ARVIN INDUSTRIES, INC. NOTICE
of
Annual Meeting of Shareholders To Be Held April 18, 1996
To the Shareholders of
ARVIN INDUSTRIES, INC.
The Annual Meeting of Shareholders of Arvin Industries, Inc., an
Indiana corporation, will be held at
the Columbus East High School Auditorium, 230 South Marr Road,
Columbus, Indiana on Thursday,
April 18, 1996, at 10:30 a.m., for the following purposes:
(1) To elect five directors for a term of three years;
(2) To adopt an amendment to the Arvin Industries, Inc. 1988 Stock
Benefit Plan to increase by 950,000 the number of Arvin Common Shares
subject to the Plan;
(3) To ratify the Board of Directors' appointment of Price Waterhouse
as Arvin's independent certified public accountants for the current year; and
(4) To transact such other business as may properly come
before the Annual Meeting and any adjournment thereof.
Shareholders of record at the close of business on February 23, 1996
are entitled to notice of and to vote at the Annual Meeting.
Arvin's Annual Report for fiscal year 1995 is enclosed.
IMPORTANT! TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE MEETING,
PLEASE SIGN, DATE, AND RETURN PROMPTLY THE ENCLOSED PROXY CARD IN THE
ENVELOPE PROVIDED.
No postage is required if the proxy is mailed in the United States. If
you attend the Annual Meeting, you may vote your shares in person even
if you have previously submitted a proxy.
Ronald R. Snyder
Secretary
Columbus, Indiana
March 8, 1996
ARVIN INDUSTRIES, INC.
One Noblitt Plaza, Box 3000, Columbus, Indiana 47202-3000
--------------------------------------------------------
Proxy Statement For Annual Meeting of Shareholders
To Be Held April 18, 1996
This proxy statement and the enclosed proxy are being furnished in
connection with the solicitation of proxies by the Board of Directors
of Arvin Industries, Inc. ("Arvin") from holders of Arvin's common
shares, par value $2.50 per share ("Common Shares"), for use at the
Annual Meeting of Shareholders to be held April 18, 1996, and at any
adjournment or postponement thereof, for the purposes set forth in the
accompanying Notice (the "Annual Meeting"). Arvin will bear all costs
relating to the solicitation of proxies from its shareholders. In
addition to soliciting proxies by mail, Arvin's officers and
employees, without receiving additional compensation therefor, may
solicit proxies by telephone, by telegram or in person. Arrangements
also will be made with brokerage firms and other custodians, nominees
and fiduciaries to forward solicitation materials to the beneficial
owners of Common Shares held of record by
such persons, and Arvin will reimburse such brokerage firms,
custodians, nominees and fiduciaries for reasonable out-ofpocket
expenses incurred by them in that connection. In addition, Arvin has
retained Hill and Knowlton, Inc. to assist in soliciting proxies from
shareholders, including brokers' accounts, at a fee of $6,250 plus
reasonable outof-pocket expenses.
This proxy statement is first being sent to shareholders on or about
March 8, 1996.
VOTING AT THE MEETING
The record date for the determination of shareholders entitled to vote
at the Annual Meeting is the close of business on February 23, 1996,
at which time Arvin had issued and outstanding 22,253,480 Common
Shares. Each shareholder will be entitled to one vote for each Common
Share held with respect to all matters which may be properly submitted
to a vote of shareholders at the Annual Meeting.
All proxies that are properly signed and received by Arvin prior to
the Annual Meeting will be voted in accordance with the instructions
on such proxies unless they have been revoked. If no instruction is
indicated, the shares will be voted FOR the election of the five
nominees for director listed in this proxy statement, FOR approval of
the amendment to the 1988 Stock Benefit Plan, FOR ratification of the
appointment of independent public accountants, and in the discretion
of the persons named in the proxy on such other matters as may
properly come before the Annual Meeting. Any shareholder who has given
a proxy may revoke such proxy at any time before it is voted at the
Annual Meeting by delivering to the Secretary of Arvin written notice
of revocation or a duly executed proxy bearing a later date or by
attending the meeting and voting in person.
A quorum of shareholders is necessary to take action at the Annual
Meeting. A majority of the outstanding Common Shares, represented in
person or by proxy, will constitute a quorum of shareholders at the
Annual Meeting. The inspectors of election appointed for the Annual
Meeting will determine whether a quorum is present. Under certain
circumstances, a broker or other nominee may have discretionary
authority to vote certain Common Shares if instructions have not been
received from the beneficial owner or other person entitled to vote.
The inspectors of election will treat abstentions and broker non-votes
(which occur when a broker or other nominee holding shares for a
beneficial owner does not vote on a particular proposal, because such
broker or other nominee does not have discretionary voting power with
respect to that item and has not received instructions from the
beneficial owner) as present and entitled to vote for purposes of
determining the presence of a quorum for the transaction of business
at the Annual Meeting.
A plurality of the Common Shares voted in person or by proxy is
required to elect a director. Each of the amendments to the 1988 Stock
Benefit Plan and ratification of the appointment of the independent
public accountants will be approved if the votes cast favoring each
action exceeds the votes cast opposing such action. Votes cast by
proxy or in person at the meeting will be tabulated by the inspectors
of election appointed for the Annual Meeting. For purposes of
determining approval of the amendment to the 1988 Stock Benefit Plan,
abstentions will be treated as Common Shares voted against. For
purposes of determining ratification of the appointment of the
accountants, abstentions will not be considered. Broker non-votes,
because they are not considered votes cast, are not counted in the
vote totals and will have no effect on the proposed amendment to the
1988 Stock Benefit Plan.
PROPOSAL 1 - ELECTION OF DIRECTORS
Arvin's Restated Articles of Incorporation, as amended, provide that
its By-Laws may divide the Board of Directors into classes, with the
terms of office of directors in each class being more than one year.
The By-Laws provide that the Board of Directors shall be divided into
three classes, each class being as nearly equal in number as possible,
and that at each Annual Meeting of Shareholders the successors to the
directors whose terms expire that year shall be elected for a term of
three years. At the Annual Meeting, five incumbent
directors whose terms expire at the 1996 meeting will be nominated for
a three-year term.
Unless otherwise directed, proxies will be voted for the election of
the five nominees listed below who have been designated by the Board
of Directors. If, on account of death or other unforeseen
contingencies, any of these persons is unavailable for election, the
proxies will be voted for a substitute nominee designated by the Board
of Directors.
The following sets forth certain information with respect to the
nominees and continuing directors of Arvin:
Number of Common
Shares Beneficially Owned
as of January 1, 1996(1)
Nominees for Three-Year Terms:
William D. George, President and Chief Executive Officer of
S.C. Johnson & Son Inc. 3,000
Mr. George, 63, received a Bachelor of Arts degree from DePauw
University and a Masters of Business Administration degree from
Harvard University. In 1981, he joined S.C Johnson Wax, a manufacturer
of chemical specialty products headquartered in Racine, Wisconsin,
and, after holding a number of positions, became Executive Vice
President and Chief Operating Officer, Worldwide Consumer Products in
1988. He was elected President in 1990 and Chief Executive Officer and
a member of the Board in 1993. Mr. George was first elected to the
Arvin Board of Directors in 1994. He also serves on the board of
directors of Ralcorp, Inc. and is a member of the Board of Trustees of
Carthage College.
Frederick R. Meyer, Chairman, President and Chief Executive
Officer of Aladdin Industries, Inc. 13,100
Mr. Meyer, 68, graduated from Purdue University and holds a Master of
Business Administration degree from Harvard University. In 1985, Mr.
Meyer became Chairman of the Board of Aladdin Industries, Inc., a
diversified company principally engaged in the manufacture of
children's lunch kits, thermosware, insulated food delivery systems
and related products located in Nashville, Tennessee. Mr. Meyer
served as President and Chief Executive Officer of Aladdin Industries,
Inc. from 1977 through September 1994 and was re-elected to that
position in October 1995. Mr. Meyer was first elected to Arvin's
Board of Directors in 1980. He also serves as a director of Tyler
Corporation, Southwest Securities Group, Inc. and Palm Harbor Homes,
Inc.
Byron O. Pond, Chairman and Chief Executive Officer of
Arvin 148,551 (2)(3)
Mr. Pond, 59, is a graduate of Wayne State University with a Bachelor
of Science degree in Business Administration. Mr. Pond was first
employed by Maremont Corporation as a Director of Field Sales Planning
in 1968. After serving successively as Vice President,
General Manager, Senior Vice President and Executive Vice President,
he became President of Maremont Corporation in 1979 and Chief
Executive Officer in 1981. Mr. Pond became an Executive Vice President
and director of Arvin in 1990, President in 1991, Chief Executive
Officer in 1993, and was elected Chairman of the Board of Directors in
February 1996.
Richard A. Smith, Vice President-Finance of Arvin 53,098 (2)(3)(4)
Mr. Smith, 50, graduated from the University of Illinois at Chicago,
was awarded a Master of Business Administration by Northwestern
University and earned a Doctor of Jurisprudence degree from St. Louis
University. Mr. Smith has been Vice President-Finance and a member of
Arvin's Board of Directors since 1990.
Arthur R. Velasquez, President and Chief Executive Officer of Azteca
Foods, Inc. 1,000
Mr. Velasquez, 57, is a graduate of the University of Notre Dame with
a Bachelor of Science degree in Electrical Engineering and holds a
Masters of Business Administration from the University of Chicago. He
was a founder of Azteca Corn Products Corporation in 1970, now Azteca
Foods, Inc. Azteca is a manufacturer of Mexican foods located
in Chicago, Illinois. Mr. Velasquez was first elected an Arvin
director in 1994. He also serves on the boards of directors of LaSalle
National Bank, Peoples Energy Corporation, Chicago Metro Board of
Junior Achievement, the Maryville City of Youth, and serves on the
Boards of Trustees of the University of Notre Dame and St. Xavier
University.
Continuing Directors:
Joseph P. Allen, Chairman of the Board of Directors of Calspan SRL
Corporation (successor to Space Industries International, Inc.) 3,390
Dr. Allen, 58, is a graduate of DePauw University with a Bachelor of
Arts degree and attended Christian Albrechts Universitaet in Kiel,
Germany as a Fulbright Scholar. He also earned Master of Science and
Doctor of Philosophy degrees from Yale University. Dr. Allen was an
astronaut with NASA from 1967 to 1985, when he became Executive
Vice President of Space Industries, Inc., a designer of space
facilities located in Webster, Texas. Dr. Allen was elected President
of Space Industries in 1988, Chief Executive Officer in 1991, and
Chairman in 1995. Dr. Allen was first elected to Arvin's Board of
Directors in 1985, and his current term expires in 1998. He is also a
director of Calspan SRL Corporation.
James K. Baker, Vice Chairman of the Board of Directors of
Arvin 282,984 (2)(3)(5)
Mr. Baker, 64, graduated from DePauw University and holds a Master of
Business Administration degree from Harvard University. Associated
with Arvin since 1955, he was elected a member of the Board of
Directors in 1968, elected President and appointed Chief
Executive Officer in 1981, and elected Chairman of the Board in 1986.
He stepped down to the position of Vice Chairman in 1996. His current
term on the Board of Directors expires in 1997. Mr. Baker is also a
director of Amcast Industrial Corporation, Geon Company, NBD Bancorp,
CINergy, Inc., Calspan SRL Corporation, and Tokheim Corp., and is a
former Chairman of the United States Chamber of Commerce and the
Chairman of the NASA Commercial Programs Advisory
Committee. He also serves as Chairman of the Board of Trustees of
DePauw University and is on the Executive Committee of the Business
Higher Education Forum.
Steven C. Beering, President of Purdue University 1,000 (4)
Dr. Beering, 63, holds Bachelor of Science and Doctor of Medicine
degrees from the University of Pittsburgh. He was named President of
Purdue University and the Purdue University Foundations in 1983. He is
also a director of Eli Lilly and Company, NIPSCO
Industries, Inc., American United Life Insurance Co. and Calspan SRL
Corporation. He was first elected to Arvin's Board of Directors in
1983, and his current term expires in 1998.
Joseph P. Flannery, Chairman, President and Chief Executive Officer of
Uniroyal Holdings, Inc. 1,000
Mr. Flannery, 62, holds a Bachelor of Science degree from the
University of Lowell and a Masters of Business Administration degree
from Harvard University. He joined Uniroyal, Inc. in 1959 and, after
holding a number of positions with Uniroyal, Inc. and its Uniroyal
Chemical Division, was elected a director and President and Chief
Operating Officer of Uniroyal, Inc. in 1977 and its Chief Executive
Officer in 1980. Since 1987 Mr. Flannery has been Chairman of the
Board, President and Chief Executive Officer of Uniroyal Holdings,
Inc. He was first elected an Arvin director in
1991, and his current term expires in 1998. Mr. Flannery also serves
on the boards of directors of APS Holding Corporation, Ingersoll-Rand
Company, K mart Corp., Newmont Mining Corp. and The Scotts
Company.
Ivan W. Gorr, Former Chairman of the Board and Chief Executive Officer
of Cooper Tire & Rubber Company 1,500
Mr. Gorr, 66, is a graduate of the University of Toledo and is a
certified public accountant. Mr. Gorr began his career with Cooper
Tire in 1972 as corporate controller and, after having served as
executive vice president, treasurer and chief financial officer, was
elected president and chief operating officer in 1982 and Chairman and
Chief Executive Officer in 1989 serving in those capacities until
1994. Cooper Tire, located in Findlay, Ohio, specializes in the
manufacture and marketing of rubber products for consumers and
industrial users. Mr. Gorr was elected a director of Arvin in 1994,
and his current term on the Board of Directors expires in 1997. He
also serves as a director of Amcast Industrial Corporation, Fifth
Third Bancorp, OHM Corporation, Borg-Warner Automotive, Inc. and
Cooper Tire & Rubber Company.
Richard W. Hanselman, Former Chairman and Chief Executive
Officer of Genesco, Inc. 1,200
Mr. Hanselman, 68, is a graduate of Dartmouth College. He joined
Genesco in 1980 and was named Chief Executive Officer in 1981, serving
in that capacity and as its Chairman until 1986. Genesco is a
diversified manufacturer of footwear and apparel located in Nashville,
Tennessee. Mr. Hanselman was first elected to Arvin's Board of
Directors in 1983, and his current term on the Board of Directors
expires in 1997. He is also a director of Becton, Dickinson & Co.,
Benson Eyecare Corporation, Bradford Funds, Inc., Columbia/HCA
Healthcare Corp., Foundation Healthcare Corp., Gryphon Holdings, Inc.
and IMCO Recycling Inc.
V. William Hunt, President and Chief Operating Officer of
Arvin 83,618 (2)(3)
Mr. Hunt, 51, holds Bachelor of Arts and Doctor of Jurisprudence
degrees from Indiana University. Mr. Hunt joined Arvin in 1976 and was
elected Vice President-Administration in 1980, Secretary in
1982, Executive Vice President in 1990, and President & COO in 1996.
He was first elected to the Board of Directors in 1983, and his
current term expires in 1998. Mr. Hunt is also a member of the Board
of Governors, Motor & Equipment Manufacturers Association, Automotive
Presidents' Council.
Don. J. Kacek, Chairman, President and Chief Executive Officer of
Advanced Automation Technologies, Inc. 1,000 (4)
Mr. Kacek, 59, holds a Bachelor of Science degree from Illinois
Institute of Technology. He became President and Chief Executive
Officer of Ransburg Corporation in 1977 and was elected Chairman of
its Board of Directors in 1978, in which capacities he served until
1988. In 1989, Mr. Kacek became a director of Advanced Automation
Technologies, Inc. and since 1990 has been its Chairman, President and
Chief Executive Officer. Advanced Automation Technologies is a
manufacturer of factory automation equipment located in Indianapolis,
Indiana. He was first elected to Arvin's Board of Directors in 1982,
and his current term on the Board of Directors expires in 1997.
<FN>
(1) Except as otherwise noted, each person exercises sole voting and
investment power over the shares beneficially owned by him. Other than
Mr. Baker, who beneficially owns approximately 1.27% of the
outstanding Common Shares, no nominee or director is individually the
beneficial owner of more than 1.0% of Arvin's outstanding Common
Shares.
<FN>
(2) Includes Common Shares subject to options which may be
exercised within 60 days after January 1, 1996, as follows: Mr. Pond-
114,000 shares, Mr. Smith-41,750 shares, Mr. Baker-110,500 shares, and
Mr. Hunt-69,250 shares.
<FN>
(3) Includes Common Shares held in such participant's accounts under
certain Arvin employee benefit plans, as follows: Arvin Savings Plan:
Mr. Pond-1,051 shares, Mr. Smith-1,848 shares, Mr. Baker-19,161 shares
and Mr. Hunt-6,698 shares; and Arvin Equity Account Plan: Mr.
Baker-27,058 shares and Mr. Hunt-1,391 shares. Common Shares held in
the Arvin Savings Plan and the Arvin Equity Account Plan are voted at
the direction of the participant.
<FN>
(4) Shared voting and investment power, as follows: Dr. Beering-
1,000 shares; and Mr. Kacek-1,000 shares and Mr. Smith-9,500 shares.
<FN>
(5) Includes Common Shares owned of record by members of Mr. Baker's
immediate family. Mr. Baker has disclaimed any beneficial interest in
33,648 of those Common Shares.
Compensation of Directors
During 1995, Mr. Baker and non-employee members of the Board
of Directors were compensated for their service as directors as
follows: an annual fee of $20,000; a fee of $1,500 for membership on
any regular committee of the Board; and attendance fees of $1,500 and
$1,000, respectively, for each Board and committee meeting. Mr.
Baker and non-employee Board members were also paid fees of $1,000 for
telephonic consultation. In addition, for services through September
30, 1995, Dr. Beering was paid $13,750 and Mr. Baker was paid $4,850
for their services as non-employee directors of Calspan SRL
Corporation, which was approximately a 70%-owned subsidiary of Arvin
until September 30, 1995.
Meetings of Directors and Committees
The Board of Directors met six times in 1995.
There are three standing committees of the Board of Directors. The
Audit Committee, the current members of which are Messrs. Gorr
(Chairman), Velasquez, Meyer and Smith (ex-officio), has the
responsibility to assess and oversee the adequacy of internal controls
and the integrity of Arvin's financial statements. Its functions
include: recommending outside auditors; assessing the plan and scope
of the audit; reviewing the results of the annual audit and financial
statements before release (including disclosure requirements);
evaluating auditors' fees; overseeing the effectiveness of the
internal audit function; directing and supervising any investigation
into matters within the scope of the foregoing duties (including
compliance with the Foreign Corrupt Practices Act); and performing
such other related functions as the Board of Directors may, from time
to time, delegate to the Audit Committee. The Audit Committee met
four times in 1995.
The Compensation Committee, which met three times during 1995, is
currently comprised of Messrs. Hanselman (Chairman), Flannery and
Beering. The Compensation Committee is responsible for establishing
and administering the compensation policies of Arvin. See "Report of
the Compensation Committee on Executive Compensation."
The Committee on Directors makes recommendations to the Board of
Directors as to nominees for election as directors. This committee
will consider nominees recommended by Arvin shareholders; any such
recommendations may be submitted in writing to the Chairman of
the Committee on Directors, in care of Arvin's executive offices in
Columbus, Indiana. The current members of the Committee on Directors,
which met three times in 1995, are Messrs. Allen (Chairman), George
and Kacek.
EXECUTIVE COMPENSATION
Summary
The following table summarizes the annual and long-term compensation
for services to Arvin and its subsidiaries for fiscal years 1995,
1994, and 1993 awarded or paid to or earned by the chief executive
officer and each of the four other most highly compensated executive
officers of Arvin and its subsidiaries (the "Named Officers") during
1995.
Summary Compensation Table
Annual Compensation Long-Term Compensation
----------------------------------- ---------------------
Awards Payouts
--------- -------
Other Annual Securities LTIP All Other
Name and Principal Salary Bonus Compensation Underlying Payouts Compensation
Position Year ($) ($) ($)(1) Options(#) ($)(2) ($)(3)
- ------------------------ ---- --------- --------- ------------ --------- ------- ------------
Byron O. Pond(4) 1995 $ 500,000 $ 216,650 $ 10,656 30,000 0 $5,850
President & Chief 1994 500,000 225,000 10,145 30,000 0 4,500
Executive Officer 1993 438,269 112,347 6,626 171,500 0 7,075
V. William Hunt(4) 1995 301,500 130,640 5,181 18,000 0 5,850
Executive Vice President 1994 288,615 129,877 4,677 13,000 0 4,500
1993 276,500 70,508 3,991 10,000 0 7,075
Bernard Kievit(5) 1995 275,207 296,304 1,638 14,000 0 0
Vice President 1994 242,679 97,496 1,414 11,000 0 0
1993 235,602 130,927 1,359 6,000 0 0
Richard A. Smith 1995 242,846 105,225 5,512 14,200 0 5,850
Vice President Finance & 1994 232,800 104,760 4,003 11,000 0 4,500
Chief Financial Officer 1993 222,608 56,765 3,601 8,000 0 7,075
E. Leon Viars 1995 212,485 92,070 3,323 6,600 $64,063 5,850
Executive Vice President 1994 205,615 46,989 2,501 10,000 46,989 4,500
1993 193,269 47,970 0 6,000 47,970 7,075
<FN>
(1) The compensation reported is the amount reimbursed or paid
by Arvin for certain taxes.
<FN>
(2) Amounts for Mr. Viars represent payouts for awards for the
1986 through 1990 performance periods under the Maremont Corporation
Senior Management Deferred Compensation Plan, which
was terminated on January 1, 1991.
<FN>
(3) The compensation reported represents Arvin matching contributions
to the Arvin Savings Plan.
<FN>
(4) Mr. Pond was elected Chairman and Mr. Hunt was elected President
and Chief Operating Officer in February 1996.
<FN>
(5) Increases in Mr. Kievit's salary are principally attributable to
changes in the exchange rate for Dutch guilders into U.S. dollars.
Options Granted in 1995
The following table sets forth certain information as to options
to purchase Common Shares of Arvin granted to each of the Named
Officers under the 1988 Stock Benefit Plan during the fiscal year
ended December 31, 1995 and the potential realizable value, assuming
certain annual rates of appreciation.
Option Grants In Last Fiscal Year
Potential realizable value at
assumed annual rates of stock
Individual Grant price appreciation for option term(3)
------------------------------------------------------------------- ------------------------------------
Number of Percent of
securities total options
underlying granted to Exercise
options employees in price ($ Expiration
Name granted(#)(1) fiscal year per Sh(2)) date 5%($) 10%($)
- ---------------- ------------- ------------- ---------- ---------- ----------- ------------
Byron O. Pond 30,000 9.2% $18.5625 10/18/2005 $350,274 $ 887,659
V. William Hunt 18,000 5.5 18.5625 10/18/2005 210,165 532,595
Bernard Kievit 14,000 4.3 18.5625 10/18/2005 163,461 414,421
Richard A. Smith 14,200 4.4 18.5625 10/18/2005 165,797 420,158
E. Leon Viars 6,600 2.0 18.5625 10/18/2005 77,060 195,285
All Optionees 325,450 100 18.5625 10/18/2005 3,799,893 9,629,618
<FN>
(1) All options granted to the Named Officers were granted on
October 18, 1995 and will first become exercisable October 18, 1996.
Vesting may be accelerated as a result of certain changes in control
of Arvin.
<FN>
(2) All options were granted at market value (the average of the
high and low prices of the Arvin Common Shares) on the date of
grant.
<FN>
(3) The potential realizable value illustrates the value that might
be recognized upon the exercise of the options immediately prior to
the expiration of their term, assuming the specified compounded
rates of stock price appreciation over the ten-year term of the
option. Potential realizable value is presented net of the option
exercise price, but before taxes associated with the exercise. Actual
gains, if any, on stock option exercises and Common Share holdings
are dependent on the future performance of the Common Shares and
overall market conditions as well as the optionholders' continued
employment through the ten-year term of the option. There can be
no assurance that the amounts reflected in this table will be
achieved.
Option Exercises in 1995
The table below sets forth certain information concerning the
exercise of options to purchase Common Shares under the 1988 Stock
Benefit Plan and the 1978 Stock Option Plan during fiscal year 1995
by each of the Named Officers and the value of unexercised options
held by each of the Named Officers as of December 31, 1995.
Aggregated Option Exercises In Last Fiscal Year And Fiscal Year-End Option Values
Number of securities Value of unexercised
Shares acquired Value Realized underlying uinexercised options in-the-money options
Name on exercise (#) ($)(1) at fiscal year-end(#) at fiscal year-end ($)(2)
- ------------- -------------- --------------- -------------------------------- ----------------------------
Exercisable Unexercisable Exercisable Unexercisable
------------- ------------- ----------- --------------
Byron O. Pond 6,500 $53,844 114,000 180,000 $3,250 $ 0
V. William Hunt 0 0 69,250 18,000 0 0
Bernard Kievit 0 0 41,600 14,000 0 0
Richard A. Smith 0 0 41,750 14,200 8,000 0
E. Leon Viars 0 0 52,700 6,600 25,875 0
<FN>
(1) Represents the difference between the closing price of the
Arvin Common Shares on the New York Stock Exchange on the business day
preceding the date of exercise and the option exercise
price.
<FN>
(2) Represents the difference between $16.50, the closing price of
the Arvin Common Shares on the New York Stock Exchange on December 31,
1995, and the option exercise price.
Employment Agreement with Byron O. Pond
An employment agreement between Arvin and Mr. Pond, effective
June 17, 1993, provides, among other things, for his full time
employment until June 16, 1996, with automatic one-year extensions
commencing June 17, 1994, and continuing each June 17 thereafter,
unless terminated by Arvin or Mr. Pond, at an annual salary of not
less than $500,000. The agreement also provides that it will be
binding upon a successor corporation in the event that Arvin is
merged into any other corporation or that any other corporation
acquires substantially all of the assets of Arvin. In the event Mr.
Pond's change of control agreement (discussed below) is triggered, it
will supersede his employment agreement.
Change of Control Agreements
Arvin has entered into Change of Control Employment Agreements
(the "Agreements") with certain Company officers, including each
member of the Office of the Chief Executive and the Named Officers,
which provide severance payments and benefits in the event of the
termination of employment of the officer under certain circumstances
within the three year period following a change in control.
Under the Agreements, each officer would be entitled to
severance payments and benefits in the event that his or her
employment is terminated during the three year period following a
change in control without "cause" by Arvin, or for "good reason" by
the officer, each as is defined in the Agreement. In such case, the
officer would be entitled to a severance payment equal to three
times his current annual salary and his highest bonus during the
preceding three years. During such three-year period, the officer
would be entitled to participate in all incentive, retirement and
welfare plans of Arvin. Additional benefits would include the right to
receive a pension supplement, fringe benefits and paid vacation. In
the event that any payments made in connection with the change-in-
control would be subject to the excise tax imposed under Section
4999 of the Internal Revenue Code as a result of the aggregate
compensation payments and benefits made to the individual, under
the Agreement or otherwise, in connection with a change-incontrol,
Arvin is obligated to make whole the individual with respect to such
excise tax. Each officer would also be entitled to receive the
foregoing severance payments and benefits of the Agreement if terminated for
a limited period of time, for any reason by the officer.
Retirement Plan
The table below shows the estimated annual benefits payable upon
retirement to persons, including the Named Officers, other than Mr.
Kievit, covered under Arvin's Retirement Plan for Exempt Salaried
Employees (the "Retirement Plan") and Arvin's Supplemental Retirement
Plan (the "Supplemental Retirement Plan") (based on the
benefit formulas in effect and calculated on a straight life annuity
basis, as described below), in the specified compensation and years
of service classifications. The table assumes that the last five years of
service occur after October 1, 1991. The amounts reflected in the
table are not subject to any deduction for Social Security benefits or
other offset amounts except for the Arvin Equity Account described
below.
Annual Compensation
(Average of 5 Highest
Consecutive Years Annual Life Income With Years of Service at
in Last 10) Age 65 (Single Life Annuity)
- ------------------- -------------------------------------------------------------------------------------------
15 20 25 30 35 40
------------- ------------- ------------ -------------- ------------ -----------
$250,000 $ 40,115 $ 52,615 $ 65,115 $ 77,615 $ 90,115 $ 102,615
$350,000 56,365 73,865 91,365 108,865 126,365 143,865
$450,000 72,615 95,115 117,615 140,115 162,615 185,115
$550,000 88,865 116,365 143,865 171,365 198,865 226,365
$650,000 105,115 137,615 170,115 202,615 235,115 267,615
$750,000 121,365 158,865 196,365 233,865 271,365 308,865
$850,000 137,615 180,115 222,615 265,115 307,615 350,115
$950,000 153,865 201,365 248,865 296,365 343,865 391,365
The Retirement Plan is a defined benefit plan, based on total years of
service, which provides a life annuity determined by the average of
the five highest consecutive years' annual earnings in the last ten
years of service. For credited service earned prior to October 1,
1991, the benefit is calculated by multiplying 1% for each year of credited
service times the average annual earnings figure. Effective October 1,
1991 the Retirement Plan and certain other defined benefit pension
plans covering domestic salaried employees of Arvin and its
subsidiaries (including the Maremont Corporation Pension
Plan for Salaried Employees (the "Maremont Plan") which was merged into
the Retirement Plan effective November 1, 1988) adopted a new
unified benefit formula for service credited after that date. With
respect to credited service earned on or after October 1, 1991, the
benefit is calculated by (i) multiplying 1% for each year of credited
service times the average annual earnings figure and (ii) adding to
that amount an amount determined by multiplying 0.25% for each
year of credited service (up to a maximum of 35 years) times the
amount by which the average annual earnings figure exceeds a portion
of the social security wage base (for 1995, $40,800). Five years
of service are required for vesting under the Plan. Employees
may qualify for full benefits at age sixty-five, subject to certain
exceptions under the Employee Retirement Income Security Act of
1974, though provisions are made within the Plan for early retirement
at reduced benefits and for disability retirement. The
compensation covered by the Plan includes salaries, bonuses and
compensation deferred at the option of the employees resulting from
contributions to the Arvin Savings Plan. For the calendar year ended
December 31, 1995, credited years of service for the Named Officers
(other than Mr. Kievit) are as follows: Mr. Pond-4 years (for
determination of benefits; 27 years for vesting purposes); Mr. Hunt-
19 years; Mr. Smith-6 years and Mr. Viars-26 years. With respect to
the period prior to October 1, 1991, Mr. Pond, and other Arvin
employees who previously participated in the Maremont Plan, will
have their benefits determined under the Maremont Plan discussed
below.
In 1983, the master trust governing the Retirement Plan was amended to
allow investment of Plan funds in Common Shares. As of
September 1, 1985, the Retirement Plan was further amended to
transfer to the Arvin Equity Account of the Arvin Savings Plan assets
and liabilities for the accrued benefits of active Retirement Plan
participants, and a provision was added which credits the benefit
payable under the Arvin Equity Account against the benefit payable
under the Retirement Plan. The 1985 amendment also added provisions
prohibiting termination of the Retirement Plan and
recovery of any excess assets ("overfunding") in the Plan unless
approved by a majority of the "Continuing Directors" (as defined in
the Retirement Plan) and providing that, in the event of a change of
control of Arvin without Continuing Director approval, the percentage
for each year of credited service used in the Retirement Plan's
benefit formula would be increased as necessary so that all Plan
assets would be needed to provide benefits to participants and any
overfunding would be eliminated.
Annual benefits payable upon retirement under the Retirement Plan
are subject to limitation imposed by law in prescribed circumstances.
To the extent that an individual employee's retirement benefit would
exceed such limit, the pension benefit payable upon retirement set
forth in the above table will be paid pursuant to the Supplemental
Retirement Plan.
As noted above, prior to October, 1991 Mr. Pond was President and
Chief Executive Officer of Maremont Corporation. Mr. Pond became a
participant in the Retirement Plan effective October 1, 1991, and his
pension under the Retirement Plan for the period prior to that date
will be determined in accordance with the formula in effect under
the Maremont Plan immediately prior to its merger into the Retirement
Plan. The Maremont Plan formula applicable for pre-
October, 1991 service provides a benefit calculated by multiplying
1.5% for each year of credited service times the average annual
earnings figure and is reduced by a portion of expected primary
Social Security payments. The compensation covered by the Maremont
Plan includes salaries, bonuses and employee contributions to the
Maremont Thrift Plan. As of October 1, 1991, Mr.
Pond was credited with 22 3/4 years of service under the Maremont
Plan. The estimated annual benefits payable to Mr. Pond upon his
retirement under the Maremont Plan, assuming continued employment
until age 65, would be $49,500 for every $100,000 of
annual compensation, or $246,084 (based on the average of his five
highest consecutive years of compensation in his last fifteen years of
service with Maremont), and in each case is subject to reduction to
reflect Social Security benefits. To the extent that the retirement
benefit under the Maremont Plan formula for the period before
October 1, 1991 exceeds certain limitations imposed by law, the
excess will be paid pursuant to a Supplemental Retirement Plan
similar to the one maintained by Arvin.
In addition, upon retirement at age 65, Mr. Pond will be entitled to
receive $30,000 per year under a Maremont insurance-funded retirement
program for a period of ten (10) years. In the event of
Mr. Pond's death prior to retirement or during the ten (10) years
following retirement, such annual benefits will be paid to his
beneficiary.
Mr. Kievit participates in Dutch national pension schemes to which
Arvin Exhaust Europe makes contributions. Neither Arvin nor Arvin
Exhaust Europe sponsor a retirement program for Dutch employees.
Report of the Compensation Committee on Executive Compensation
The Compensation Committee of the Board of Directors (the
"Compensation Committee") establishes the general compensation
policies of Arvin, makes recommendations to the Board of Directors
with respect to the specific compensation levels for the Chairman and
the President, reviews and approves the annual cash bonus incentive
plan for executives, including the Named Officers, who are members
of the Office of the Chief Executive, administers the 1988 Stock
Benefit Plan, reviews the remuneration of other officers and considers
and recommends the adoption of compensation plans for
officers and directors.
Arvin's compensation philosophy is to provide a total compensation
program which will attract and retain qualified executives and
motivate superior performance. The Compensation Committee and
management of Arvin are committed to the principle that pay should
be commensurate with performance and attainment of predetermined
financial and strategic objectives. As a consequence,
pay is more heavily influenced by company performance.
The compensation program consists of three components: base salary,
annual cash incentive opportunities and long-term stockbased
incentive opportunities. The compensation philosophy for base salary
is to set executive base salaries slightly below industry norms, with
the proportion of total cash compensation that can be earned based
on variable incentive compensation above industry norms. Industry
norms used in establishing base salaries for the CEO and each of the
Named Officers in 1995 were determined by gathering competitive
compensation information from the companies comprising the Dow
Jones Auto Parts and Equipment Index as well as from other
manufacturing companies selected on the basis of similar sales
volume, level of employment and international scope.
The Arvin philosophy for variable cash bonus incentive compensation is
to provide rewards when financial objectives are
achieved. In 1995, these objectives, designed to increase shareholder
value, were earnings per share, labor cost as percentage of net sales,
cost of quality as a percentage of cost of sales, return on net
producing assets and implementation of the Arvin Total Quality
Production System (ATQPS) as measured by the percentage of ATQPS-
certified direct employees. The relative weights assigned to
these objectives were equal except for earnings per share which was
weighted more by a multiple of two and one-half and ATQPS which
was weighted less by a factor of three-fourths. Maximum bonuses
that could be earned with respect to each of these objectives are set
as a percentage of the executive's base salary. The maximum aggregate
bonus that could be earned if all of the objectives were
attained was 125% of the executive's base salary. Minimum achievement
levels against each of the financial objectives were
required before the portion of the bonus relating to that objective
could be earned. The CEO and each of the Named Officers, except Mr.
Kievit, Vice President of Arvin and Managing Director of Arvin
Exhaust Europe, participated in the 1995 cash bonus incentive plan.
Long-term incentives are currently provided through the grant of
stock options to the Named Officers and the CEO and the award of
performance shares to the CEO. Stock options and performance shares
are an important component of the Compensation Committee's long-
term performance based compensation philosophy. The number of
options granted is determined subjectively by considering the
executive's ability to influence Arvin's long-term growth and
profitability. Options are granted at the current market price and are
exercisable commencing one year after the date of grant. Since the
value of an option is directly related to Arvin's stock price, it
provides an incentive to create value for shareholders. Performance
shares are awarded to the CEO to provide an incentive to enhance
Arvin's earnings growth. In 1995, performance share awards could
be earned upon attainment of performance goals, which were based
upon the percentages by which Arvin's 1995 earnings from continuing
operations exceeded Arvin's 1994 earnings from continuing operations
(without giving effect to the restructuring and
special charges taken in 1994). If earned, performance shares are
paid in a combination of Arvin Common Shares and cash. Fifty percent
of the Arvin Common Shares earned must be held for a period of three
years. In 1995, the maximum number of performance shares that the CEO
could earn was 18,200, 14,000 of
which were payable in Arvin Common Shares and 4,200 of which were
payable in cash.
Mr. Pond's employment agreement (see "Executive Compensation-Employment
Agreement") did not impact the determination of his
compensation for 1995 except insofar as it addresses minimum annual
base salary. Mr. Pond's cash incentive bonus was determined
in accordance with the 1995 cash bonus incentive plan. In 1995, the
minimum achievement level was surpassed on the labor cost as a
percentage of net sales objective and the objectives relating to cost of
quality as a percentage of cost of sales and ATQPS implementation
were fully achieved. Minimum achievement levels relating to return
on net producing assets and earnings per share were not met. As a
result, the cash bonus paid to Mr. Pond, as CEO for 1995, was
$216,650. Mr. Pond was granted performance shares which could be
earned based upon attainment of 1995 earnings performance goals.
The minimum earnings goals were not achieved in 1995, resulting in
a forfeiture of all performance shares. The stock options granted to
Mr. Pond during 1995 are consistent with the design and philosophy
of the overall program and are shown above in the Summary Compensation
Table.
Mr. Kievit's cash incentive bonus was determined in accordance with
a plan with financial and strategic objectives relating to Arvin
Exhaust Europe. In 1995, these objectives were the operating profit,
return on net producing assets, labor cost as a percentage of sales,
inventory turnover, implementation of ATQPS and cost reduction
performance of Arvin Exhaust Europe. The relative weights assigned
to these objectives were equal except for return on net producing
assets, which was weighted more by a multiple of two, and operating
profit, which was weighted more by a multiple of four. Maximum
bonuses that could be earned with respect to each of these objectives
were set as a percentage of Mr. Kievit's base salary. The maximum
aggregate bonus that could be earned if all of the objectives are
attained was 125% of base salary. Minimum achievement levels against
each of the objectives were required before the portion of the
bonus relating to that objective could be earned. In 1995, the
minimum achievement levels were met on all of the objectives except
labor cost as a percentage of sales, and the objectives relating
to operating profit, return on net producing assets and ATQPS
implementation were fully achieved.
The Compensation Committee believes this compensation philosophy
and practice encourages outstanding individuals to achieve levels of
performance that otherwise would not have been reached and to
maintain their employment and personal commitment to Arvin. Arvin
shareholders and customers are also beneficiaries.
Because Arvin's stock benefit plans are currently considered "performance
based" and therefore not subject to the limitations on
deductibility of executive compensation under Section 162(m) of the
Internal Revenue Code, and because the Compensation Committee
considers it unlikely that compensation subject to the one million
dollar limitation will be paid to any of the Named Officers, the
Committee has not yet had a need to adopt a policy relating to such
compensation.
This report is submitted on behalf of the Compensation Committee:
Richard W. Hanselman, Chairman
Steven C. Beering
Joseph P. Flannery
COMMON SHARE PRICE PERFORMANCE GRAPH
The graph below compares cumulative total return of the Arvin
Common Shares with the S&P 500 Index and the Dow Jones Auto Parts and
Equipment Index during the years 1991 through 1995,
assuming the investment of $100 on December 31, 1990 and the
reinvestment of dividends.
Comparison of Five-Year Cummulative Total Return
Among Arvin Industries, Inc., The S & P 500 Index
and The Dow Jones Auto Parts & Equipment Index
12/90 12/91 12/92 12/93 12/94 12/95
-------- -------- -------- -------- -------- --------
Arvin Industries 100 131 190 203 152 111
S & P 500 100 130 140 155 157 215
Dow Jones Auto Parts & 100 148 192 238 203 252
Equipment
CERTAIN BENEFICIAL OWNERS
As of February 23, 1996, the only persons or groups known to
Arvin to be the beneficial owners of more than 5% of the Common
Shares were:
Amount and nature of Percent
Name and address of beneficial owner beneficial ownership of class
- ------------------------------------ -------------------- --------
The Berkeley Financial Group 1,804,100 8.1%
101 Huntington Avenue
Boston, Massachusetts 02199
Cincinnati Financial Corporation 1,350,580 6.06
P. O. Box 145496
Cincinnati, Ohio 43250
First Union Corporation 1,285,000 5.77
Primecap Management 1,124,000 5.05
225 South Lake Avenue, #400
Pasadena, California 91101-3005
As of January 1, 1996, Mr. Viars beneficially owned 53,700 Arvin
Common Shares, which includes 52,700 Common Shares subject to
options which may be exercised within 60 days after January 1,
1996 and 1,000 Common Shares in the Arvin Savings Plan. As of
January 1, 1996, Mr. Kievit beneficially owned 42,000 Arvin Common
Shares, which includes 41,600 Common Shares subject to
options which may be exercised within 60 days after January 1,
1996.
As of January 1, 1996, all directors and executive officers as a group
(17 persons) beneficially owned 752,104 Arvin Common Shares, or
3.37% of the outstanding Common Shares.
COMPLIANCE WITH FORMS 3, 4 AND 5 REPORTING REQUIREMENTS
Based solely upon its review of Reports on Forms 3, 4 or 5 and any
amendments thereto furnished to Arvin pursuant to Section 16 of
the Securities Exchange Act of 1934, as amended, and written
representations from the executive officers and directors that no
other reports were required, Arvin believes that all of such Forms
were filed on a timely basis by reporting persons during 1995, with
the exception of the following: Mr. Hunt neglected to timely report
two gifts of Common Shares in 1994. These transactions were
subsequently reported on an amended Form 5.
PROPOSAL 2 - AMENDMENT OF THE ARVIN 1988
STOCK BENEFIT PLAN
At its February 1996 meeting, the Board of Directors adopted, subject
to shareholder approval, an amendment to the Arvin Industries, Inc.
1988 Stock Benefit Plan (the "Plan") increasing the number of
Common Shares (and related rights to purchase Series C Preferred
Shares) that may be made subject to awards under the Plan from
2,760,000 to 3,710,000. As of February 23, 1996, an aggregate of
1,938,650 options to purchase Common Shares were granted but not
yet exercised and performance shares relating to an aggregate of
18,200 Common Shares were outstanding, leaving only 44,715 Common
Shares available for future awards under the Plan. On February 26,
1996, the closing price of the Arvin Common Shares on
the New York Stock Exchange was $22. The Board believes that there
is a continuing need, and that it is in the best interests of Arvin and
its shareholders, to make share-related awards available to key
employees so that Arvin will be able to continue to hire and retain
highly qualified personnel. In addition, the Board of Directors has
adopted minimum Common Share ownership guidelines applicable to
each of the members of the Office of the Chief Executive, including
the Named Officers. Share awards under the Plan are a mechanism
which will assist these employees in satisfying the Common Share
ownership guidelines. Accordingly, the Board recommends the proposed
increase in the number of Common Shares as to which awards may be made
under the Plan.
The Plan was originally adopted by the Board and approved by the
shareholders in 1988. Under the original terms of the Plan, awards
relating to up to 900,000 Common Shares could be granted to key
employees of Arvin and designated subsidiaries. In 1991 and 1993,
the Board of Directors adopted and the shareholders approved
amendments increasing to 1,800,000 and 2,760,000, respectively, the
number of Common Shares as to which awards may be granted under the
Plan.
The Compensation Committee, which is responsible for administering
and interpreting the Plan, determines the employees eligible to
receive awards and, in a manner consistent with the Plan, the terms
of those awards. Approximately 250 key employees are currently
eligible to receive future awards under the Plan. Awards to be
granted to participants in the Plan are not determinable at this time.
Reference is made to the table entitled "Option Grants in Last Fiscal
Year," which sets forth the options granted under the Plan to the
Named Officers and all participants in the Plan as a group during
1995. Reference is made to the "Report of the Compensation Committee
on Executive Compensation" which discusses the performance shares
award to the CEO in 1995. The proposed amendment will not modify the
Plan in any respect except to increase the number of Common Shares
covered by the Plan. Awards under the Plan may take the following forms:
Stock Options-Options to purchase Common Shares under the Plan
may be either Incentive Stock Options ("ISOs"), within the meaning of
Section 422(b) of the Internal Revenue Code of 1986, as amended
(the "Internal Revenue Code") or Nonstatutory Stock Options ("NSOs").
At the time of grant, the Committee determines which form of option
is being granted and the terms relating to its exercise. No option
under the Plan may be exercisable more than ten years after the
date of grant. Any option granted under the Plan must have an
exercise price of at least 100% of the fair market value of a Common
Share on the date of grant or, if greater, the par value of a Common
Share. Under the Plan, an optionee may pay the purchase price of
Common Shares upon exercise of an option in cash, by delivering
already owned Common Shares, or by delivering his or her promissory
note. The specific form of payment is either established
by the agreement governing the option or, if not so established, by
the Compensation Committee in its discretion.
Any option granted under the Plan will become fully exercisable
upon a change of control of Arvin (as defined in the Plan) or on the
date the rights issued pursuant to Arvin's shareholder rights plan
become exercisable for Series C Preferred Shares (the "Distribution
Date"). If an option is exercised within ten days after the Distribution
Date, its exercise will be effective as of the day before the
Distribution Date, unless the optionee specifies a later effective
date.
ISOs are options that meet requirements imposed by the Internal
Revenue Code. Under the Internal Revenue Code, the aggregate fair
market value (determined at the time of grant) of the Common Shares
with respect to which ISOs are exercisable for the first time
by an optionee during any calendar year (under all plans of Arvin
and its subsidiaries) may not exceed $100,000.
Stock Appreciation Rights-Stock Appreciation Rights ("SARs") give
recipients the opportunity to share in the appreciation of Common
Shares. SARs may be granted "in tandem" with an option (in which
case the exercise of all or part of the SAR will cause the expiration of
a corresponding portion of the option and vice versa) or not in
tandem with an option. Tandem SARs give recipients the opportunity
to share in all or a portion (as specified by the Committee at the time
of grant) of the increase in the value of Common Shares between the
date of grant and the date of exercise. Non-tandem SARs give the
recipients the opportunity to share in all, some portion or some
multiple of such appreciation. Upon exercise of an SAR, the recipient
receives Common Shares with a fair market value equal to the amount of
appreciation in the value of the Common Shares covered
by the SAR. Arvin may elect to deliver cash in lieu of these Common
Shares. An SAR may be designated as a "limited right," which means
that following a change in control of Arvin (as defined in the Plan) or
in connection with Arvin's dissolution or liquidation, the SAR will be
settled only in cash. Whether or not an SAR is designated as a limited
right, it will become exercisable upon a change of control or on the
Distribution Date and, if exercised within ten days after the
Distribution Date, will be subject to the retroactive exercise
provisions described above in connection with stock options.
Restricted Shares-Common Shares may be granted to employees or
sold to employees for any amount determined by the Committee (which
may be less than fair market value but may not be less than
par value). Such shares must be forfeited by the recipient (in the
case of shares that have been granted) or subject to Arvin's option to
require the recipient to resell the shares to Arvin at his or her cost
(in the case of shares that have been sold) if his or her employment
with Arvin and its subsidiaries terminates prior to a date specified
by the Committee at the time of grant or sale, which must be at least
one year after grant or sale. These restrictions do not apply if
employment terminates after attainment of retirement age under the
Arvin Retirement Plan for Salaried Employees, because of disability
or death or following a change of control of Arvin except where the
termination is for cause. Restricted Common Shares are not
transferable by the recipient while the foregoing restrictions are in
force, although the recipient is entitled to exchange the Common
Shares in connection with corporate transactions affecting Arvin as
long as the consideration received in the transactions is subject to
restrictions identical to those covering the surrendered Common
Shares. Any Series C Preferred Shares issued pursuant to rights
relating to Restricted Shares will be subject to the same restrictions
as the related Restricted Shares.
Performance Shares-Each Performance Share corresponds to one Common
Share. If performance targets established by the Committee
are met, Performance Shares are credited to an account maintained
for the recipient. That account also is credited with amounts equal to
the dividends payable on the number of Common Shares corresponding to
the number of Performance Shares in the account.
The account becomes distributable on a date determined by the
Committee. If the recipient's employment terminates prior to that
date, his or her account must be forfeited unless employment
terminates because of one of the reasons specified above under
"Restricted Shares." Distributions are made either in stock or cash as
elected by the Committee, provided that if, following a change of
control of Arvin, a recipient's employment terminates for any reason
other than retirement, death, disability or for cause, distribution to
such recipient will be made in cash.
Performance Units-Performance Units are subject to the same rules
as Performance Shares, except that each Performance Unit represents
$25.00 (instead of a Common Share). After a Performance Unit has
been credited to an account, it may be credited with earnings at a
rate specified by the Committee.
Miscellaneous-Awards may be made under the Plan until April 13,
1998. Awards outstanding at that date will continue in effect in
accordance with the terms of the Plan. The Board of Directors may
amend, alter or terminate the Plan except that, without the approval
of shareholders, no amendment or alteration may be made that would
change the class of employees eligible to participate, increase
the aggregate number of shares that may be issued or materially
increase the benefits accruing to recipients of awards.
Tax Aspects of Options Granted Under the Plan-The following discussion
is intended to summarize briefly the general principles of
Federal income tax law applicable to each option granted under the
Plan. A recipient of an ISO will not recognize taxable income upon
either the grant or exercise of the ISO. The option holder will
recognize long-term capital gain or loss on a disposition of the
Common Shares acquired upon exercise of an ISO, provided the option
holder does not dispose of those Common Shares within two
years from the date the ISO was granted or within one year after the
Common Shares were transferred to such option holder (a "disqualifying
disposition"). Currently, for regular Federal income tax
purposes, long-term capital gain is taxed at a maximum rate of 28%,
while ordinary income may be subject to a maximum rate of 39.6%.
If the option holder satisfies both of the foregoing holding periods,
then Arvin will not be allowed a deduction by reason of the grant or
exercise of an ISO.
As a general rule, if the option holder disposes of the Common Shares
in a disqualifying disposition, the gain recognized will be taxed as
ordinary income to the extent of the difference between (a) the
lesser of the fair market value of the Common Shares on the date of
exercise or the amount received for the Common Shares in the
disqualifying disposition, and (b) the adjusted basis of the Common
Shares, and Arvin will be entitled to a deduction in that amount. The
gain (if any) in excess of the amount recognized as ordinary income
on a disqualifying disposition will be long-term or short-term capital
gain, depending on the length of time the option holder held the
Common Shares prior to the disposition.
The amount by which the fair market value of a Common Share at
the time of exercise exceeds the exercise price will be included in
computation of such option holder's "alternative minimum taxable
income" in the year the option holder exercises the ISO. Currently,
the alternative minimum tax rate is 24%. If an option holder pays
alternative minimum tax with respect to the exercise of an ISO, the
amount of such tax paid will be allowed as a credit against regular
tax liability in subsequent years. The option holder's basis in the
Common Shares for purposes of the alternative minimum tax will be
adjusted when income is included in alternative minimum taxable
income.
A recipient of a nonqualified stock option will not recognize taxable
income at the time of grant, and Arvin will not be allowed a deduction
by a reason of the grant. Such an option holder will
recognize ordinary income in the taxable year in which the option
holder exercises the nonqualified stock option, in an amount equal to
the excess of the fair market value of the Common Shares received
upon exercise at the time of exercise of such an option over the
exercise price of the option, and Arvin may be allowed a deduction in
that amount. If the amendment to the Plan is approved by shareholders
of Arvin, compensation under the Plan will be subject
to the limitations on deductibility of compensation in excess of one
million dollars under Section 162(m) of the Internal Revenue Code.
Upon disposition of the Common Shares subject to the option, an
option holder will recognize long-term or short-term capital gain or
loss, depending upon the length of time the Common Shares were
held prior to disposition, equal to the difference between the amount
realized on disposition and the option holder's adjusted basis of the
Common Shares subject to the option (which adjusted basis ordinarily
is the fair market value of the Common Shares subject to
the option on the date the option was exercised.)
Tax Aspects of Performance Shares Granted Under the Plan At the
date of granting of performance shares, the recipient will not be
deemed to receive income, and Arvin will not be entitled to a
deduction. Upon exercise, the holder of a performance share will
realize ordinary income equal to the amount of cash or the market
value of the shares received on exercise. Arvin may be entitled to a
deduction with respect to the ordinary income realized by the
exercising holder, subject to the limitations of Section
162(m) of the Internal Revenue Code.
The Board of Directors believes that the proposed amendment to the
Arvin Industries, Inc. 1988 Stock Benefit Plan is in the best
of Arvin and its shareholders and recommends that shareholders
vote FOR approval of the amendment.
PROPOSAL 3 - RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
Based upon the recommendation of the Audit Committee, at its February
1996 meeting, the Board of Directors approved the engagement of the
accounting firm of Price Waterhouse as Arvin's independent certified public
accountants for the fiscal year beginning January 1, 1996.
Representatives from Price Waterhouse will be present at the Annual
Meeting and will be afforded the opportunity to make a statement if
they so desire and to respond to appropriate shareholder questions.
Although not required to do so, the Board of Directors is submitting
its appointment of auditors for shareholder ratification. In the event
the appointment of Price Waterhouse is not ratified by the
shareholders, it will be reconsidered by the Board of Directors. The
Board recommends that its appointment of Price Waterhouse be ratified
by the shareholders.
SHAREHOLDER NOMINATIONS AND PROPOSALS
Pursuant to the rules under the Securities Exchange Act of 1934,
proposals of shareholders intended to be presented at the 1997
Annual Meeting must be received at Arvin's executive offices no
later than November 9, 1996 to be considered for inclusion in next
year's proxy materials.
Further, Arvin's By-Laws set forth certain additional procedures
regarding shareholder nominations of persons for election to the
Board of Directors and shareholder proposals of business to be
considered at meetings of the shareholders. Pursuant to these
provisions, written notice of any shareholder nominations or proposals
relating to the 1997 Annual Meeting of Shareholders must
also be received by the Secretary of Arvin at its executive offices in
Columbus, Indiana, no earlier than January 19, 1997 and no later
than February 18, 1997.
BUSINESS TO BE TRANSACTED
At the date of this statement, the Board of Directors does not know of
any business to be brought before the Annual Meeting other than the
matters described in this proxy statement. In the event that any
other matters properly shall come before the meeting, it is the
intention of the persons named in the accompanying proxy to vote in
accordance with their judgment on such matters.
By the order of the Board of Directors.
Ronald R. Snyder
Secretary of
ARVIN INDUSTRIES, INC.
Columbus, Indiana
March 8, 1996
COMMON STOCK ARVIN INDUSTRIES, INC. PROXY
This Proxy is Solicited on Behalf of the Board of Directors
for The Annual meeting to be held April 18, 1996.
The undersigned hereby appoints Byron O. Pond and
Ronald R. Snyder, or either of them, the true and
lawful proxies of the undersigned, with full power of
substitution, for and on behalf of the undersigned to
vote the shares of ARVIN INDUSTRIES, INC. registered
in the name of the undersigned, or with respect to
which the undersigned may be entitled to vote, at the
Annual Meeting of Shareholders to be held at Columbus
East High School Auditorium, 230 S. Marr Road,
Columbus, Indiana, on April 18, 1996,
at 10:30 A.M., and at any adjournment thereof,
upon the matters set forth on the reverse side hereof.
The Board of Directors recommends a vote "FOR"
proposals 1, 2 & 3.
PLEASE MARK, SIGN, DATE AND MAIL THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
(Continued and TO BE SIGNED on reverse side.)
ARVIN INDUSTRIES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK
INK ONLY. ( o )
This proxy, as properly executed, will be voted in the
manner directed herein by the undersigned shareholder(s).
If no direction is given this proxy will be voted "FOR"
proposals 1, 2 & 3.
For Withheld FOR ALL Except
1. Election of Directors for terms of 3 years-( ) ( ) Nominee(s) Written
Nominees: W. D. George, F. R. Meyer, below
B. O. Pond, R. A. Smith & A. R. Valasquez. -------------------------------
For Against Abstain
2. Amendment of 1988 Stock Benefit Plan. ( ) ( ) ( )
For Against Abstain
3. Ratification of appointment of Price ( ) ( ) ( )
Waterhouse as independent auditors.
4. In their discretion on such
other business as may properly
come before the meeting.
Dated: __________________, 1996
Signature:____________________
The shareholder's signature below should
correspond with the name of the shareholder
as it appears here. A proxy executed by a
corporation should be signed in its name by a
duly authorized officer. If the proxy is to
be signed by an attorney, executor,
administrator, trustee, guardian or in any
other representative capacity, the title of
the person signing should be given in full.
When shares are held by joint tenants, both
should sign.