, MN
55440
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Roger L. Hale, William A. Hodder, and David
C. Cox, 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 10, 1997, at the Annual Meeting of
Shareholders to be held on May 1, 1997, or any adjournment thereof.
<TABLE>
<S> <C> <C>
1. TO ELECT 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.)
David C. Cox William I. Miller Edwin L. Russell
If elected, the nominees will serve for a term of three years.
2. TO APPROVE AND RATIFY THE NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN.
/ / FOR / / AGAINST / / ABSTAIN
3. TO RATIFY THE APPOINTMENT OF KPMG PEAT MARWICK LLP as the independent public accountants of the corporation.
/ / FOR / / AGAINST / / ABSTAIN
4. IN THEIR DISCRETION, the PROXIES are authorized to vote upon such other business as may properly come before the meeting.
</TABLE>
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THESE INSTRUCTIONS, WHEN PROPERLY EXECUTED, WILL BE FOLLOWED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED PARTICIPANT. IF NO DIRECTION IS MADE, THE
TRUSTEE IS INSTRUCTED TO VOTE FOR ALL PROPOSALS.
The undersigned understands that, in accordance with the terms of the Plan,
these instructions shall be held in the strictest confidence by the Trustee
and shall not be divulged or released to any person, including officers or
employees of Tennant Company.
Please sign exactly as name appears below.
____________________________________
Signature
Dated: _______________________, 1997
PLEASE MARK, SIGN, DATE AND
RETURN THE INSTRUCTION CARD
PROMPTLY USING THE ENCLOSED
ENVELOPE.
TENNANT COMPANY PROFIT SHARING AND EMPLOYEE
STOCK OWNERSHIP PLAN VOTING INSTRUCTIONS TO TRUSTEE
I hereby instruct First Trust National Association, as Trustee of the
Tennant Company Profit Sharing and Employee Stock Ownership Plan, to "vote,"
in the manner specified in the Plan, at the Annual Meeting of the
Shareholders of Tennant Company (the "Company") to be held on May 1, 1997,
and at any and all adjournments of said meeting, all shares of Common Stock
of the Company held in the Plan with respect to which I have authority to
direct voting.
I understand that if I complete this card and return it to the Trustee by
April 18, 1997, the Trustee will vote, in accordance with my instructions,
the shares of the Company's Common Stock allocated to my account under the
Plan.
The Trustee is hereby instructed to vote as indicated below on the
following proposals which are more fully described in the Company's Notice of
Annual Meeting of Shareholders and Proxy Statement dated March 25, 1997.
<TABLE>
<S> <C> <C>
1. TO ELECT 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.)
David C. Cox William I. Miller Edwin L. Russell
If elected, the nominees will serve for a term of three years.
2. TO APPROVE AND RATIFY THE NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN.
/ / FOR / / AGAINST / / ABSTAIN
3. TO RATIFY THE APPOINTMENT OF KPMG PEAT MARWICK LLP as the independent public accountants of the corporation.
/ / FOR / / AGAINST / / ABSTAIN
4. IN THEIR DISCRETION, the Trustee or the Trustee's representative is authorized to vote upon such other business
as may properly come before the meeting.
</TABLE>
