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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2)).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Rule 14a-12
TECUMSEH PRODUCTS COMPANY
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[TECUMSEH PRODUCTS COMPANY LOGO]
[TECUMSEH LOGO]
March 16, 2001
Dear Shareholder:
We cordially invite you to attend our 2001 annual meeting of shareholders
next month in Tecumseh, Michigan.
Only Class B shareholders will vote at the meeting. However, all
shareholders are most welcome to attend. Starting today, we are sending the
enclosed proxy statement to all our shareholders and a form of proxy to Class B
shareholders only.
If you are a Class B shareholder, your vote is very important. Even if you
plan to attend in person, please complete and mail the enclosed proxy, or vote
by telephone or on the Internet, at your earliest convenience. Thank you.
Sincerely,
[KENNETH G. HERRICK]
Chairman of the Board of Directors
[TODD W. HERRICK]
President and Chief Executive Officer
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[TECUMSEH PRODUCTS COMPANY LETTERHEAD]
[TECUMSEH PRODUCTS LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Date: Wednesday, April 25, 2001
Time: 9:00 a.m.
Location: Tecumseh Country Club
Tecumseh, Michigan
From the center of Tecumseh, go north on the Tecumseh-Clinton Road
about one mile to Burt Street. Turn right. Tecumseh Country Club is on the south
side of Burt Street about one mile east of the Tecumseh-Clinton Road.
The purposes of this year's annual meeting are:
- To elect directors for the following year.
- To consider any other matters properly presented at the meeting.
All shareholders are most welcome to attend the meeting, but only those who
held Class B shares at the close of business on March 2, 2001 will be entitled
to vote.
If you are a Class B shareholder, you will find enclosed a form of proxy
solicited by our Board of Directors. Whether or not you plan to attend the
meeting, please take the time to vote by completing and mailing the enclosed
proxy or by voting by telephone or on the Internet. Even if you sign a proxy or
vote by telephone or on the Internet, you may still attend the meeting and vote
in person. You may revoke your proxy any time before the voting begins.
YOUR VOTE IS VERY IMPORTANT.
Thank you.
TECUMSEH PRODUCTS COMPANY
Daryl P. McDonald
Corporate Counsel and Secretary
March 16, 2001
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PROXY STATEMENT
The Board of Directors of Tecumseh Products Company is soliciting proxies
to vote Class B shares at our 2001 annual meeting of shareholders. This proxy
statement contains information that may help you decide whether and how to vote.
Please read this proxy statement carefully. Appendices A, B, and C contain
important information about share ownership, executive compensation, and market
performance. You can obtain more information about Tecumseh Products Company
from our 2000 annual report to shareholders on Form 10-K and from the other
public documents that we file with the SEC.
VOTING
We have two classes of common stock: Class B, which has full voting rights,
and Class A, which generally has no voting rights. Nothing on the agenda for
this year's annual meeting will require a vote by Class A shareholders so we are
only soliciting proxies from Class B shareholders.
At the close of business on March 2, 2001 (the record date for the
meeting), 5,453,846 Class B shares and 13,406,938 Class A shares were
outstanding. Of the outstanding Class B shares, 4,880,346 currently are entitled
to vote. To have a quorum, a majority of the outstanding Class B shares that are
entitled to vote must be present at the meeting -- either in person or by proxy.
Instead of signing and returning a proxy, if you hold your shares in your
own name, you may vote by telephone or on the Internet by following the
instructions attached to your proxy. If your shares are held through a broker,
bank, or other nominee, you must contact the broker, bank, or other nominee to
find out whether you will be able to vote by telephone or on the Internet.
If you complete the enclosed proxy and return it before the meeting, or if
you vote by telephone or on the Internet, the persons named will vote your
shares as you specify.
You may revoke a proxy any time before voting begins at the meeting. A
later proxy by any means will cancel any earlier proxy. For example, if you vote
by telephone and later vote differently on the Internet, the Internet vote will
count, and the telephone vote will be canceled. If you wish to change your vote
by mail, you should write our Secretary to request a new proxy. The last proxy
we receive before the meeting will be the one we use. You also may change your
vote by voting in person at the meeting.
ELECTION OF DIRECTORS
ELECTION PROCEDURE
Our bylaws authorize the Board of Directors to determine the number of
directors that will make up the full board. We currently have nine directors.
The board has decided to keep the same number for the coming year and has
nominated all nine incumbent directors for reelection. If you return a proxy or
vote by telephone or on the Internet, your shares will be voted for all of the
board's nominees or, if you specify otherwise, as you specify. If a nominee
becomes unable to serve, which we do not expect to happen, your proxy will be
voted for a substitute determined in the best judgment of the proxy holders.
From the persons duly nominated, directors will be elected by plurality
vote of the Class B shareholders present or represented at the meeting. This
means that this year, regardless of the number of Class B shares not voted for a
nominee, the nominees who receive the highest through ninth highest numbers of
votes will be elected.
NOMINEES FOR DIRECTOR
Kenneth G. Herrick (director since 1951, age 79). Chairman of the Board of
Directors of Tecumseh Products Company. Mr. Herrick is a member of the Boards of
Trustees of Howe Military School and Herrick Foundation.
Todd W. Herrick (director since 1973, age 58). President and Chief
Executive Officer of Tecumseh Products Company. Mr. Herrick is a member of the
Board of Directors of Comerica Bank and a member of the Boards of Trustees of
Howe Military School and Herrick Foundation. He also is a member of the Advisory
Boards to the School of Business of the University of Michigan and the School of
Business of the University of Notre Dame. He serves on our Pension and
Investment Committee. Mr. Herrick is the son of Kenneth G. Herrick.
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John H. Foss (director since 1982, age 58). Vice President, Treasurer and
Chief Financial Officer of Tecumseh Products Company. Mr. Foss is a member of
the Boards of Directors of United Bancorp, Inc. and United Bank & Trust. He
serves on our Pension and Investment Committee.
J. Russell Fowler (director since 1967, age 82). Retired since 1994;
Chairman Emeritus of Jacobson Stores, Inc. (mercantile business) from 1992 to
1994; Chairman of the Board of Directors and Chief Executive Officer of Jacobson
Stores, Inc. from 1982 to 1992. Mr. Fowler is a member of the Boards of
Directors of Butterfield Investment Company and Quanta, Inc. He serves on our
Governance and Executive Compensation Committee, our Audit Committee, and
Nominating Committee.
John W. Gelder (director since 1989, age 67). Of counsel to the law firm of
Miller, Canfield, Paddock and Stone, P.L.C. since 1999; senior member of Miller,
Canfield, Paddock and Stone, P.L.C. until 1999. Mr. Gelder is a member of the
Board of Trustees of Herrick Foundation. He serves on our Pension and Investment
Committee and our Audit Committee.
Stephen L. Hickman (director since 1991, age 58). Chairman of the Board of
Directors and Chief Executive Officer of Brazeway, Inc. (manufacturer of
aluminum extrusions and fabricator of aluminum products) since January 2001;
also President of Brazeway, Inc. until January 2001. Mr. Hickman is a member of
the Board of Directors of Spangler Candy Company. He also is a member of the
Board of Trustees of Siena Heights University. He serves on our Governance and
Executive Compensation Committee.
Peter M. Banks (director since 1991, age 63). Partner in XR Ventures,
L.L.C. (investments) since September 2000; Senior Executive of Veridian
Corporation (research and development) from January 2000 to April 2000;
President and Chief Executive Officer of ERIM International, Inc. (research and
development) from 1997 to January 2000; President and Chief Executive Officer of
Environmental Research Institute of Michigan (government research and
development services) from 1995 to 1997; Professor and Dean of the College of
Engineering of the University of Michigan from 1990 to 1994. Dr. Banks is a
member of the Boards of Directors of X-Rite Corp., HandyLab, Inc., and Chaos
Technology, Inc. He serves on our Governance and Executive Compensation
Committee, Pension and Investment Committee, and Nominating Committee.
Jon E. Barfield (director since 1993, age 49). Chairman, President, and
Chief Executive Officer of The Bartech Group, Inc. (contract employment and
related staffing services) since 1997; Chairman and Chief Executive Officer of
The Bartech Group, Inc. from 1995 to 1997; President of The Bartech Group, Inc.
from 1981 to 1995. Mr. Barfield is a member of the Boards of Directors of
National City Corporation and Granite Broadcasting Corporation. He also is a
Charter Trustee of Princeton University, a member of the Boards of Trustees of
Kettering University, Henry Ford Museum and Greenfield Village, and a director
of Blue Cross and Blue Shield of Michigan and the Community Foundation for
Southeastern Michigan. He serves on our Pension and Investment Committee and our
Audit Committee.
Ralph W. Babb, Jr. (director since 1998, age 52). Vice Chairman and Chief
Financial Officer of Comerica Incorporated and of its principal subsidiary,
Comerica Bank, since 1999; Executive Vice President and Chief Financial Officer
of Comerica Incorporated and Comerica Bank from 1995 to 1999. Mr. Babb is a
member of the Boards of Directors of Comerica Bank, the Detroit Symphony
Orchestra, Oakland University Foundation, Citizen's Research Council of
Michigan, and St. Vincent & Sarah Fisher Center and a member of the Board of
Trustees of William Beaumont Hospital -- Royal Oak. He serves on our Governance
and Executive Compensation Committee, Audit Committee, and Nominating Committee.
DIRECTOR COMPENSATION
We do not pay employees any separate compensation for serving as directors.
We pay all other directors a monthly retainer of $1,000, a $1,500 fee for each
board meeting attended, and a $1,000 fee for each committee meeting attended. We
also reimburse those directors for travel expenses.
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DIRECTORS' MEETINGS AND STANDING COMMITTEES
We held eleven board meetings during 2000. The Audit Committee met three
times during the year, and the Governance and Executive Compensation Committee
met three times. We established the Nominating Committee after the end of the
year. Each director attended at least 75% of the total of all board meetings and
all meetings of board committees on which he served that were held during his
period of service.
NOMINATING COMMITTEE
The function of the Nominating Committee is to make recommendations on
nominations for the Board of Directors. The committee will consider shareholder
suggestions for nominees for director (other than self-nominations). If you wish
to make a suggestion, you should submit it in writing to Daryl P. McDonald,
Corporate Counsel & Secretary, Tecumseh Products Company, 100 E. Patterson
Street, Tecumseh, Michigan 49286. The committee will consider suggestions
received before December 31 at a meeting in the following year, before we mail
the proxy materials for that year's annual meeting.
AUDIT COMMITTEE
The board has adopted a written charter specifying the powers and duties of
the Audit Committee. A copy of the charter is included as Appendix D to this
proxy statement.
All members of the Audit Committee are independent (as independence is
defined in Rule 4200(a)(15) of the National Association of Securities Dealers,
Inc.).
AUDIT COMMITTEE REPORT
We have reviewed the audited financial statements for the fiscal year ended
December 31, 2000 and discussed them with management. We also have discussed
with the independent accountants the matters required to be discussed by SAS 61
(Codification of Statements on Auditing Standards, AU sec. 380) and have
considered whether their provision of non-audit services is compatible with
maintaining their independence. In addition, we have received from the
independent accountants the written disclosures and letter required by
Independence Standards Board Standard No. 1 (Independence Discussions with Audit
Committees), and we have discussed their independence with them.
Based on the review and discussion described above, we recommended to the
Board of Directors that the audited financial statements for the fiscal year
ended December 31, 2000 be included in the annual report to shareholders on Form
10-K for that year.
Presented by the members of the Audit Committee of the Board of Directors
J. Russell Fowler, Chairman
John W. Gelder
Jon E. Barfield
Ralph W. Babb, Jr.
GOVERNANCE AND EXECUTIVE COMPENSATION COMMITTEE
The overall mission of the Governance and Executive Compensation Committee
is to assist the board in conducting our business successfully so as to maximize
long-term benefits to shareholders, including optimizing long-term financial
success. Its functions include:
- Actively developing and recommending to the board strategies for
achieving those goals.
- Monitoring and reporting to the board on the effectiveness of management
policies and decisions.
- Annually reporting to the board the committee's assessment of the board's
performance in light of the objectives described above.
- Annually reviewing with the board the appropriate skills and
characteristics required of board members in the context of the then
current composition and needs of the board, including issues of
diversity, age, and skills.
- Reviewing our policies for compensating outside directors and, if
appropriate, making recommendations for changes.
- Annually fixing the salaries of our Chief Executive Officer and other
executive officers, considering, developing, reviewing, and making
recommendations about programs for annual and long-term incentive
compensation for those executives
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and for other key employees, and administering those programs, including
our Management Incentive Plan.
No director on this committee can be an employee of Tecumseh Products
Company.
GOVERNANCE AND EXECUTIVE COMPENSATION COMMITTEE REPORT
Compensation Philosophy and Objectives
We follow a "pay for performance" philosophy designed to accomplish three
primary objectives:
- Encouraging teamwork among members of management and excellence in the
performance of individual responsibilities.
- Aligning the interests of key managers with the interests of shareholders
by offering an incentive compensation vehicle that is based on growth in
return on equity and shareholder value.
- Attracting, rewarding, and retaining strong management.
Our "pay for performance" strategy is intended to enhance shareholder
value:
- In the short term, by focusing management's attention on return on
equity, cash return on assets, and other measures of current financial
performance so as to challenge each business group to achieve and
maintain positions of market leadership, to reduce costs where
appropriate, and to continually seek to maintain and enhance Tecumseh
Products Company's reputation for excellence in product quality and
customer service.
- In the longer term, by causing a substantial portion of each executive's
potential compensation to be directly tied to market performance of the
Class A shares.
Management Incentive Plan Awards
The principal tool for implementing our "pay for performance" philosophy is
the Management Incentive Plan, which covers approximately 40 key executives,
including all executive officers. (We also have a plan for awarding annual cash
bonuses based on similar performance criteria, which covers lower level
management employees.) The Management Incentive Plan is structured to provide
both a short-term incentive tied to achievement of company-wide and business
unit annual performance goals and a long-term incentive tied to the market
performance of the Class A shares.
One third of each plan award granted for 2000 was payable in cash, and the
remainder was denominated in phantom stock "units" considered for record keeping
purposes as equivalents to Class A shares and valued accordingly. Half of the
phantom stock units granted under each 2000 award (that is, one-third of the
total award) vest after three full fiscal years, and the remaining units vest
after five full fiscal years. All awards for years before 2000 were denominated
entirely in phantom stock units vesting after five full fiscal years. Except in
cases of earlier employment termination due to death, disability, or retirement,
or in the event of a "change in control" (as defined in the plan), these phantom
stock units are subject to forfeiture if the grantee does not remain with us
until the units vest. As cash dividends are paid on Class A shares, additional
phantom stock units (also subject to forfeiture), equal in value to the
dividends paid, are credited to employee accounts under the plan. Thus, the
potential payout on an award, although payable only in cash, is tied directly to
the market value performance of Class A shares over three- and five-year
periods. For purposes of computations under the plan, units are valued at the
average of the closing prices for the Class A shares on the first trading day of
the month over the eleven months preceding the valuation date rather than by the
method required by the SEC for the Summary Compensation Table.
The Management Incentive Plan affords us broad discretion to determine the
amounts of awards granted, subject only to a limitation setting the maximum
number of units awardable during a given year at 2% of the number of Class A
shares outstanding at the end of the year. We also have broad discretion under
the plan to establish criteria under which otherwise eligible employees may
receive awards. In general, however, as was true for 2000, before or early in
each year, we expect to establish objective company-wide and business group
performance criteria and, after year-end, to use actual performance (measured
against these criteria) as the principal basis for award decisions for that
year.
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For 2000, the company-wide criteria established for the Corporate Office
Group, which includes Todd W. Herrick and John H. Foss, related to return on
equity, both in absolute terms and in relation to historical performance. The
same company-wide return on equity criteria also applied to our business units,
and additional group criteria relating to cash return on assets (both absolute
and relative to prior performance) also were established for each business unit,
including the Engine and Power Train Group and the Compressor Group. Under the
plan as implemented for 2000, depending on the extent to which actual return on
equity for that year (and, for employees in a business unit, the extent to which
the unit's actual cash return on assets for the year) fell within or exceeded
our pre-approved ranges, each covered employee could have received an award of
up to 80% of his 2000 salary.
Tecumseh's 2000 performance in terms of return on equity was down
significantly from the excellent level achieved in 1999, and cash return on
assets for both the Engine and Power Train Group and the Compressor Group was
also disappointing. Applying the criteria we established at the beginning of the
year to these measures of actual 2000 performance resulted in the plan awards
shown in the Summary Compensation Table. We believe those awards are appropriate
in view of last year's performance and that the plan is continuing to function
as intended.
Salaries
In keeping with our "pay for performance" philosophy, we believe executive
officers should receive salaries that are reasonable, but modest, in light of
their experience, skills, and responsibilities, and that the opportunity to
achieve significantly greater total compensation should be tied to Tecumseh
Products Company's short- and long-term performance through the potential for
awards under the Management Incentive Plan. When we considered 2000 executive
salaries, it was our shared perception, based on our general business knowledge
and without review of any data specifically collected by us for that purpose,
that existing salary levels for the CEO and other executive officers continued
to be too low given their responsibilities. In our salary deliberations with
respect to executive officers other than the CEO, we considered the CEO's
recommendations. Fiscal year 1999 performance also was a factor, but not a
controlling factor, in our decisions on 2000 salaries, due to our belief that
short-term performance generally is not appropriate for consideration with
respect to that form of compensation. Based on these considerations, we decided
to establish the 2000 salary for each executive officer at the level reported in
the Summary Compensation Table. Except for the fact that we did not obtain a
recommendation from the CEO concerning his own salary, we made our salary
determinations on the same basis for each executive officer.
Concluding Observations
We expect to continue our "pay for performance" strategy for the
foreseeable future. We intend to continue to closely monitor the impact of
compensation philosophy on financial performance and shareholder value and to
consider additional ways in which current plans and policies might be improved.
Section 162(m) of the Internal Revenue Code generally prohibits the
deduction of certain compensation in excess of $1 million per year paid by a
publicly-held corporation to any individual named in the corporation's summary
compensation table for the year. The compensation paid to each of our executive
officers was well below $1 million for 2000, and we expect the same will be true
for the current year. Therefore, we have decided to defer consideration of any
compensation policies related to Section 162(m) for the present.
Presented by the members of the Governance and Executive Compensation
Committee of the Board of Directors
Ralph W. Babb, Jr., Chairman
Peter M. Banks
J. Russell Fowler
Stephen L. Hickman
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
All members served on the Governance and Executive Compensation Committee
throughout the period covered by its report. No one who served on the committee
is or ever has been an officer or employee of Tecumseh Products Company or any
of its subsidiaries.
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Mr. Babb is an executive officer of Comerica Bank. In the normal course of
its business, Comerica has various banking relationships (both credit and
non-credit) with Tecumseh Products Company and with some of our executive
officers.
We employ Kent B. Herrick, the son of Todd W. Herrick and grandson of
Kenneth G. Herrick, as the General Manager of our Applied Electronics Division.
His 2000 compensation was $65,000.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Ciulla, Smith & Dale, LLP, our independent accountants for the fiscal year
ended December 31, 2000 and for many years before, will continue to serve for
the fiscal year ending December 31, 2001. A representative of Ciulla, Smith &
Dale, LLP will be present at the annual meeting and available to respond to
appropriate questions from shareholders. He will have an opportunity to make a
statement if he so desires.
AUDIT FEES
The aggregate fees billed to us for professional services rendered for the
audit of our annual financial statements for fiscal year 2000 and the reviews of
our quarterly financial statements included in our quarterly reports on Form
10-Q for that fiscal year were approximately $492,000.
ALL OTHER FEES
Ciulla, Smith & Dale, LLP billed us approximately $19,000 for all other
services it rendered in fiscal year 2000. None of those services involved
financial information systems design or implementation.
OTHER MATTERS
We know of no business to be acted on at the annual meeting other than the
matters listed in the accompanying notice. If any other matter does properly
come before the meeting, the proxy holders will vote on it in accordance with
their judgment.
SHAREHOLDER PROPOSALS IN OUR 2002 PROXY STATEMENT
In order for shareholder proposals for the 2002 annual meeting of
shareholders to be eligible to be included in our proxy statement, they must be
received at our principal office no later than November 16, 2001. We retain the
right to omit any proposal if it does not satisfy the requirements of SEC Rule
14a-8.
ADVANCE NOTICE REQUIREMENTS
Our bylaws contain advance notice procedures which a shareholder must
follow to nominate a person for election to our board or to present any other
proposal at an annual meeting of shareholders. In general, these provisions
require notice of a nomination or other proposal expected to be made at an
annual meeting to be in writing, to contain specified information about the
nominee or other proposal and the shareholder proponent, and to be delivered or
sent by first class U.S. mail to our Secretary and received at our principal
office.
Except when an annual meeting is called for a date that is not within 20
days before or after the first anniversary of the prior year's annual meeting
(in which case other time limits apply), we must receive the nomination or
proposal no later than 60 days nor earlier than 90 days before the first
anniversary of the prior year's annual meeting. This means that any nomination
or proposal for next year's annual meeting must be received no later than
February 24, 2002 and no earlier than January 25, 2002.
Management proxies for the 2002 annual meeting may confer discretionary
authority to vote on an untimely proposal without express direction from
shareholders giving the proxies.
PROXY SOLICITATION EXPENSES
We will pay the expenses of this solicitation. We have engaged Georgeson
Shareholder Communications Inc. to assist in soliciting proxies, for which we
will pay approximately $10,500 plus out-of-pocket expenses. We also may pay
brokers, nominees, fiduciaries, custodians, and other organizations performing
similar functions their reasonable expenses for sending proxy material to
principals and obtaining their instructions. In addition to solicitation by
mail, our directors,
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officers, and employees may solicit proxies in person or by telephone, fax, or
similar means.
YOUR VOTE IS VERY IMPORTANT.
If you are a Class B shareholder, please complete and return the enclosed
proxy, or vote by telephone or on the Internet, as soon as possible, even if you
currently plan to attend the annual meeting in person.
By Order of the Board of Directors,
[DARYL P. McDONALD]
Daryl P. McDonald
Corporate Counsel and Secretary
Tecumseh, Michigan
March 16, 2001
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APPENDIX A
SHARE OWNERSHIP
5% CLASS B SHAREHOLDERS
This table shows the Class B shares held by persons we know to be
beneficial owners of more than 5% of the class. We obtained the information
about Comerica Bank, EQSF Advisers, Inc., and M.J. Whitman Advisers, Inc. (which
is as of December 31, 2000) from the Schedules 13G they filed with the SEC. The
other information is as of March 2, 2001.
Amount and Nature of Beneficial Ownership
--------------------------------------------------------
Sole Sole Shared Shared
Voting Investment Voting Investment Percent
Power Power Power Power Total of Class
------ ---------- ------ ---------- ----- --------
Herrick Foundation
150 W. Jefferson
Suite 2500
Detroit, MI 48226 1,367,525 1,367,525 1,367,525 25.1%
Kenneth G. Herrick
Tecumseh Products Co.
100 E. Patterson St.
Tecumseh, MI 49286 888,113 888,113 888,113 16.3%
Comerica Bank
411 W. Fort St.
Detroit, MI 48226 7,159 12,149 1,246,615 1,241,625 1,253,774 23.0%
John W. Gelder
150 W. Jefferson
Suite 2500
Detroit, MI 48226 100 100 888,113 888,113 888,213 16.3%
EQSF Advisers, Inc.
767 Third Ave.
New York, NY 10017 573,500 573,500 10.5%
Kenneth G. Herrick, Todd W. Herrick, and John W. Gelder, all of whom are
directors and nominees for director, are members of the Board of Trustees of
Herrick Foundation.
Kenneth G. Herrick's shares are held as a trustee of trusts for the benefit
of himself and his descendants. The shares for which Mr. Gelder is shown as
having shared voting and investment power are held as a trustee of the Kenneth
G. Herrick trusts. Comerica Bank's shares include shares it held on the date of
its Schedule 13G as a trustee of the Kenneth G. Herrick trusts and of other
trusts.
Martin J. Whitman is the chief executive officer and controlling person of
EQSF Advisers, Inc. and also of M.J. Whitman Advisers, Inc. In addition to the
shares shown in the table, M.J. Whitman Advisers, Inc. beneficially owns 239,662
shares, all with sole investment power.
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MANAGEMENT'S BENEFICIAL OWNERSHIP
SHARES BENEFICIALLY OWNED AS OF MARCH 2, 2001
----------------------------------------------------------------------------
Sole Voting Shared Voting
Class of and and
Common Investment Investment
Stock Power Power Total Percentage
-------- ----------- ------------- ----- ----------
Ralph W. Babb, Jr. Class B............... -0- 500 500 *
Class A............... -0- -0- -0- -0-
Peter M. Banks Class B............... -0- -0- -0- -0-
Class A............... 200 -0- 200 *
Jon E. Barfield Class B............... -0- -0- -0- -0-
Class A............... 659 -0- 659 *
John H. Foss Class B............... 100 -0- 100 *
Class A............... 300 -0- 300 *
J. Russell Fowler Class B............... 1,300 -0- 1,300 *
Class A............... 900 -0- 900 *
John W. Gelder Class B............... 100 -0- 100 *
Class A............... 300 -0- 300 *
Kenneth G. Herrick Class B............... -0- 2,328,188 2,328,188 42.7%
Class A............... -0- 1,015,765 1,015,765 7.6%
Todd W. Herrick Class B............... 21,906 -0- 21,906 *
Class A............... -0- -0- -0- -0-
Stephen L. Hickman Class B............... 100 -0- 100 *
Class A............... 300 -0- 300 *
James E. Martinco Class B............... 10 -0- 10 *
Class A............... 30 -0- 30 *
Dennis E. McCloskey Class B............... 46 -0- 46 *
Class A............... -0- -0- -0- -0-
All directors and current Class B............... 23,516 2,328,688 2,352,204 43.1%
executive officers as a
group Class A............... 2,689 1,015,765 1,018,454 7.6%
(10 persons)
---------------------
* less than 1%
Mr. Babb holds his shares jointly with his wife.
Herrick Foundation, of which Kenneth G. Herrick, Todd W. Herrick, and John
W. Gelder are co-trustees, owns 1,367,525 Class B shares and 458,347 Class A
shares. The shared voting and investment power column includes those shares for
Kenneth G. Herrick but not for Todd W. Herrick or Mr. Gelder. All three of them
disclaim beneficial ownership of the shares.
Kenneth G. Herrick and Mr. Gelder are trustees of trusts that hold 888,113
Class B shares and 454,441 Class A shares for the benefit of Kenneth G. Herrick
and his descendants. The shared voting and investment power column includes the
trusts' shares for Mr. Herrick but not for Mr. Gelder. Mr. Gelder disclaims
beneficial ownership of the shares. Todd W. Herrick is an income beneficiary of
the trusts.
Kenneth G. Herrick and Todd W. Herrick are members of the Board of Trustees
of Howe Military School, which owns 72,550 Class B shares and 102,977 Class A
shares. The shared voting and investment power column includes those shares for
Kenneth G. Herrick but not for Todd W. Herrick. Both of them disclaim beneficial
ownership of the shares.
A-2
13
Mr. McCloskey left our employment during December 2000 and no longer is an
executive officer.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Directors, certain officers, and beneficial owners of more than 10% of the
Class B shares are required to file reports about their ownership of our equity
securities under Section 16(a) of the Securities Exchange Act of 1934 and to
provide copies of the reports to us. Based on the copies we received and on
written representations from the persons we know are subject to these
requirements, we believe all 2000 filing requirements were met.
A-3
14
APPENDIX B
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
This table provides compensation information for our Chief Executive
Officer and each other person who served as an executive officer during 2000 and
whose total salary for that year exceeded $100,000.
- ---------------------------------------------------------------------------------------------------------------
Long-Term
Annual Compensation Compensation
--------------------------------- ------------
Awards
------------
Restricted
Stock All Other
Name and Principal Position Year Salary Bonus Award Compensation
- ---------------------------------------------------------------------------------------------------------------
Todd W. Herrick 2000 $475,000 $16,783 $ 33,066 $4,800
President, CEO 1999 435,000 -0- 273,543 4,800
1998 410,000 -0- 46,763 4,800
John H. Foss 2000 $345,000 $12,190 $ 24,016 $4,800
Vice-President, 1999 315,000 -0- 198,265 4,800
Treasurer, CFO 1998 290,000 -0- 33,076 4,800
Dennis E. McCloskey 2000 $202,000 $ -0- $ -0- $4,800
Group Vice President, 1999 196,000 -0- 51,388 4,800
Compressors 1998 190,000 -0- 15,643 4,800
James E. Martinco 2000 $190,000 $ 1,647 $ 3,244 $4,800
Group Vice President, 1999 160,000 -0- 89,091 4,800
Engine & Power Train 1998 150,000 -0- 14,391 4,500
Components
- ---------------------------------------------------------------------------------------------------------------
Salary includes any amounts deferred at the officer's election and
contributed on his behalf to our Retirement Savings Plan (a 401(k) plan).
Bonus consists of the one-third of 2000 awards under the Management
Incentive Plan payable in cash.
"Restricted Stock Awards" are restricted phantom stock units relating to
Class A shares that were awarded under the Management Incentive Plan, which
represent two-thirds of each total award for 2000 and the entirety of each award
for 1999 and previous years. As more fully discussed in the Governance and
Executive Compensation Committee Report, awards under this plan and any deemed
dividend reinvestments that may be credited on those awards generally are
nontransferable and subject to forfeiture until three years (as to half of the
phantom stock units awarded for 2000) or five years (as to the other half of the
phantom stock units awarded for 2000 and all awards for 1999 and prior years)
after the end of the year for which they were granted. As required by SEC rules,
for purposes of attributing a dollar value to the units reported, values have
been calculated by multiplying the number of units awarded by the grant date
closing price for a Class A share on the Nasdaq Stock Market. Please note,
however, that plan awards are denominated in share units, not dollars, so that
the potential payout on an award, when and if vested, is tied directly to the
market value performance of Class A shares after the grant. Thus, the actual
dollar amount ultimately realized will depend on our future performance and on
general market conditions prevailing in the future.
As cash dividends are paid on Class A shares, additional phantom stock
units, which correspond to the dividends paid, are credited to employees'
accounts.
B-1
15
As of December 31, 2000, before the 2000 awards reported in the table, our
current named executives held phantom stock units under the plan (valued based
on the Class A share closing price on the Nasdaq Stock Market on the last
trading day of 2000) as follows:
- Todd W. Herrick -- 10,765.16 share units valued at $451,469
- John H. Foss -- 7,554.66 share units valued at $316,827
- James E. Martinco -- 3,075.73 share units valued at $128,990
Amounts shown under "All Other Compensation" are matching contributions to
the Retirement Savings Plan.
RETIREMENT PLANS
Our retirement plan, which is a broad-based defined benefit and (since
1985) noncontributory plan, and our supplemental retirement plan, which covers
certain executives, provide benefits in the event of normal (i.e., at age 65),
early, deferred, or disability retirement. Upon a participant's death, these
plans provide a surviving spouse pension and a refund of any pre-1985 employee
contributions. Participants are vested after five years of credited service. As
of January 1, 2001, our current executives named in the Summary Compensation
Table had the following years of credited service:
- Todd W. Herrick -- 36.5 years
- John H. Foss -- 22.0 years
- James E. Martinco -- 24.3 years
These plans provide retirement benefits to a vested participant in the form
of a life-time pension, the amount of which is equal to a percentage of the
participant's average base salary over the 60 months immediately before his or
her retirement date, multiplied by years of credited service (up to a maximum of
35 years), and reduced in the case of some benefits payable under the
supplemental retirement plan by a percentage of Social Security benefits.
B-2
16
The table below shows the estimated annual pension benefit (which is not
subject to further deduction for Social Security benefits or other offset
amounts) payable under the plans on a straight life annuity basis to executive
officers retiring at age 65 in the earnings and years of service classifications
specified, without considering any benefits which in some cases may be payable
to a participant due to voluntary contributions made by the participant before
1985.
Estimated Annual Benefit at Age 65
for Years of Service Indicated
Average --------------------------------------------------------------------
Annual 35 or
Base Salary 15 20 25 30 Longer
----------- -------- -------- -------- -------- --------
$ 90,000................... $ 16,875 $ 22,500 $ 28,125 $ 33,750 $ 39,375
100,000................... 18,750 25,000 31,250 37,500 43,750
125,000................... 23,437 31,250 39,062 46,875 54,687
150,000................... 28,125 37,500 46,875 56,250 65,625
175,000................... 35,075 46,767 58,459 70,150 83,275
200,000................... 40,700 54,267 67,834 81,400 96,400
225,000................... 46,325 61,767 77,209 92,650 109,525
250,000................... 51,950 69,267 86,584 103,900 122,650
275,000................... 57,575 76,767 95,959 115,150 135,775
300,000................... 63,200 84,267 105,334 126,400 148,900
400,000................... 85,700 114,267 142,834 171,400 201,400
450,000................... 96,950 129,267 161,584 193,900 227,650
500,000................... 108,200 144,267 180,334 216,400 253,900
Mr. McCloskey left our employment in December 2000 at age 58. When he
reaches age 65, he will be entitled to begin receiving a pension of $960 per
month under the plans described above. In connection with the termination of his
employment, we agreed to pay him a supplemental pension benefit of $2,072 per
month beginning in January 2001. His supplemental benefit will be reduced by the
amount of his pension under our pension plans when he begins receiving it.
B-3
17
APPENDIX C
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
The graph which follows compares the performance over the last five years
of our Class B shares (trading symbol TECUB) to the Standard & Poor's 500 Stock
Index and to a composite industry group index made up of the Standard & Poor's
Household Furnishing and Appliances Index (70%) and the Standard & Poor's
Diversified Machinery Index (30%). The graph assumes an investment of $100 in
the Class B shares and in each index on December 31, 1995 and reinvestment of
all cash dividends in shares of the same class.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG TECUMSEH PRODUCTS COMPANY, S&P 500 INDEX,
AND S&P COMPOSITE INDUSTRY INDEX
[GRAPH]
- ---------------------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000
- ---------------------------------------------------------------------------------------------------------
TECUMSEH PRODUCTS COMPANY $100.00 $112.31 $ 98.70 $ 93.54 $ 88.52 $ 84.16
- ---------------------------------------------------------------------------------------------------------
S&P 500 INDEX 100.00 122.96 163.98 210.85 255.21 231.98
- ---------------------------------------------------------------------------------------------------------
S&P COMPOSITE INDUSTRY INDEX 100.00 102.14 145.74 172.53 171.09 143.07
- ---------------------------------------------------------------------------------------------------------
C-1
18
APPENDIX D
TECUMSEH PRODUCTS COMPANY
AUDIT COMMITTEE CHARTER
The Audit Committee is appointed by the Board of Directors to assist the
Board of Directors in overseeing and monitoring management's and the independent
auditor's participation in the financial reporting process.
The Audit Committee shall consist of at least three members. The members of
the Audit Committee shall meet the independence and experience requirements of
the National Association of Securities Dealers, Inc. The members of the Audit
Committee shall be appointed by the Board of Directors.
The Audit Committee shall have the authority to retain special legal,
accounting or other consultants to advise the Committee. The Audit Committee may
request any officer or employee of the Company or the Company's outside counsel
or independent auditor to attend a meeting of the Committee or to meet with any
members of, or consultants to, the Committee.
The Audit Committee shall meet not less than three times per year and shall
make regular reports to the Board. The Chairman of the Committee may call
special meetings of the Committee as circumstances require. The Committee will
keep minutes of its meetings. The minutes will be circulated among the members
of the Committee, and the Board of Directors.
The Audit Committee shall:
1. Review and reassess the adequacy of this Charter annually and
report to the Board of Directors on such review.
2. Review the annual audited financial statements with management,
including major issues regarding accounting and auditing principles and
practices as well as the adequacy of internal controls that could
significantly affect the Company's financial statements.
3. Review analyses prepared by management and the independent auditor
of significant financial reporting issues and judgments made in connection
with the preparation of the Company's financial statements.
4. Engage the independent auditor to review the Company's quarterly
financial statements prior to the filing of the Company's Quarterly Report
on Form 10-Q.
5. Meet periodically with management to review the Company's major
financial risk exposures and the steps management has taken to monitor and
control such exposures.
6. Review major changes to the Company's auditing and accounting
principles and practices as suggested by the independent auditor, internal
auditors or management.
7. Recommend to the Board of Directors the appointment of the
independent auditor, which firm is ultimately accountable to the Audit
Committee and the Board of Directors.
8. Approve the compensation to be paid to the independent auditor.
9. Meet periodically with the Company's independent auditor(s) to
ascertain whether there are any relationships, financial interests,
investments, arrangements or non-audit consulting services being performed
which could impair or give the appearance of impairing the auditors'
independence. In making such judgements, the Committee will rely primarily
on their own sound business judgment, and the guidelines established for
auditor independence by the Securities and Exchange Commission's Rules as
set forth in the Revisions of the Commission's Auditor Independence
Requirement issued November 21, 2000 (which may be amended from time to
time) and other generally accepted standards or pronouncements which may
govern or define standards of auditor independence.
10. Review and approve management's recommendation to retain the
independent auditors for the performance of non-audit or tax services.
D-1
19
11. Evaluate the performance of the independent auditor and, if so
determined by the Audit Committee, recommend that the Board of Directors
replace the independent auditor.
12. Review the appointment and replacement of the senior internal
auditing executive.
13. Review the significant reports to management prepared by the
internal auditing department and management's responses.
14. Meet with the independent auditor prior to the audit to review the
planning and staffing of the audit.
15. Discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the conduct
of the audit.
16. Review with the independent auditor any problems or difficulties
the auditor may have encountered and any management letter provided by the
auditor and the Company's response to that letter.
17. Prepare the report required by the rules of the Securities and
Exchange Commission to be included in the Company's annual proxy statement.
18. Receive and take any necessary action with respect to any reports
from management, the Company's senior internal auditing executive, or the
independent auditor, concerning conformity by the Company or its affiliates
with applicable legal requirements.
19. Meet at least annually with the chief financial officer, the
senior internal auditing executive and the independent auditor in separate
executive sessions.
20. Consider, in consultation with the senior internal auditing
executive and the independent auditor, the adequacy of the Company's
internal financial controls.
21. Review policies and procedures with respect to officers' expense
accounts and perquisites, including their use of corporate assets.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
This is the responsibility of management and the independent auditor. Nor is it
the duty of the Audit Committee to conduct investigations, to resolve
disagreements, if any, between management and the independent auditor or to
assure compliance with laws and regulations and the Company's policies on
business ethics.
D-2
20
2001 ANNUAL MEETING OF SHAREHOLDERS
WEDNESDAY, APRIL 25, 2001
Tecumseh Country Club
5200 Milwaukee Road
[TECUMSEH PRODUCTS COMPANY LOGO] Tecumseh, MI 49286
TECUMSEH PRODUCTS COMPANY
___________________________________________________________________________________________________________________________________
INSTRUCTIONS FOR VOTING YOUR PROXY
This proxy covers all Class B shares of Tecumseh Products Company held of record.
THERE ARE THREE WAYS TO VOTE YOUR PROXY
TELEPHONE VOTING INTERNET VOTING VOTING BY MAIL
This method of voting is available for Visit the internet voting website at Simply mark, sign and date your
residents of the U.S. and Canada. HTTP://PROXY.GEORGESON.COM. Enter proxy card and return it in the
On a touch tone telephone, call the COMPANY NUMBER AND CONTROL NUMBER postage-paid envelope. If you are
TOLL FREE 1-877-260-0388, 24 shown below and follow the voting by telephone or the internet,
hours a day, 7 days a week. You will instructions on your screen. You will please do not mail your proxy card.
be asked to enter ONLY the incur only your usual internet charges.
CONTROL NUMBER shown below. Available 24 hours a day, 7 days a week
Have your proxy card ready, then until 5:00 p.m. Eastern time on
follow the prerecorded instructions. April 24, 2001.
Your vote will be confirmed and cast
as you directed. Available 24 hours a
day, 7 days a week until 5:00 p.m.
Eastern time on April 24, 2001.
COMPANY NUMBER CONTROL NUMBER
PLEASE DETACH AT PERFORATION BEFORE MAILING
___________________________________________________________________________________________________________________________________
/X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE
ELECTION OF DIRECTORS. FOR ALL
FOR WITHHOLD EXCEPT
Kenneth G. Herrick, Todd W. Herrick, John H. Foss, J. Russell Fowler, John W. Gelder, Stephen L. Hickman, / / / / / /
Peter M. Banks, Jon E. Barfield, Ralph W. Babb, Jr.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, check the "For All Except" box and write that nominee's
name in the space provided below.)
___________________________________________________________________________________________________________________________________
If you sign and return this proxy, the proxies will vote your shares as specified above. IF YOU DO NOT SPECIFY HOW TO VOTE, THE
PROXIES WILL VOTE YOUR SHARES FOR THE ELECTION AS DIRECTORS OF ALL NOMINEES LISTED ABOVE AND IN THEIR DISCRETION ON ANY OTHER
MATTERS THAT MAY COME BEFORE THE MEETING.
WE APPRECIATE YOUR PROMPT ACTION IN SIGNING AND RETURNING THIS PROXY.
________________________________________________
Signature
________________________________________________
Signature
Dated:____________________________________ ,2001
NOTE: Please sign exactly as your name(s) appear
above. Joint owners should each sign. When
signing as an attorney, executor,
administrator, trustee or guardian, please
give your full title.
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND RETURN THIS PROXY CARD USING THE ENCLOSED ENVELOPE.
If you have any questions or need assistance, please contact Georgeson Shareholder Communications Inc., our Proxy Solicitor, at
1-800-223-2064.
21
- --------------------------------------------------------------------------------
PLEASE DETACH AT PERFORATION BEFORE MAILING
- --------------------------------------------------------------------------------
TECUMSEH PRODUCTS COMPANY
THE BOARD OF DIRECTORS SOLICITS THIS PROXY FOR THE ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD APRIL 25, 2001
By signing on the reverse, I (or, if more than one person signs, we)--
P - authorize either of Kenneth G. Herrick or Todd W. Herrick to act as my
(or our) proxy at the Annual Meeting of Shareholders of Tecumseh
R Products Company to be held on Wednesday, April 25, 2001 and at any
adjournments of that meeting,
O
- give each proxy full power to name another person to substitute for
X him as proxy.
Y - authorize each proxy to vote any and all shares of Tecumseh Products
Company Class B Common Stock, $1.00 par value, registered in my name
(or our names) or which for any reason I (or we) may be entitled to
vote, and
- direct the proxies to vote as specified on the reverse side and to
vote in their discretion on any other matters that may come before the
meeting.
Continued and to be voted and signed on reverse