The Company estimates that its total expenditures relating to
the solicitation (excluding costs representing salaries and wages of regular
employees and officers of the Company) will be approximately $1,000,000. The
Company to date has incurred estimated total expenses of approximately
$600,000. In addition to the members of the Board (which consists of Messrs.
Creamer, Dauch, DeVane, Echlin, Jensen, Jones, McCurdy, Nusbaum and Rivard),
Company's executive officers and certain officers of its subsidiaries may
solicit Revocations. The business address for each of the members of the Board
and the officers named above is, and the Company's executive offices are
located at, 100 Double Beach Road, Branford, Connecticut 06405. For further
information with respect to participants in the solicitation, including the
names of its executive officers and certain officers of its subsidiaries who
may solicit Revocations, and certain transactions by those participants in the
Company's shares of Common Stock, see Schedules A and B.
Change in Control Severance Policy
The Company has established a Change In Control Severance
Policy covering some 350 designated employees of Echlin Inc. and its domestic
U.S. subsidiaries, including the Named Executive Officers. A "change in
control" event of Echlin Inc. is defined as: (i) more than 30 percent of
Echlin's outstanding Common Stock being beneficially held or acquired by any
person or entity; (ii) more than 20 percent of Echlin's outstanding Common
Stock being purchased pursuant to a tender or exchange offer; (iii) Echlin
Inc. merging or consolidating with or selling substantially all of its assets
to another entity and Echlin Inc. not being the surviving corporation; or (iv)
during any two year period, a majority of individuals who are Directors of
Echlin Inc. at the beginning of the period ceasing to be Directors by the end
of the period, unless the nomination of each new Director is approved by a
two-thirds majority of those who are Directors at the beginning of the period.
If the Special Meeting is held, removal of the Board of Directors from office
would constitute a "change of control" event. The Board of Directors must
declare whether such an event qualifies as a change in control event under the
Echlin Inc. Change In Control Severance Policy.
Employees covered by the policy receive special severance
benefits if, within two years after a qualified change in control, the
employee terminates for "good reason" because (i) there has been an adverse
change in the employee's duties, responsibilities, title, position,
compensation, benefits or general status; (ii) the employee is required to
relocate to a place of business more than 50 miles from the location where the
employee works at the time of the change in control; (iii) the employee is
terminated for reasons other than for cause; or (iv) for Echlin Inc. corporate
officers, including the Named Executive Officers other than Mr. Jones and Mr.
Mancheski (who has retired), the employee elects to terminate his or her
employment during the 30-day period commencing one year after the change in
control.
Severance benefits are payable within 30 days of termination
and consist of a lump sum payment equivalent to the sum of the higher of the
employee's annual base salary and most recent executive bonus, if applicable,
either as of the date of the change in control or the date of the termination
for a period varying from 7.5 months to 36 months depending upon the
employee's employment level. The Named Executive Officers other than Mr. Jones
and Mr. Mancheski qualify for the payment equivalent to 36 months. Employees
covered by the policy continue to receive other benefits such as medical
insurance for a period equivalent to the period associated with their
severance payment. The policy also provides that all outstanding performance
units under the Company's long-term incentive plan immediately vest on the
date of the change in control. Performance units are valued at 100 percent of
their original targeted value multiplied by a fraction representing the number
of months lapsed in the three-year vesting cycle. Further, if the Board of
Directors declares a qualifying change in control event, all options will be
deemed to have stock appreciation rights attached. In some cases, such
severance payments are increased to compensate for any excise taxes resulting
from the payment and any other benefits extended based upon the change in
control.
If a covered employee's employment ends after a change in
control because of death, disability or for cause, or if the employee
voluntarily terminates employment, other than as provided in the severance
policy, the employee will get no special severance benefits.
Security Ownership of Certain Beneficial Owners and Management
The following shareholders are beneficial owners of more than
five percent (5%) of the shares of Common Stock as of February 17, 1998. The
Company has no other class of equity security outstanding:
The following table sets forth information as to the only
persons known to the Company to be the beneficial owner of more than five
percent of the Company's Common Stock:
Amount and Nature of
Name and Address of Beneficial Owner Beneficial Ownership Percentage of Class
- ------------------------------------ -------------------- -------------------
Scudder Kemper Investments, Inc.
Two International Place
Boston, MA 02110-4103 4,579,317(1) 7.24%
McKay-Shields Financial Corporation
Investment Advisors
9 West 57th Street
New York, New York 10019 4,349,380(2) 6.88%
The Capital Group Companies, Inc
333 South Hope Street
Los Angeles, California 90071 3,582,400(3) 5.66%
- ------------
(1) Scudder Kemper Investments, Inc., has sole voting power with respect to
969,650 shares, shares voting power with respect to 3,358,544, sole
dispositive power with respect to 4,549,973 and shares dispositive power
with respect to 29,344 shares as reported on Schedule 13G filed with the
Securities and Exchange Commission on February 12, 1998.
(2) McKay-Shields Financial Corporation, Investment Advisors, has shared voting
and shared dispositive power with respect to 4,349,380 shares as reported on
Schedule 13F filed with the Securities and Exchange Commission on February
13, 1998.
(3) The Capital Group Companies, Inc., through its wholly-owned subsidiaries,
including Capital Research and Management Company (acting as investment
advisor), has sole voting power with respect to 491,400 shares and sole
dispositive power with respect to 3,582,400 as reported on Schedule 13G
filed with the Securities and Exchange Commission on February 10, 1998.
The following table sets forth information with respect to
beneficial ownership as of February 17, 1998 by the Company's current
directors, the Company's "named executive officers" for 1997 fiscal year, the
Company's chief executive officer, the Company's "named executive officers"
for the 1998 fiscal year and by all directors and current executive officers
as a group, together with the percentage of the outstanding shares of Common
Stock which such ownership represents. Unless otherwise indicated, the
beneficial ownership consists of sole voting and investment power with respect
to the shares indicated, except to the extent that authority is shared by
spouses under applicable law.
Number of Shares of
Common Stock Percentage of
Name Beneficially Owned Class
- ---------------------------- ------------------- -------------
John F. Creamer, Jr.(1)..... 21,750 shares
Richard E. Dauch ......... 1,135 shares *
Milton P. DeVane(2)......... 13,600 shares *
John E. Echlin, Jr.(3)...... 634,392 shares 1.00%
Donald C. Jensen(4)......... 9,050 shares *
Trevor O. Jones(5).......... 118,350 shares *
Jon P. Leckerling(6)........ 34,589 shares *
Milton J. Makoski(7)........ 41,395 shares *
Larry W. McCurdy(8)......... 108,000 shares *
William P. Nusbaum.......... 3,000 shares *
Joseph A. Onorato(9)........ 40,880 shares *
Jerome G. Rivard(10)........ 6,800 shares *
Edward D. Toole(11)......... 27,264 shares *
- ------------
* Less than 1 percent of class.
(1) Includes 6,750 shares exercisable currently or within 60 days of February
17, 1998, under the Echlin Inc. 1996 Non-Executive Director Stock Option
Plan.
(2) Includes 12,600 shares exercisable currently or within 60 days of February
17, 1998, under the Echlin Inc. 1996 Non-Executive Director Stock Option
Plan.
(3) Includes 125,200 shares held in an irrevocable charitable foundation of
which Mr. Echlin is a trustee with shared voting rights over such shares
and 61,907 shares owned by Mrs. John E. Echlin, Jr. and 12,900 shares
exercisable currently or within 60 days of February 17, 1998 under the
Echlin Inc. 1996 Non-Executive Director Stock Option Plan.
(4) Shares held indirectly by the Donald C. Jensen Revocable Living Trust dated
September 6, 1990. Includes 6,050 shares exercisable currently or within
60 days of February 17, 1998 under the Echlin Inc. 1996 Non-Executive
Director Stock Option Plan.
(5) Includes 100,000 shares exercisable within 60 days of February 17, 1998
under the Echlin Inc. 1992 Executive Stock Option Plan and 10,850 shares
exercisable currently or within 60 days of February 17, 1998 under the
Echlin Inc. 1996 Non-Executive Director Stock Option Plan.
(6) Includes 29,029 shares either exercisable currently or within 60 days of
February 17, 1998 under the Echlin Inc. 1992 Executive Stock Option Plan or
credited to Mr. Leckerling's account in the Echlin Incentive Savings and
Investment Plan as of August 31, 1997.
(7) Includes 35,045 shares either exercisable currently or within 60 days of
February 17, 1998 under the Echlin Inc. 1992 Executive Stock Option Plan or
credited to Mr. Makoski's account in the Echlin Incentive Savings and
Investment Plan as of August 31, 1997.
(8) Includes 100,000 shares either exercisable currently or within 60 days of
February 17, 1998 under the Echlin Inc., 1992 Executive Stock Option Plan.
(9) Includes 32,780 shares either exercisable currently or within 60 days of
February 17, 1998 under the Echlin Inc. 1992 Executive Stock Option Plan or
credited to Mr. Onorato's account in the Echlin Incentive Savings and
Investment Plan as of August 31, 1997.
(10) Includes 3,800 shares exercisable currently or within 60 days of February
17, 1998, under the Echlin Inc. 1996 Non-Executive Director Stock Option
Plan.
(11) Includes 21,814 shares either exercisable currently or within 60 days of
February 17, 1998 under the Echlin Inc. 1992 Executive Stock Option Plan or
credited to Mr. Toole's account in the Echlin Incentive Savings and
Investment Plan as of August 31, 1997.
Committees and Meetings of the Board of Directors
During the fiscal year ended August 31, 1997, there were ten
meetings of the Board of Directors (four of which were telephone meetings).
Each director attended at least 75 percent of the aggregate of (i) the total
number of meetings of the Board and (ii) the total number of meetings held by
all Committees of the Board on which the director served.
The Board of Directors has established the following committees
with responsibilities as described:
The Executive Committee may exercise all powers that the Board
of Directors possesses except those powers delineated in the By-Laws including
the power to change the Certificate of Incorporation or By-Laws and the power
to declare any dividend or other distribution with respect to the stock of the
Company. During the fiscal year, seven meetings of the Executive Committee
were held. Messrs. Jones (Chairman), Creamer, DeVane, Echlin, Jensen and
McCurdy are members of this Committee.
The Audit Committee reviews the accounting policies and
procedures of the Company and the performance of the internal audit staff,
monitors compliance with such policies and procedures and makes
recommendations thereon to the full Board. The Audit Committee meets with the
Company's independent accountants and reviews and approves in advance the
scope of the annual audit and other audits and the type and scope of each
non-audit professional service rendered by the Company's independent
accountants. The Committee also considers the possible effect that rendering
such services might have on the independence of such accountants. The
Committee recommends to the Board the appointment of independent accountants
for ratification by the shareholders at the Annual Meeting. During the fiscal
year, five meetings of the Audit Committee were held. Messrs. Jensen
(Chairman), Dauch, DeVane, Echlin and Gustafson are members of this Committee.
The Compensation and Management Development Committee reviews
and approves the Company's basic compensation philosophy covering executive
officers and senior management employees as well as the competitiveness of the
Company's total compensation practices. The Committee reviews and recommends
to the Board the compensation package and employee benefits of the President
and Chief Executive Officer and any other officers who are also directors. It
also reviews and approves base salaries and short-term incentive awards of
officers and key management executives, sets performance measures for the
Echlin Inc. Performance Unit Plan (see page 16) and makes recommendations to
the Board with respect to the granting of options under the Echlin Inc. 1992
Executive Stock Option Plan. This Committee also reviews and reports to the
Board on the status of the Company's organization and succession plans for all
key executive positions and the continuity for such positions. During the
fiscal year, seven meetings of the Compensation and Management Development
Committee were held. Messrs. Jensen (Chairman) and DeVane are members of this
Committee.
The Corporate Governance Committee advises and makes
recommendations to the Board on all matters concerning directorships and
corporate governance practices, including the structure and membership of all
committees of the Board, compensation of directors and the review and
recommendation of candidates for election as directors. The Committee will
consider shareholder nominations for director sent in accordance with the
procedures set forth in the By-Laws to the Corporate Governance Committee, c/o
Jon P. Leckerling, Secretary, Echlin Inc., 100 Double Beach Road, Branford,
Connecticut 06405. The Committee also reviews and makes recommendations to the
Board concerning succession planning for the positions of Chairman of the
Board and President and Chief Executive Officer. During the fiscal year, four
meetings of the Corporate Governance Committee were held. Messrs. DeVane
(Chairman), Creamer, Echlin and Jensen are members of this Committee.
The Finance Committee reviews periodically the capital
structure, financing, dividend and risk management strategies of the Company.
The Committee also monitors the performance of management's Investment Advisory
Committee and Benefits Committee as to the management and administration of
the Company's various defined benefit and defined contribution retirement
plans. During the fiscal year, two meetings of the Finance Committee were held.
Messrs. Echlin (Chairman) and Nusbaum are members of this Committee.
The Board established three advisory committees which were
discontinued as Board committees as of December 31, 1997. The Scientific
Advisory Committee reviewed production and research activities of the various
units of the Company and reported on scientific and technological developments
with potential impact on the Company's operations. During the fiscal year,
four meetings of the Scientific Advisory Committee were held. Phillip S. Myers
(Chairman), who has retired as a director as of the Annual Meeting of
Stockholders, and Mr. Rivard were members of this Committee. The Asian
Development Advisory Council was a Committee of the Board with membership
comprised of experienced business executives who had conducted business over a
period of years within various countries in the Asian region, and which
assisted and advised corporate and Asian-based management and the Board on the
conduct and expansion of the Company's business in Asia. During the fiscal
year, the Council had one meeting. Dr. Myers served as Chairman of this
Council. The European Advisory Council was comprised of experienced automotive
industry executives from various countries within the region and assisted and
advised corporate and European-based management and the Board on developments
and strategic opportunities in Europe. During the fiscal year, the Council had
two meetings. Mr. Jones served as Chairman of this Council.
Compensation of Directors
The annual retainer paid to outside directors is $25,000. Mr.
Jones, as Non-Executive Chairman of the Board, received a monthly retainer of
$30,000 and for service as Non-Executive Vice-Chairman of the Board receives a
retainer of $25,000 per month for Fiscal Year 1998, in lieu of all other Board
and Committee fees and retainers. Mr. Creamer served as Non-Executive Vice
Chairman of the Board until December 31, 1997, received a special retainer of
$57,777 for Board service from February 20, 1997 through June 30, 1997 and
thereafter received Board fees and retainers at twice the normal rate for
service as Vice Chairman which ended December 31, 1997. The fee for attendance
at each meeting of the Board is $1,200 and $800 is payable for participation
in telephone meetings. The standard fee for attendance at each Committee
meeting, other than the European Advisory Council and the Asian Development
Advisory Council, is $1,000. Chairmen of each Committee, other than the
European Advisory Council and the Asian Development Advisory Council are paid
an annual retainer of $6,000 and a per meeting fee of $2,000. Scientific
Advisory Committee members received a $3,000 annual retainer. European
Advisory Council and Asian Development Advisory Council members received an
annual retainer of $24,000 and each Council's Chairman received a $36,000
annual retainer.
Under the 1996 Non-Executive Director Stock Option Plan,
directors who are not employees of the Company, annually receive 2,000 options
for Board service, 500 options for service as a Board committee chairman,
1,000 options for service on the Executive Committee, 4,000 options for
service as Vice Chairman of the Board and 8,000 options for service as
Chairman of the Board. The Board also established Non-Executive Director Stock
Ownership Guidelines on June 18, 1997 which require outside directors to own
Common Stock equal in value to four times the annual retainer. These
guidelines are phased in over three years for then current directors and five
years for new directors. Options held under the 1996 Non-Executive Director
Stock Option Plan do not count as shares held under the guidelines.
Mr. Creamer is President of Distribution Marketing Services,
Inc. Distribution Marketing Services, Inc. provides advice regarding
distribution and marketing strategies to various subsidiaries of the Company
at a cost in Fiscal Year 1997 of $108,200.
Dr. Myers provides consulting services to the Company in regard
to existing and new technologies within the automotive industry. He was paid a
total of $4,289 in Fiscal Year 1997 for these services.
Mr. Rivard is President of Global Technology and Business
Development. Global Technology and Business Development provides consulting
services to the Company in regard to patented technologies and business
opportunities and was paid a total of $51,581 in Fiscal Year 1997 for these
services.
Mr. DeVane is a former partner in the law firm of Tyler Cooper
& Alcorn. Tyler Cooper & Alcorn has been retained by the Company on various
legal matters and it is expected that this relationship will continue. Legal
fees paid under this arrangement did not exceed five percent of the gross
revenues of Tyler Cooper & Alcorn.
Certain Transactions
In September, 1996, the Company purchased Long Manufacturing
Ltd. ("Long") for approximately $173,000,000 from Long's shareholders. Mr.
Nusbaum was the principal shareholder of Long, controlling some 40 percent of
the shares acquired by the Company. The Company settled a claim for adjustment
of the purchase price by approximately $1,000,000 against an escrow provided
by the selling shareholders in connection with certain contingencies. Mr.
Nusbaum is currently a director of the Company.
As of February 17, 1998, the directors and twelve executive
officers of the Company (including the Named Executive Officers other than Mr.
Mancheski, who is neither a director nor executive officer of the Company) as a
group owned beneficially 1,161,089 shares of Common Stock or 1.84 percent
thereof. Such shares include 441,075 shares either exercisable currently or
within 60 days of February 17, 1998 under the Echlin Inc. 1992 Executive Stock
Option Plan and the Echlin Inc. 1996 Non-Executive Director Stock Option Plan
or, with respect to officers of the Company, held in their respective accounts
in the Echlin Incentive Savings and Investment Plan as of February 17, 1998.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires the Company's directors and executive officers and persons
who own more than ten percent of Echlin's common stock to file initial stock
ownership reports and reports of changes in ownership with the Securities and
Exchange Commission and the New York Stock Exchange. SEC regulations require
that the Company be furnished with a copy of these reports. Based on its
review of these reports and on written representations from the reporting
persons that no other reports were required, the Company believes that all
applicable Section 16(a) reporting requirements have been met.
Compensation Committee Interlocks And Insider Participation
The members of the Compensation and Management Development
Committee during Fiscal Year 1997 were Donald C. Jensen (Chairman), Milton P.
DeVane and Trevor O. Jones until his election as Chairman and Interim Chief
Executive Officer in February, 1997. All Committee members are outside
directors and no Committee member has ever been an officer or employee of the
Company or any of its subsidiaries.
Summary Compensation Table
The following table summarizes the annual and long-term compensation for
services to the Company for Fiscal Years 1997, 1996 and 1995 paid to the
executives serving as Chief Executive Officer during Fiscal Year 1997 and to
each of the four other most highly compensated officers of the Company at
August 31, 1997 (such officers being referred to as the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
Long-Term Compensatin
------------------------------------------
Annual Compensation Awards Payouts
--------------------------------------------------- ------------- ----------
Incentive Long-Term
Other Annual Securities Plan All Other
Bonus Compensation Underlying Payouts Compensation
Name and Principal Position Year Salary($) (A)($) (B)($) Options(#)(C) ($)(D) (E)($)
- --------------------------- ----- --------- ------- ------------ ------------- ---------- ------------
L.W. McCurdy (*)........... 1997 283,330 300,000 3,200,000(1) 100,000 0 0
President and Chief
Executive Officer
T.O. Jones (**)............ 1997 869,900(2) 0 110,850(3) 0 0
Chairman and Interim
Chief Executive
Officer
F.J. Mancheski (***)....... 1997 360,577 0 12,975 0 248,600(4)
Chairman and Chief 1996 700,000 264,000 1,446(5) 50,000 788,163 900
Executive Officer 1995 625,000 600,000 57,000 1,702,575 2,610
(retired)
J.P. Leckerling............ 1997 202,500 58,300 1,700 0 1,146
Executive Vice President 1996 172,500 34,700 131(5) 3,000 72,443 1,445
Administration, 1995 164,000 65,000 6,300 192,465 2,612
General Counsel and
Corporate Secretary
J.A. Onorato............... 1997 184,000 53,700 1,775 0 1,148
Vice President and 1996 152,500 37,200 3,000 72,443 1,538
Chief Financial 1995 145,000 65,000 6,300 192,465 2,610
Officer
M.J. Makoski............... 1997 178,000 38,200 1,700 0 1,046
Vice President--Human 1996 164,100 34,700 3,000 79,770 1,445
Resources 1995 157,000 65,000 6,300 211,995 2,612
E.D. Toole................. 1997 158,200 32,300 1,250 0 938
Vice President, 1996 150,700 32,700 1,400 47,282 1,608
Associate General 1995 143,500 39,200 2,050 131,040 2,624
Counsel and Assistant
Secretary
- ------------
* Mr. McCurdy was elected President and Chief Executive Officer on March 7,
1997.
** Mr. Jones was elected Chairman and Interim Chief Executive Officer on
February 20, 1997. He became Non-Executive Chairman upon the election of
Mr. McCurdy as President and Chief Executive Officer.
*** Mr. Mancheski retired as Chairman and Chief Executive Officer on February
20, 1997.
(A) Annual bonuses received under the Company's Executive Bonus Plan are
reported in the year earned, although paid in the subsequent year.
(B) Except as noted, no amounts of "Other Annual Compensation" were paid to
each Named Executive Officer, except for perquisites and other personal
benefits, securities or properties which for each executive officer did
not exceed the lesser of $50,000 or 10% of such individual's salary plus
bonus.
(C) Options may have stock appreciation rights attached in accordance with the
provisions of the Change in Control Severance Policy described below (see
page 19).
(D) Long-term incentive payouts received for three-year performance periods
under the Company's Performance Unit Plan are reported in the last year of
the performance period during which they were earned, although paid in the
subsequent year. Performance unit payouts may be accelerated in accordance
with the provisions with the Change in Control Severance Policy described
below (see page 19).
(E) Except as noted, the Company contribution under the Echlin Inc. Incentive
and Savings Investment Plan (a qualified salary deferral plan under
Section 401(k) of the Internal Revenue Code).
(1) Includes amount awarded to Mr. McCurdy to replace unvested long-term
compensation benefits forfeited with his prior employer when he joined the
Company as President and Chief Executive Officer in March, 1997 which was
deferred by Mr. McCurdy under the Company's 1976 Deferred Compensation
Plan until the year 2001 and thereafter and $200,000 paid in lieu of Mr.
McCurdy's participation in the Performance Unit Plan during Fiscal Year
1997.
(2) Includes $179,900 in Board fees earned by Mr. Jones from September 1, 1996
through February 20, 1997; $630,000 in Chairman and Interim Chief
Executive Officer's fees paid February 20, 1997 through June 30, 1997; and
$60,000 Non-Executive Chairman's fees paid July 1, 1997 through August 31,
1997.
(3) Includes 100,000 options granted in March, 1997 under the Echlin Inc. 1992
Executive Stock Option Plan when Mr. Jones became Chairman of the Board
and Interim Chief Executive Officer and 10,850 options granted in
December, 1996 under the 1996 Non- Executive Director Stock Option Plan.
(4) Includes $247,000 paid to Mr. Mancheski under the Supplemental Executive
Retirement Plan and the Supplemental Senior Executive Retirement Plan.
(5) Under the Company's 1976 Deferred Compensation Plan, as amended, directors
can defer up to 100 percent of their directors' fees and designated
officers and key executives can defer up to 25 percent of their salary and
bonus and up to 100 percent of their performance unit plan award payment
each year. Interest is accrued on deferred accounts at the greater of the
average rate of interest paid by the Company on its commercial paper
borrowings or the Company's return on assets. The amount shown is the
interest accrued on deferred compensation accounts equal to the Company's
return on assets but in excess of 120 percent of the Federal long-term
interest rate on December 31, 1995 (5.982 percent).
Option/SAR Grants in Fiscal Year 1997
Shown below is further information on grants of stock options pursuant to
the Company's 1992 Executive Stock Option Plan, and in the case of Mr. Jones,
options granted under the Echlin Inc. 1996 Non-Executive Director Stock Option
Plan during the fiscal year ended August 31, 1997 to the Named Executive
Officers. Such grants are reflected in the Summary Compensation Table.
Option/SAR Grants in FY 1997 and FY 1997 Grant Date Value
Individual Grants Grant Date Value
----------------------------------------------- ------------------------------------
Grant Date
(December 18,
1996, March 7,
1997 and
December 20,
Options Granted 1996)
Options Granted to Employees in Exercise Price Expiration Date Present Value
Name (#)(A) Fiscal Year ($/SH)(B) (C) ($)(D)
- --------------------------------- --------------- --------------- -------------- --------------- -------------
Larry W. McCurdy................. 100,000 29.2453 34.8750 3/07/07 1,100,000
Trevor O. Jones.................. 10,850* 3.1731 31.1250 12/20/06 108,066
Frederick J. Mancheski........... 12,975 3.7645 30.7500 12/18/06 127,674
Jon P. Leckerling................ 1,700 0.4971 30.7500 12/18/06 16,728
Milton J. Makoski................ 1,700 0.4971 30.7500 12/18/06 16,728
Joseph A. Onorato................ 1,775 0.5191 30.7500 12/18/06 17,466
Edward D. Toole.................. 1,250 0.3655 30.7500 12/18/06 12,300
- -------------------
* 1996 Non-Executive Director Stock Option Plan.
(A) No stock appreciation rights ("SAR") were granted in Fiscal Year 1997.
(B) The exercise price is based on the fair market value of the Company's
common stock on the date of the grant of the option.
(C) Options may be exercised during a period that begins one year after the
date of grant and ends ten years after the date of the grant of the
option.
(D) Valuation based on Black-Scholes option pricing model. The Company does not
advocate or necessarily agree that the Black-Scholes model can properly
determine the value of an option. The actual value, if any, a Named
Executive Officer may realize will depend on the excess of the stock price
over the exercise price on the date the option is exercised so that there
is no assurance the value realized by a Named Executive Officer will be at
or near the value estimated by the Black-Scholes model. The value
calculations for the options listed above are based on the following
assumptions for the December 18, 1996 and December 20, 1996 stock option
grants: interest rate of 6.3%; annual dividend yield of 2.6%; and
volatility as measured by the standard deviation of .212. For the March 7,
1997 stock option grant, the assumptions were: interest rate of 6.42%;
annual dividend yield of 2.6% and volatility as measured by the standard
deviation of .207.
Aggregate Option Exercises in Fiscal Year 1997 and
Fiscal Year-End Option Value
Shown below is information with respect to options exercised by the Named
Executive Officers during Fiscal Year 1997 and unexercised options to purchase
the Company's Common Stock granted in Fiscal Year 1997 and prior years under
the Echlin Inc. 1992 Executive Stock Option Plan to the Named Executive
Officers and held by them as of August 31, 1997.
Aggregated Option/SAR Exercises in FY 1997 and FY 1997
Year End Option/SAR Values
Value of Unexercised
Number of Unexercised in-the-money Options at
Shares Value Options at FY End (#) FY End ($) (B)
Acquired on Realized -------------------------- --------------------------
Name Exercise (#) ($)(A) Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------ ------------ -------- ----------- ------------- ----------- -------------
Larry W. McCurdy.................... 0 0 0 100,000 0 218,750
Trevor O. Jones..................... 0 0 0 110,850 0 283,171
Frederick J. Mancheski.............. 23,175 312,862 523,465 12,975 9,009,71 81,904
Jon P. Leckerling................... 1,425 29,450 27,700 1,700 338,612 10,731
Milton J. Makoski................... 1,375 18,562 34,720 1,700 491,270 10,731
Joseph A. Onorato................... 1,625 21,734 31,140 1,775 426,027 11,204
Edward D. Toole..................... 4,350 66,815 21,045 1,250 345,32 7,890
- -------------------
(A) The Value Realized is ordinary income, before taxes, and represents the
amount equal to the excess of the fair market value of the shares at the
time of exercise over the exercise price.
(B) Represents the fair market value as of August 29, 1997 ($37.0625 per share
closing stock price) of the option shares less the exercise price of the
options.
Performance Unit Plan
The Company sponsors a long-term incentive plan known as the Performance
Unit Plan for certain key employees of the Company, including the Named
Executive Officers other than Mr. Jones, whose responsibilities and job
performance can have an impact upon the growth and performance of the Company.
At the beginning of each fiscal year, the Compensation and Management
Development Committee of the Board, no member of which is a participant under
the plan, may award performance units for a forward three-year cycle period to
eligible employees.
The target value for each participant is based on a percentage of
benchmark total compensation of executives with similar positions and
responsibilities at the Market Median Group. The targeted percentage of total
compensation attributable to performance units for the Named Executive Officers
varied for Fiscal Year 1997 from 56 percent for Mr. Mancheski, who was serving
as Chief Executive Officer at the time of the grant, to 30 percent for Mr.
Toole. The actual number of performance units awarded depends on the then
current performance rating for the individual and his or her business unit and
a target compounded, annual growth rate in earnings per share over the
three-year cycle as established by the Compensation and Management Development
Committee. The value of each unit will equal the actual earnings per share of
the Company's Common Stock over the three-year performance period multiplied by
a factor based upon the compounded annual growth rate in earnings per share
over such three-year period. The value of each unit will be zero if the actual
compounded earnings per share growth rate over the three-year period is less
than one-half the targeted growth rate and will be increased by a factor of two
if the targeted growth rate is exceeded by 50 percent. The value of a
performance unit cannot be determined and does not vest in the participant
until the end of the three-year period following the fiscal year in which the
performance unit was granted, when the actual earnings per share and compound
growth rate can be computed.
The following table shows estimated future threshold, target and maximum
payouts for performance unit awards made during Fiscal Year 1997.
Long-term Incentive Plans--Fiscal 1997 Awards
Estimated Future Payouts under Non-Stock Price-Based Plans
- -------------------------------------------------------------------------------------------------------------------------
Performance
Period Until
Number Maturation or
Name of Units (#) Payout (A) Threshold ($)(B) Target ($)(B) Maximum (S)(D)
- --------------------------------- ------------ ------------- ---------------- ------------- --------------
Larry W. McCurdy................. 0
Trevor O. Jones.................. 0
Frederick J. Mancheski........... 44,750 8/31/99 13,276* 60,189* 136,786*
Jon P. Leckerling................ 5,825 8/31/99 10,369 47,008 106,831
Milton J. Makoski................ 5,825 8/31/99 10,369 47,008 106,831
Joseph A. Onorato................ 6,100 8/31/99 10,858 49,227 111,874
Edward D. Toole.................. 4,300 8/31/99 7,654 34,701 78,862
All Executive Officers as a
group (12) including those
above......................... 86,325 8/31/99 87,279 395,697 899,271
All employees who are not
Executive Officers, as a
group......................... 526,100 8/31/99 870,078 3,944,682 8,964,744
- -------------------
* Mr. Mancheski, having retired after only six months of the thirty-six month
long-term incentive cycle, is only eligible for one-sixth of the future
payout. The reduced estimated future payout is, therefore, shown.
(A) Performance Unit payouts may be accelerated as a result of a change in
control and the value of such units would then be determined in accordance
with the provisions of the Change in Control Severance Policy described
below.
(B) The threshold amount will be earned if 50 percent of the target compounded
growth rate of earnings per share over the three year cycle is achieved.
(C) The target amount will be earned if 100 percent of the target compounded
growth rate of earnings per share over the three year cycle is achieved.
(D) The maximum amount will be earned if 150 percent of the target compounded
growth rate of earnings per share over the three year cycle is achieved.
Pension Plans
The Company maintains a noncontributory Pension Plan for Echlin Employees
(the "Plan") which includes, among the participants, the Named Executive
Officers of the Company other than Mr. Jones. A director who is not also an
employee is ineligible to participate. The Plan provides that a participant who
retires with 30 years of service will receive a pension of 26 percent of final
average earnings up to the Average Social Security Covered Compensation plus 44
percent of final average earnings in excess of such Average Social Security
Compensation. Final average earnings is based upon cash compensation (comprised
of base salary and annual bonus) computed as of the highest five consecutive
calendar years of the participant's final ten calendar years of service
preceding his or her termination date. Normal retirement occurs at the later of
age 65 or completion of five years of service. Participants vest in pension
benefits after five years of service or, if the Board of Directors declares a
qualifying change in control event (as defined below under the Change In
Control Severance Policy), on the date of a change in control of Echlin. In
addition, employees receiving lump sum payments under the Change In Control
Severance Policy receive credit for years of service equivalent to the period
of time associated with their lump sum payment. The Company has also put into
effect two supplemental executive retirement plans. The Code limits both the
annual pension which may be paid by an employer from plans which are qualified
under the Code for federal income tax purposes and the maximum amount
of earnings utilized to compute benefits under such plans. The Supplemental
Executive Retirement Plan ("SERP") was established by the Board of Directors to
provide designated executive employees with the benefits they would have
received under the Pension Plan for Echlin. Employees but for the limitations
imposed by the Code. All Named Executive Officers other than Mr. Jones
participate under the SERP. The second plan, the Supplemental Senior Executive
Retirement Plan ("SSERP"), was established by the Board of Directors to provide
designated senior executive employees with a benefit increasing the Plan
benefit from 44 percent of final average earnings in excess of the Average
Social Security Covered Compensation to 60 percent of such final average
earnings. Mr. Mancheski is currently the only participant under the SSERP.
The following illustrative table provides the total annual pension
benefits under various years of credited service assuming retirement in 1997 at
age 65.
Illustrative total annual benefits from both the Echlin Inc. Pension Plan
and the SERP:
Years of Service at Age 65
-----------------------------------------------------
Final Average Earnings 15 20 25 30
- ------------------------------------------------------- ------- ------- ------- -------
$ 100,000............................................. 19,363 25,817 32,271 38,725
200,000............................................. 41,363 55,150 68,938 82,725
400,000............................................. 85,363 113,817 142,271 170,725
600,000............................................. 129,363 172,484 215,604 258,725
800,000............................................. 173,363 231,150 298,938 346,725
1,000,000............................................. 217,363 289,817 362,271 434,725
1,200,000............................................. 261,363 348,484 435,604 522,725
The current covered five-year compensation average and the current years
of credited service for the Named Executive Officers are as follows: Larry W.
McCurdy, (not yet eligible) $0.00 and 1 year; Jon P. Leckerling, $212,580 and 7
years; Milton J. Makoski, $206,907 and 11 years; Joseph A. Onorato, $193,660
and 16 years; Edward D. Toole, $180,577 and 11 years and Frederick J.
Mancheski, $1,041,633 and 34 years. Mr. Jones is not a participant under any of
the Company's pension or retirement plans. In addition to the benefit shown in
the table above, Mr. Mancheski's annual benefit from the SSERP is $164,080.
The Company has also authorized the establishment of a grantor trust with
a trust company for the purpose of paying amounts due under the 1976 Deferred
Compensation Plan and the SERP and SSERP described above.
Deadline for Submission of Shareholder Proposals
Proposals of shareholders intended to be presented at the next Annual
Meeting must be received by the Secretary, Echlin Inc., 100 Double Beach Road,
Branford, Connecticut 06405 no later than July 17, 1998.
The Board of Directors
By: /s/ Jon P. Leckerling
----------------------------------------
Name: Jon P. Leckerling
Title: Senior Vice President
and Corporate Secretary
Date: March 12, 1998