<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):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid 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 8, 1998
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 Friday, May 8, 1998, 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 Tennant Company 1998 Management Incentive
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 9,
1998, will be entitled to vote at the meeting or any adjournment thereof.
You are cordially invited to attend the meeting. Whether or not you
plan to come to the meeting, please sign, date and return your Proxy in the
reply envelope provided. Your cooperation in promptly signing and returning
your Proxy will help avoid further solicitation expense.
March 25, 1998 Bruce J. Borgerding, Secretary
<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 Friday, May 8,
1998, 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 9, 1998, the record date for
shareholders entitled to vote at the meeting, 9,661,337 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, 1998.
1
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of February 28, 1998, 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
(and director nominees) of the Company, the executive officers of the Company
included in the Summary Compensation Table set forth under the caption
"Executive Compensation" below and all directors and executive officers of
the Company as a group. Except as otherwise indicated, the shareholders
listed in the table have sole voting and investment powers with respect to
the Common Stock owned by them.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP COMMON STOCK
- ------------------- -------------------- ------------
<S> <C> <C>
First Trust National Association(1) 979,066 shares(2) 10.2%
Minneapolis, MN
First Trust National Association has sole
voting authority for 16,290 shares, shared
investment authority for 978,006(2) shares and
shared voting authority for 962,776(2) shares.
Trimark Financial Corporation(1) 855,000 shares 8.9%
Toronto, Ontario
First Bank National Association(3) 784,260 shares 8.1%
Minneapolis, MN
Roger L. Hale 415,303 shares(4)(5) 4.3%
Douglas R. Hoelscher 37,962 shares(5)(6) *
Richard A. Snyder 37,101 shares(5)(7) *
Janet M. Dolan 28,694 shares(5)(8) *
Keith D. Payden 18,958 shares(5)(9) *
Andrew P. Czajkowski 6,140 shares(10) *
William A. Hodder 5,798 shares(11) *
David C. Cox 5,786 shares(12) *
William I. Miller 4,988 shares(13) *
Delbert W. Johnson 4,646 shares(14) *
Arthur D. Collins, Jr. 3,722 shares(15) *
Edwin L. Russell 1,663 shares *
Pamela K. Knous 0 shares *
All directors and executive officers as 865,867 shares(5)(16) 8.9%
a group (18 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, 1997.
(2) This number includes 641,948 shares held in the "unallocated" account,
as of December 31, 1997, of the Tennant Company Profit Sharing and
Employee Stock Ownership Plan and Trust, as to which First Trust
National Association acts as trustee. The number of "allocated" shares
held in such trust (1,007,058 shares as of December 31, 1997) 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) All shares are being held in trust for the Pennock family. George T.
Pennock, who passed away in February 1998, was a former Chief Executive
Officer of Tennant Company.
(4) Of these shares, Mr. Hale has an interest in 144,074 shares in a trust
established under the will of his mother, of which he is a beneficiary.
Includes 18,536 shares owned by or held in trust for members of his
family, in which he disclaims any beneficial ownership. Also includes
42,700 shares covered by currently exercisable options granted to Mr.
Hale.
(5) Includes shares allocated to the individual or group under the Tennant
Company Profit Sharing and Employee Stock Ownership Plan.
(6) Includes 8,046 shares covered by currently exercisable options granted
to Mr. Hoelscher.
(7) Includes 6,556 shares covered by currently exercisable options granted
to Mr. Snyder.
(8) Includes 10,942 shares covered by currently exercisable options granted
to Ms. Dolan.
(9) Includes 4,410 shares covered by currently exercisable options granted
to Mr. Payden.
(10) Includes 200 shares covered by currently exercisable options granted to
Mr. Czajkowski.
(11) Includes 200 shares covered by currently exercisable options granted to
Mr. Hodder.
(12) Includes 200 shares covered by currently exercisable options granted to
Mr. Cox.
(13) Includes 200 shares covered by currently exercisable options granted to
Mr. Miller.
(14) Includes 200 shares covered by currently exercisable options granted to
Mr. Johnson.
(15) Includes 200 shares covered by currently exercisable options granted to
Mr. Collins.
(16) Of these shares, 2,108 shares are held in the name of the wife of an
executive officer and 183,382 shares are held in trusts for various
family members, in which such officer disclaims beneficial ownership.
Includes 86,182 shares covered by currently exercisable options granted
to ten executive officers of the Company.
3
<PAGE>
DIRECTORS
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 Arthur D. Collins, Jr., Andrew P. Czajkowski, and
Pamela K. Knous as nominees for election to serve three-year terms ending at
the time of the Annual Meeting in 2001 and until their successors are elected
and have qualified. Mr. Collins and Mr. Czajkowski are currently directors
of the Company and have previously been elected by the shareholders. Ms.
Knous is being nominated for her 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.
4
<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:
Nominees for election for terms expiring 2001 (Class III Directors):
[PHOTO] ARTHUR D. COLLINS, JR., 50 Director since 1995
Arthur Collins, Jr. was elected Chief Operating Officer
of Medtronic, Inc., a leading manufacturer of cardiac
pacemakers, in January 1994; was appointed to its Board
of Directors in August 1994; and was named President in
August 1996. He joined Medtronic in 1992, and served as
Corporate Executive Vice President and President of
Medtronic International prior to assuming his present
position. Mr. Collins served in a number of senior
executive positions with Abbott Laboratories, a
manufacturer of pharmaceuticals and medical equipment,
from 1978 through 1992, most recently as Corporate Vice
President responsible for worldwide diagnostic business
units. Mr. Collins also serves as a director of
Medtronic, Inc., U.S. Bancorp, GalaGen Inc., the
National Association of Manufacturers and the Walker Art
Center. Mr. Collins serves as a member of the Board
Affairs Committee and the Executive Compensation
Committee.
[PHOTO] ANDREW P. CZAJKOWSKI, 62 Director Since 1992
Mr. Czajkowski is President and Chief Executive Officer
of Blue Cross and Blue Shield of Minnesota and Aware
Integrated Inc., a non-profit holding company. Mr.
Czajkowski was a founder, President and Chair of the
Minnesota Comprehensive Health Association, the
state-administered risk pool for those individuals
unable to afford private health coverage. He served as
Chairman of the Board for Blue Cross and Blue Shield
Association from 1991 through 1994. Mr. Czajkowski
serves as a member of the Audit Committee and the
Executive Committee.
[PHOTO] PAMELA K. KNOUS, 44
Ms. Knous has served as Executive Vice President and
Chief Financial Officer for SUPERVALU INC. since
September 1997. Before joining SUPERVALU, Ms. Knous
served in a number of senior executive positions with
the Vons Companies, Inc. from 1991 to 1997, most
recently as Executive Vice President, Chief Financial
Officer and Treasurer. Ms. Knous was employed by KPMG
Peat Marwick for 14 years prior to her position at Vons.
Ms. Knous previously served on the Board of Girl Scouts
and was a founding member of Dream Street, a non-profit
organization which funds camps for children with cancer
and other disabilities.
Directors whose terms expire in 1999 (Class I Directors):
[PHOTO] ROGER L. HALE (1), 63 Director Since 1969
Mr. Hale has been President of the Company since January
1975 and Chief Executive Officer since May 1976. He
previously served as Chief Operating Officer from
January 1975 to May 1976 and as Vice President from
April 1969 to December 1974. Mr. Hale is a director of
U.S. Bancorp, and was formerly a director of Dayton
Hudson Corporation, The St. Paul Companies, Inc.,
Donaldson Company, Inc., and The Valspar Corporation.
His community activities include serving as Chairman of
the Minneapolis Neighborhood Employment Network and as
Vice Chair of Public Radio International. Mr. Hale
serves as a member of the Executive Committee.
(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.
5
<PAGE>
[PHOTO] DELBERT W. JOHNSON, 59 Director Since 1993
Mr. Johnson is Chairman and Co-Chief Executive Officer
of Pioneer Metal Finishing, a division of Safeguard
Scientifics Inc. and one of the largest metal finishing
companies in the United States. He joined Pioneer Metal
Finishing in 1965 and was elected to his present
position in 1978. From 1987 through 1993, Mr. Johnson
served on the Board of Directors of the Federal Reserve
Bank of Minneapolis and, in 1989, was named Chairman.
He serves as a director of Ault Inc., U.S. Bancorp,
Safeguard Scientifics Inc., Coherent Communications
Systems Corp. and CompuCom Systems, Inc. He also serves
on the Advisory Boards of Hospitality House and Turning
Point, Inc. Mr. Johnson serves as a member of the Audit
Committee and the Board Affairs Committee.
Directors whose terms expire in 2000 (Class II Directors):
[PHOTO] DAVID C. COX, 60 Director Since 1991
Mr. Cox has been President and Chief Executive Officer
of Cowles Media Company since 1985. Mr. Cox joined
Cowles Media in 1982 and served as Executive Vice
President, Chief Operating Officer, Treasurer and
Corporate Secretary prior to being named as President in
1984. Mr. Cox also serves as a director of Cowles Media
Company, National Computer Systems, Inc., and ReliaStar
Financial Corp. His community activities include
serving as a director of United Way of Minneapolis, and
of the Newspaper Association of America. Mr. Cox serves
as a member of the Board Affairs Committee and the
Executive Committee. With the McClatchy Newspapers,
Inc. acquisition of Cowles Media Company, Mr. Cox's
positions with Cowles Media Company will end on or about
March 19, 1998.
[PHOTO] WILLIAM I. MILLER, 41 Director Since 1994
Mr. Miller became Chairman in 1990 and has been a
Director since 1985 of Irwin Financial Corporation, a
publicly traded diversified financial services company.
He was President of Irwin Management Company, a family
investment management company, from 1984 to 1990. Mr.
Miller continues to serve as Chairman of the Board and a
director of Irwin Management Company and as Chairman of
the Board of Tipton Lakes Company (a real estate
development firm). Mr. Miller also serves as a director
of Cummins Engine Company, Inc. and New Perspective
Fund, Inc. and as a Trustee of the EuroPacific Growth
Fund (both are mutual funds). Mr. Miller also is a
Trustee of The Taft School, Watertown, CT, and Public
Radio International, Minneapolis, MN. Mr. Miller serves
as a member of the Audit Committee and the Executive
Compensation Committee.
[PHOTO] EDWIN L. RUSSELL, 53 Director Since 1997
Mr. Russell was named Chairman, President and Chief
Executive Officer in 1996 after joining Minnesota Power
& Light Company as President in 1995. Mr. Russell was
previously Group Vice President of J. M. Huber
Corporation, a broadly diversified manufacturing and
natural resources company. Mr. Russell also serves as a
director for Minnesota Power, Advantage Minnesota,
Capital Re Corporation, Edison Electric Institute,
Duluth's Lake Superior Center and The United Way. Mr.
Russell serves as a member of the Audit Committee and
the Executive Compensation Committee.
6
<PAGE>
During 1997, the Board of Directors met on four occasions. The Board of
Directors has an Audit Committee composed of Messrs. Czajkowski, Johnson,
Miller, and Russell which met on three occasions during 1997. 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 (currently a
director who is not standing for reelection), Collins, Miller, and Russell
which met on four occasions during 1997. The primary function of the
Executive Compensation Committee is to review and develop executive
compensation plans of the Company and determine the compensation of officers.
The Board has designated an Executive Committee composed of Messrs. Hale,
Cox, Czajkowski, and Hodder, which did not meet during 1997. 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, Collins,
Hodder, and Johnson, which met twice in 1997. 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. 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. All incumbent directors attended more than 75% of the aggregate
number of meetings of the Board and committees on which they served during
1997.
COMPENSATION OF DIRECTORS
Non-management directors of the Company received an annual retainer plus
$750 for each meeting or committee meeting of the Board of Directors during
1997. 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.
Pursuant to the Tennant Company Non-Employee Director Stock Option Plan,
non-employee directors received an option grant for 1,000 shares at Fair
Market Value of $27.50 per share on January 1, 1997, and an option grant for
2,000 shares at Fair Market Value of $28.00 per share on May 2, 1997.
7
<PAGE>
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERVIEW AND PHILOSOPHY. The Executive Compensation Committee of the
Board of Directors is composed entirely of outside directors and is
responsible for reviewing and developing executive compensation plans of the
Company. In addition, the Executive Compensation Committee, pursuant to
authority delegated by the Board, determines on an annual basis the
compensation to be paid to the Chief Executive Officer and each of the other
executive officers of the Company.
The 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 currently have a general policy with respect to the
limit under 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. Certain
of the Company's compensation plans, including the 1998 Management Incentive
Plan if it receives the approval requested in this Proxy Statement, should
qualify for exemption from the deduction limitations of Section 162(m).
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 1997, 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%).
In 1998, the Company will modify its financial reporting system to create a
closer alignment with shareholder value creation. The system, referred to as
Economic Value Management, will be described in greater detail in next year's
Proxy Statement.
8
<PAGE>
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 executive
stock holding guidelines. These guidelines, which were revised late 1997,
identify the amount of stock (restricted and unrestricted) each executive
should hold as a multiple of his or her base pay. The current guidelines
are: CEO - 6 x base salary; Vice Presidents - 3 x base salary; Operating
Management - 1 x base salary. Each year the Committee reviews the progress
of each executive towards those goals. As of December 31, 1997, the
Company's Chief Executive Officer was significantly above his stockholding
goals with the other two groups, on average, approximately at goal level.
The Executive Compensation Committee annually grants a variety of
stock-based awards under the Company's stock incentive plans. The amount of
the awards increases 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 1997, showed that the
Company's executive pay was below market average for similar sized companies.
In reaction to 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. Commencing with
fiscal 1998, the Committee reduced cash compensation, i.e., base and bonus,
and increased the size of stock option grants.
During 1997, the following types of awards were granted:
- 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 1997 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 1997 was
$435,000, with $107,868 of this being deferred, yielding
$327,132 in actual salary paid (see note 1 on page 10).
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 1997 was
$202,805. This amount was based on sales growth of
8% (vs. 6% in 1996) and a return on average invested
capital, on a current value basis, of 21% (vs. 19%
in 1996).
Long-Term Performance Grants - Mr. Hale received in 1997 a non-vested
Performance Share grant equal to 55% of
his total base salary, a vested
Performance Share grant equal to 52% of
his total base salary (in lieu of
previous salary increases), a Restricted
Stock grant equal to 10% of his total
base salary, and a stock option grant
equal to 2.3 times his total base salary.
William A. Hodder, Chairman Edwin L. Russell
William I. Miller Arthur D. Collins
Members of the Executive Compensation Committee
9
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and noncash compensation for
each of the last three fiscal years awarded to or earned by the Chief
Executive Officer of the Company and the four other most highly compensated
executive officers of the Company (the "named executive officers").
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
- ----------------------------------------------------------------------------------------------------------------------------------
RESTRICTED ALL OTHER
NAME AND ANNUAL STOCK LTIP COMPEN-
PRINCIPAL POSITION YEAR SALARY(1) INCENTIVE AWARD(S)(2) OPTIONS PAYOUTS(3) SATION(4)
($) ($) ($) (#) ($) ($)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Roger L. Hale 1997 327,132 202,805 42,319 59,407 521,324 23,538
President and 1996 327,132 187,025 31,853 26,100 308,603 18,222
Chief Executive Officer 1995 327,132 201,681 31,951 37,000 218,940 21,444
Janet M. Dolan 1997 256,584 130,437 26,349 19,046 120,315 16,530
Executive Vice President 1996 223,248 71,731 20,111 11,460 66,013 10,397
1995 182,820 76,089 17,860 6,000 37,551 9,475
Douglas R. Hoelscher 1997 182,436 83,129 21,989 12,269 189,270 30,480
Senior Vice President 1996 182,436 62,842 17,763 6,520 85,191 24,129
1995 182,436 76,513 17,813 5,800 51,504 27,022
Richard A. Snyder 1997 173,880 75,458 21,989 10,046 149,561 30,472
Vice President, 1996 173,880 57,235 16,926 3,780 86,234 24,624
Treasurer and 1995 173,880 65,533 16,965 5,800 51,504 26,282
Chief Financial Officer
Keith D. Payden 1997 176,853 76,748 18,003 6,873 128,280 30,965
Vice President 1996 176,856 56,180 17,228 3,080 58,120 24,763
1995 160,992 59,898 15,881 3,400 27,074 24,179
</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 1997, the
following base pay increases have been deferred: Mr. Hale, $107,868;
Ms. Dolan, $14,423; Mr. Hoelscher, $43,564; Mr. Snyder, $52,120; and Mr.
Payden, $8,147.
(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, 1997, 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: 1,582 shares ($57,545) by Mr. Hale; 985 shares ($35,829) by Ms.
Dolan; 822 shares ($29,900) by Mr. Hoelscher; 822 shares ($29,900) by
Mr. Snyder; and 673 shares ($24,480) by Mr. Payden. These shares of
Restricted Stock have a two-year vesting period, from respective dates
of issuance. Dividends are paid on Restricted Stock awards at the same
time and rate as paid to all shareholders.
(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.
Participants may elect to defer such payouts, and if so elected, payout
is made, in cash, within ten years of termination of employment.
Interest is paid on these deferred amounts at a rate set annually by the
Executive Compensation Committee. For 1998, the interest rate has been
set at 7% of the amounts deferred. Payments thus deferred are reported
in the table for the year in which they would have been paid but for
such deferral election. Of the total LTIP payouts set forth in the
table, the following amounts were deferred: Mr. Hale, $521,324 and Mr.
Payden, $128,280.
10
<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
1995, 1996, and 1997, respectively: $6,464.78, $3,535.24, and $8,941.34
to Mr. Hale; $4,696.37, $3,307.07, and $7,392.98 to Ms. Dolan;
$4,933.44, $4,696.63, and $6,077.14 to Mr. Hoelscher; $4,568.24,
$3,240.59, and $5,901.33 to Mr. Snyder; and $4,447.27, $3,242.59, and
$5,947.55 to Mr. Payden; (b) employer Matching Contributions relating to
employee Individual Shelter Contributions (Internal Revenue Code Section
401(k) contributions) were paid as follows for 1995, 1996, and 1997,
respectively, through the allocation of Company Common Stock from the
unallocated ESOP reserve: $3,234.00, $2,100.00, and $2,240.00 to Mr.
Hale; $2,319.90, $2,100.00, and $2,240.00 to Ms. Dolan; $1,386.00,
$900.00, and $960.00 to Mr. Hoelscher; $2,741.46, $2,100.00, and
$2,239.98 to Mr. Snyder; and $2,454.28, $2,100.00, and $2,240.00 to Mr.
Payden; (c) Profit Related Retirement Contributions were paid as follows
for 1995, 1996, and 1997, respectively: $10,770.00, $10,650.00, and
$12,544.00 to Mr. Hoelscher; $10,770.00, $10,650.00, and $12,544.00 to
Mr. Snyder; and $10,770.00, $10,650.00, and $12,544.00 to Mr. Payden;
and (d) Excess Benefit Plan payments were made as follows for 1995,
1996, and 1997, respectively: $11,745.63, $12,586.53, and $12,356.96 to
Mr. Hale; $2,458.45, $4,990.29, and $6,896.82 to Ms. Dolan; $10,169.17,
$9,324.03, and $10,899.31 to Mr. Hoelscher; $8,202.60, $8,633.20, and
$9,786.47 to Mr. Snyder; and $6,507.70, $8,770.83, and $10,233.13 to Mr.
Payden.
STOCK OPTION AWARDS IN LAST FISCAL YEAR
The following table summarizes Stock Option awards made during the last
fiscal year under the Tennant Company 1995 Stock Incentive Plan (the "Plan")
for the named executive officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
% OF TOTAL AT ASSUMED ANNUAL RATES
OPTIONS OF STOCK PRICE APPRECIATION
GRANTED TO FOR THE OPTION TERM
NAME OPTIONS EMPLOYEES EXERCISE -------------------------------
GRANTED DURING PRICE EXPIRATION 5%(4) 10%(4)
(#) FISCAL YEAR ($/sh)(3) DATE ($) ($)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Roger L. Hale 36,400(1) 19.4 27.50 2/26/07 629,523 1,595,336
17,114(2) 9.1 27.50 2/10/05 224,707 538,213
5,893(2) 3.1 27.50 2/21/06 89,347 220,066
Janet M. Dolan 14,800(1) 7.9 27.50 2/26/07 255,960 648,653
2,787(2) 1.5 27.50 2/10/05 36,593 87,647
1,459(2) 0.8 27.50 2/21/06 22,121 54,484
Douglas R. Hoelscher 8,200(1) 4.4 27.50 2/26/07 141,816 359,389
2,645(2) 1.4 27.50 2/10/05 34,729 83,182
1,424(2) 0.8 27.50 2/21/06 21,590 53,177
Richard A. Snyder 6,600(1) 3.5 27.50 2/26/07 114,144 289,264
2,645(2) 1.4 27.50 2/10/05 34,729 83,182
801(2) 0.4 27.50 2/21/06 12,144 29,912
Keith D. Payden 4,700(1) 2.5 27.50 2/26/07 81,285 205,991
1,550(2) 0.8 27.50 2/10/05 20,352 48,745
623(2) 0.3 27.50 2/21/06 9,446 23,265
</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.
11
<PAGE>
(2) Reload option grants contain the same features mentioned in (1) except
that they are immediately exercisable. Their exercise period is the
remainder of the initial ten-year option period.
(3) 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.
(4) 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 VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE OPTIONS AT FISCAL YEAR-END (#) FISCAL YEAR-END ($)(4)
EXERCISE(2) REALIZED(3) ----------------------------------- ----------------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Roger L. Hale 1,993 101,406 23,007 74,500 204,187 824,819
Janet M. Dolan 354 19,038 5,446 26,460 54,934 290,256
Douglas R. Hoelscher 431 18,656 4,069 16,020 36,112 176,604
Richard A. Snyder 354 15,331 3,446 12,380 30,583 134,609
Keith D. Payden 227 9,806 2,173 8,780 19,285 95,710
</TABLE>
(1) Last fiscal year ended December 31, 1997.
(2) After provision for income tax.
(3) Value realized equals the number of shares exercised multiplied by the
difference between market price and option price, before any provision
for taxes.
(4) Market value of underlying securities at fiscal year-end minus the
exercise price.
12
<PAGE>
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
The following table summarizes Performance Share awards made during the
last fiscal year under the Tennant Company 1992 or 1995 Stock Incentive Plan
for the named executive officers.
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK PRICE-BASED PLANS(1)
NUMBER OF PERFORMANCE --------------------------------------------
SHARES, UNITS OR OTHER PERIOD
OR OTHER UNTIL MATURATION THRESHOLD TARGET MAXIMUM
NAME RIGHTS(#) OR PAYOUT ($) ($) ($)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Roger L. Hale 17,012 4 years 0 866,343 1,441,796
Janet M. Dolan 3,773 4 years 0 192,133 319,773
Douglas R. Hoelscher 5,345 4 years 0 272,194 453,014
Richard A. Snyder 5,038 4 years 0 256,553 426,970
Keith D. Payden 1,691 4 years 0 86,136 143,318
</TABLE>
(1) Payout of Performance Share awards is based on Company performance
during a four-year performance period. Payout can range from 0% to 2.33%
of the performance grant, which represents the threshold and maximum
payouts, respectively. Payout of 100% of the performance grant
represents the target payout. Awards are payable in Common Stock of the
Company on a share-for-share basis with respect to 50% of the
Performance Shares earned and in cash with respect to 50% of the
Performance Shares earned, unless the participant elects in advance to
receive a greater portion in stock, or in certain cases, elects to defer
payout. If payout is deferred, payment is made 100% in cash within ten
years of termination. (Also reference page 10, note 3.) The value of
the estimated future payouts was determined using the market value of
the Company's Common Stock on December 31, 1997.
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, 8,253; Ms. Dolan, 1,045; Mr. Hoelscher, 3,070; Mr. Snyder,
3,673; and Mr. Payden, 574.
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
13
<PAGE>
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
$1,954,613; Ms. Dolan, $811,072; Mr. Hoelscher, $840,196; Mr. Snyder,
$803,030; and Mr. Payden, $708,049. 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,
1998, 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 SERVICE
ANNUAL -----------------------------------------------------------
COMPENSATION 10 15 20 25 30
------------ ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$ 50,000 $ 5,215 $ 7,822 $ 10,430 $ 13,037 $ 15,645
100,000 12,215 18,322 24,430 30,537 36,645
150,000 19,215 28,822 38,430 48,037 57,645
200,000 26,215 39,322 52,430 65,537 78,645
250,000 33,215 49,822 66,430 83,037 99,645
300,000 40,215 60,322 80,430 100,537 120,645
350,000 47,215 70,822 94,430 118,037 141,645
400,000 54,215 81,322 108,430 135,537 162,645
450,000 61,215 91,822 122,430 153,037 183,645
500,000 68,215 102,322 136,430 170,537 204,645
550,000 75,215 112,822 150,430 188,037 225,645
600,000 82,215 123,322 164,430 205,537 246,645
</TABLE>
Under the Retirement Plan, benefits are payable based upon a percentage
of a participant's final average pay excluding bonus, overtime, or other
special forms of remuneration. Currently under ERISA, as amended, the
maximum annual amount that can be paid during 1998 to any individual is
$130,000. 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 16 years and Ms. Dolan 12 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,
1997, would be $543,012 for Mr. Hale and $262,675 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.
14
<PAGE>
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, 1992, with reinvestment of all dividends.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
[GRAPH]
ASSUMES $100 INVESTED ON DECEMBER 31, 1992, WITH DIVIDENDS REINVESTED.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Tennant Company 100.00 112.76 119.26 121.25 143.65 194.29
Overall Stock Market 100.00 114.79 113.84 147.60 178.25 231.46
Performance Index (Media General)
Industry Index (Media General) 100.00 136.89 141.93 164.61 192.99 226.89
</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, 1997.
15
<PAGE>
TENNANT COMPANY 1998 MANAGEMENT INCENTIVE PLAN SUMMARY
On February 26, 1998, the Board of Directors adopted the Tennant Company
1998 Management Incentive Plan (the "Plan") and directed that the Plan be
submitted to a vote of the shareholders at the meeting. The full text of the
Plan is set forth in Appendix A to this proxy statement and the following
description of the Plan is qualified in its entirety by the text of the Plan.
The Plan is a management incentive plan designed to provide certain
employees of the Company with incentive compensation based upon achievement
of pre-established performance goals. The Plan is designed to comply with
Section 162(m) of the Internal Revenue Code of 1986 (the "Code"), which
denies deductions for compensation in excess of $1,000,000 paid by the
Company to the Chief Executive Officer and each of the four other most highly
compensated executive officers, except to the extent such compensation was
performance-based and approved by the shareholders of the Company.
The Plan will be administered by the Executive Compensation Committee of
the Board of Directors (the "Committee"). The Committee will select Plan
participants who will be eligible to receive awards under the Plan
(collectively "Awards").
The Plan provides that within 90 days following the commencement of each
"Performance Period" (fiscal year of the Company), the Committee may select
such key employees as it deems appropriate for participation in the Plan.
Plan participants will be entitled to receive an Award of incentive
compensation based on the attainment of performance targets selected by the
Committee consisting of one or more of the following: earnings or earnings
per share before income tax (profit before taxes); net earnings or net
earnings per share (profit after taxes); inventory, total or net operating
asset turnover; accounts receivable (measured in terms of days sales
outstanding); operating expenses; operating profits; total shareholder
return; return on equity; pre-tax and pre-interest expense return on average
invested capital, which may be expressed on a current value basis; operating
profit before taxes or operating profit after taxes less a capital charge for
net assets; sales growth; or economic profit. Any such targets may relate to
one or any combination of two or more of corporate, group, unit, division,
affiliate or individual performance.
For purposes of the Plan, "Annual Profits" means the consolidated income
before interest expense and income taxes of the Company for the Performance
Period, before provisions for incentive compensation earned pursuant to the
Plan and before extraordinary items. For purposes of calculating Annual
Profits, (i) changes in generally accepted accounting principles and (ii) the
effect of discontinued operations and restructuring costs will be taken into
account to the extent determined by the Committee. The total amount of
Awards pursuant to the Plan with respect to any Performance Period may not
exceed 10% of the Annual Profits for such Performance Period and no
participant may receive an Award pursuant to the Plan with respect to any
Performance Period that exceeds 3% of the Annual Profits for such Performance
Period.
The Committee is authorized at any time during or after a Performance
Period, in its sole and absolute discretion, to reduce or eliminate an Award
payable to any participant for any reason, including changes in the position
or duties of the participant, whether due to termination of employment
(including death, disability, retirement or termination with or without
cause) or otherwise. No reduction in an Award made to any participant shall
increase the amount of the Award to any other participant.
Following the completion of each Performance Period, the Committee shall
certify in writing the degree to which performance targets were attained and
Awards are payable to participants. Awards shall be paid in such form (cash
or shares) and at such times as the Committee may provide. The number of
shares available for use in payment of Awards under the Plan is 100,000,
subject to adjustment in accordance with the Plan in the event of changes in
the capitalization of the Company. On March 9, 1998, the closing sale price
of a share of Common Stock of the Company on the NASDAQ National Market
System was $37.50.
16
<PAGE>
If the employment of a participant terminates by reason of retirement
(as defined in the Plan), death or disability, then a pro-rated portion of
any Award relating to the Performance Period in which the participant's
employment terminates and the unpaid portion of any Award relating to any
prior Performance Period shall be paid as and to the extent provided in such
procedures as may from time to time be approved by the Committee. If a
participant's employment with the Company terminates for any reason other
than retirement, death or disability, then such participant's Awards,
including the unpaid portion of any Award relating to any prior Performance
Period, shall be canceled and no payment will be made with respect thereto.
If any payment with respect to an Award is made in shares, it shall be made
in whole shares only (with fractions of a share being paid in cash), and the
number of shares shall be the amount of the payment divided by the fair
market value of a share as of the payment date. Payments made pursuant to
the Plan may be deferred in accordance with procedures established by the
Committee.
The Board of Directors may at any time terminate, suspend or modify the
Plan and the terms and provisions of any Award theretofore awarded to any
participant which has not been paid. Amendments are subject to approval of
the stockholders of the Company only if such approval is necessary to
maintain the Plan in compliance with the requirements of Section 162(m) of
the Code, its successor provisions or any other applicable law or regulation.
No Award may be granted during any suspension of the Plan or after its
termination.
The Plan became effective as of January 1, 1998, subject to approval of
the shareholders at the meeting. If approval of the shareholders is not
obtained, then the Plan shall not become effective and any Award granted
thereunder shall be canceled.
Although any employee that the Committee determines to be a key employee
is eligible to participate in the Plan, it is currently anticipated that
grants under the Plan will be made only to senior management (eleven
persons). The Committee, on February 25, 1998, made grants of Awards under
the Plan to such eleven persons (subject to adoption of the Plan by the Board
of Directors and shareholder approval of the Plan at the meeting). Each of
such Awards involves a short-term element and a long-term element. Both
elements require that following each Performance Period the Company calculate
an amount based upon a percentage of each participant's targeted incentive
compensation for the Performance Period. In each case, the percentage of the
participant's targeted incentive compensation that is used in the calculation
will vary based upon the extent to which the Company meets its financial
goals.
With respect to the short-term element of the Awards, the calculated
amount is payable in cash following the completion of the Performance Period.
The amount calculated with respect to the long-term element of a
participant's Award is credited by the Company to an account maintained for
such participant. Following each Performance Period, one-third of the amount
credited to such account at the beginning of the Performance Period will be
distributed to the participant. Because there was no amount credited to any
participant's account as of January 1, 1998, the first distributions, if any,
with respect to the long-term element of the Awards will occur after December
31, 1999. With respect to the long-term element of the Awards only,
financial performance in any Performance Period that is substantially below
objectives can result in a negative performance factor for the Performance
Period and a reduction both in the amount credited to participants' accounts
and in the payout. The long-term element of Awards under the Plan is
intended to replace awards of performance shares under the Company's 1992
Stock Incentive Plan and 1995 Stock Incentive Plan. It is not currently
intended that any future awards of such performance shares will be made,
although outstanding awards will continue to be earned over their four-year
terms.
The following table sets forth information regarding potential Awards
for the year 1998 pursuant to grants made under the Plan. Such potential
Awards are based on current salary levels, the performance targets designated
by the Committee at its meeting on February 25, 1998, and performance
estimates made by the Company. No Awards will be earned under the Plan for
the year 1998 unless minimum performance objectives are achieved. The
following table indicates estimated threshold Awards if minimum performance
objectives are achieved, targeted Awards if long-term average performance
objectives are achieved and the maximum Awards if all performance objectives
are exceeded.
17
<PAGE>
<TABLE>
<CAPTION>
Name and Position Estimated Short-Term Estimated Long-Term
Incentive Awards Incentive Awards
-------------------------------------- --------------------------------------
Threshold Target Maximum Threshold Target Maximum
--------- ------ ------- --------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Roger L. Hale, President and CEO 0 $231,900 $380,320 0 $231,900 $380,320
Janet M. Dolan, Executive Vice 0 $126,900 $208,120 0 $84,600 $138,750
President
Douglas R. Hoelscher, Senior Vice 0 $93,200 $152,850 0 $69,900 $114,640
President
Richard A. Snyder, Vice President, 0 $94,000 $154,160 0 $47,000 $77,080
Treasurer and Chief Financial Officer
Keith D. Payden, Vice President 0 $67,000 $109,890 0 $19,200 $31,490
All Executive Officers as a Group 0 $838,000 $1,376,720 0 $517,000 $849,360
All Directors who are not Executive 0 0 0 0 0 0
Officers as a Group
All Non-Executive Officer Employees 0 $123,200 $202,400 0 $39,700 $65,220
as a Group
</TABLE>
The affirmative vote of the holders of a majority of the outstanding
shares of Common Stock of the Company entitled to vote on this matter and
present in person or by proxy at the annual 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 THE VOTE FOR APPROVAL OF THE TENNANT
COMPANY 1998 MANAGEMENT INCENTIVE PLAN.
18
<PAGE>
APPOINTMENT OF AUDITORS
At the meeting, a vote will be taken on a proposal to ratify the
appointment of KPMG Peat Marwick LLP as independent auditors of the Company
for the year ending December 31, 1998. 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 23, 1998, to be eligible for inclusion in the Company's
Proxy Statement and form of Proxy relating to that meeting.
OTHER MATTERS
So far as the management is aware, no matters other than those described
in this Proxy Statement will be acted upon at the meeting. If, however, any
other matters properly come before the meeting, it is the intention of the
persons named in the enclosed Proxy to vote the same in accordance with their
judgment on such other matters.
March 25, 1998 By Order of the Board of Directors
Bruce J. Borgerding, Secretary
19
<PAGE>
APPENDIX A
TENNANT COMPANY
1998 MANAGEMENT INCENTIVE PLAN
1. PURPOSE. The purpose of the Tennant Company 1998 Management Incentive
Plan (the "Plan") is to provide incentives to the senior executives of
Tennant Company (the "Company") and its subsidiaries to produce a
superior return to the stockholders of the Company and to encourage such
executives to remain in the employ of the Company and its subsidiaries.
Amounts paid pursuant to the Plan are intended to qualify as
performance-based compensation within the meaning of Section 162(m) of
the Internal Revenue Code, as amended (the "Code").
2. DEFINITIONS.
2.1 The terms defined in this section are used (and capitalized)
elsewhere in the Plan.
a. "Annual Profits" means the consolidated income before interest
expense and income taxes of the Company for the Performance
Period, before the provision for incentive compensation earned
pursuant to this Plan and before extraordinary items. For
purposes of this calculation, (i) changes in generally accepted
accounting principles which occur during the fiscal year, and
(ii) discontinued operation and restructuring costs, as computed
in accordance with generally accepted accounting principles,
shall be taken into account to the extent determined by the
Committee.
b. "Award" means an award payable to a Participant pursuant to
Section 4 hereof.
c. "Board" means the Board of Directors of the Company.
d. "Committee" means the Executive Compensation Committee of the
Board, or such other Board committee as may be designated by the
Board to administer the Plan.
e. "Company" means Tennant Company, a Minnesota corporation. For
purposes of the provisions of this Plan relating to employment
of a Participant with the Company, the term "Company" shall
include any subsidiary of the Company, 50% or more of the voting
stock of which is directly or indirectly owned by the Company.
f. "Disability" means a medical condition that the Committee has
determined renders a Participant unable to perform the normal
duties of the Participant's position with the Company. The
Committee may, in its sole discretion, obtain a medical opinion
from a physician selected by the Committee before any
determination of Disability is made.
g. "Effective Date" means the date specified in Section 5.
h. "Eligible Employee" means any key employee of the Company or a
subsidiary thereof.
i. "Fair Market Value" of a Share as of a date means the closing
price on the preceding day on the Nasdaq National Market System
or, if no trading in Shares occurred on such day on the Nasdaq
National Market System, the closing price of a Share on the most
recent day on which such trading occurred.
j. "Participant" means an Eligible Employee designated by the
Committee to participate in the Plan for a designated
Performance Period.
k. "Performance Period" means the Company's fiscal year.
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<PAGE>
l. "Retirement" means termination of employment (i) after attaining
age 55 for a reason other than death or Disability, provided
that no less than 6 months' prior written notice is given to the
Company, or (ii) with the approval of the Committee.
m. "Share" means a Share of common stock of the Company, par value
$.375 per share (as such par value may be adjusted from time to
time).
2.2 GENDER AND NUMBER. Except when otherwise indicated by context,
reference to the masculine gender shall include, when used, the
feminine gender and any term used in the singular shall also include
the plural.
3. ADMINISTRATION.
3.1 AUTHORITY OF COMMITTEE. The Committee shall administer the Plan.
The Committee's interpretation of the Plan and of any Awards made
under the Plan shall be final and binding on all persons with an
interest therein. The Committee shall have the power to establish
rules to administer the Plan and to change such rules.
3.2 INDEMNIFICATION. To the full extent permitted by law, (i) no member
of the Committee shall be liable for any action or determination
taken or made in good faith with respect to the Plan or any Award
made under the Plan, and (ii) the members of the Committee shall be
entitled to indemnification by the Company with regard to such
actions.
4. AWARDS.
4.1 ALLOCATION OF AWARDS. Within 90 days following the commencement of
each Performance Period, the Committee may select such Eligible
Employees as it deems appropriate for participation in the Plan.
Eligible Employees selected for participation will be entitled to
receive an award of incentive compensation based on the attainment
of performance targets selected by the Committee consisting of one
or more of the following: earnings or earnings per share before
income tax (profit before taxes); net earnings or net earnings per
share (profit after taxes); inventory; total or net operating asset
turnover; accounts receivable (measured in terms of days sales
outstanding); operating expenses; operating profit; total
shareholder return; return on equity; pre-tax and pre-interest
expense return on average invested capital, which may be expressed
on a current value basis; operating profit before taxes or operating
profit after taxes less a capital charge for net assets; sales
growth; or economic profit. Any such targets may relate to one or
any combination of two or more of corporate, group, unit, division,
affiliate or individual performance.
4.2 MAXIMUM AMOUNT OF AWARDS. The total amount of Awards pursuant to
this Plan for any Performance Period shall not exceed 10% of the
Annual Profits generated by the Company during such Performance
Period.
4.3 ADJUSTMENTS. No Participant shall be entitled to receive an Award
in any Performance Period that exceeds 3% of the Annual Profits
generated by the Company during such Performance Period. The
Committee shall reduce the Award payable to any Participant to
comply with this limitation. In addition, the Committee is
authorized at any time during or after a Performance Period, in its
sole and absolute discretion, to reduce or eliminate an Award
payable to any Participant for any other reason, including changes
in the position or duties of any Participant with the Company or any
subsidiary of the Company during the Performance Period, whether due
to any termination of employment (including death, Disability,
Retirement, or termination with or without cause) or otherwise. No
reduction in an Award made to any Participant shall increase the
amount of the Award to any other Participant.
4.4 PAYMENT OF AWARDS: Following the completion of each Performance
Period, the Committee shall certify in writing the degree to which
the performance targets were attained and the Awards payable to
Participants. Awards shall be paid in such form (cash or Shares)
and at such times as the Committee may provide. The number of
Shares available for use in payment of Awards under this Plan shall
be 100,000, subject to adjustment, as provided in Section 12. If a
Participant's employment with the Company terminates by reason of
Retirement, death or Disability, then a prorated portion of any
Award relating to the Performance Period in which the Participant's
employment terminates and the unpaid
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<PAGE>
portion of any Award relating to any prior Performance Period shall
be paid as and to the extent provided in such procedures as may from
time to time be approved by the Committee. If a Participant's
employment with the Company terminates for any reason other than
Retirement, death or Disability, then such Participant's Awards,
including the unpaid portion of any Award relating to any prior
Performance Period, shall be canceled and no payment will be made
with respect thereto. If any payment with respect to an Award is
made in Shares, it shall be made in whole Shares only (with
fractions of a Share being paid in cash), and the number of Shares
shall be the amount of the payment divided by the Fair Market Value
of a Share on the payment date.
5. EFFECTIVE DATE OF THE PLAN. The Plan shall become effective as of
January 1, 1998; provided that the Plan is approved and ratified by the
stockholders of the Company at a meeting thereof held no later than May
31, 1998. The Plan shall remain in effect until it has been terminated
pursuant to Section 8.
6. RIGHT TO TERMINATE EMPLOYMENT. Nothing in the Plan shall confer upon any
Participant the right to continue in the employment of the Company or any
Subsidiary or affect any right which the Company or any Subsidiary may
have to terminate the employment of a Participant with or without cause.
7. TAX WITHHOLDING. The Company shall have the right to withhold from
payments under the Plan to a Participant or other person an amount
sufficient to cover any required withholding taxes. If the Company
withholds Shares to cover such taxes, the number of Shares withheld shall
be the number of whole Shares determine by dividing the amount of such
taxes by the Fair Market Value of a Share on the payment date and
rounding the result to the next whole Share.
8. AMENDMENT, MODIFICATION AND TERMINATION OF THE PLAN. The Board may at
any time terminate, suspend or modify the Plan and the terms and
provisions of any Award theretofore awarded to any Participant which has
not been paid. Amendments are subject to approval of the stockholders of
the Company only if such approval is necessary to maintain the Plan in
compliance with the requirements of Section 162(m) of the Code, its
successor provisions or any other applicable law or regulation. No grant
may be given during any suspension of the Plan or after its termination.
9. UNFUNDED PLAN. The Plan shall be unfunded and the Company shall not be
required to segregate any assets that may at any time be represented by
Awards under the Plan.
10. OTHER BENEFIT AND COMPENSATION PROGRAMS. Neither the adoption of the
Plan by the Board nor its submission to the stockholders of the Company
shall be construed as creating any limitation on the power of the Board
to adopt such other incentive arrangements as it may deem necessary.
Payments received by a Participant under an Award made pursuant to the
Plan shall not be deemed a part of a Participant's regular recurring
compensation for purposes of the termination, indemnity or severance pay
law of any state or country and shall not be included in, nor have any
effect on, the determination of benefits under any other employee benefit
plan, contract or similar arrangement provided by the Company or any
Subsidiary unless expressly so provided by such other plan, contract or
arrangement, or unless the Committee expressly determines that an Award
or portion of an Award should be included to accurately reflect
competitive compensation practices or to recognize that an Award has been
made in lieu of a portion of the competitive cash compensation.
11. GOVERNING LAW. To the extent that Federal laws do not otherwise control,
the Plan and all determinations made and actions taken pursuant to the
Plan shall be governed by the laws of Minnesota and construed accordingly.
12. ADJUSTMENT FOR CHANGES IN CAPITALIZATION. Appropriate adjustments in the
aggregate number and type of Shares available for use in payment of
Awards under this Plan may be made by the Committee in its sole
discretion to give effect to adjustments made in the number or type of
Shares through a fundamental change, recapitalization, reclassification,
stock dividend, stock split, stock combination, or other relevant change,
provided that fractional Shares shall be rounded to the nearest whole
Share.
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<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR ALL PROPOSALS.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
____________________________________
Signature
Dated: _______________________, 1998
------------------------------
PLEASE MARK, SIGN, DATE AND
RETURN THE PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE.
------------------------------
[LOGO] TENNANT COMPANY THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
PROXY 701 NORTH LILAC DRIVE OF DIRECTORS
P.O. BOX 1452
MINNEAPOLIS, MN 55440 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 9, 1998, at the Annual
Meeting of Shareholders to be held on May 8,
1998, 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 / /
</TABLE>
(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.)
Arthur D. Collins, Jr. Andrew P. Czajkowski Pamela K. Knous
If elected, the nominees will serve for a term of three years.
2. TO APPROVE AND RATIFY THE TENNANT COMPANY 1998 MANAGEMENT INCENTIVE 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.
<PAGE>
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: _______________________, 1998
------------------------------
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 8, 1998,
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 17, 1998, 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 9, 1998.
<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 / /
</TABLE>
(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.)
Arthur D. Collins, Jr. Andrew P. Czajkowski Pamela K. Knous
If elected, the nominees will serve for a term of three years.
2. TO APPROVE AND RATIFY THE TENNANT COMPANY 1998 MANAGEMENT INCENTIVE 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.
