SCHEDULE 14A
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 Section 240.14a-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:
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(2) Aggregate number of securities to which transaction applies:
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(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.
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[ ] 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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(4) Date Filed:
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[TECUMSEH PRODUCTS COMPANY LOGO]
[TECUMSEH LOGO]
March 15, 2002
Dear Shareholder:
We cordially invite you to attend our 2002 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,
/s/ KENNETH G. HERRICK
Chairman of the Board of Directors
/s/ TODD W. HERRICK
President and Chief Executive Officer
[TECUMSEH PRODUCTS COMPANY LETTERHEAD]
[TECUMSEH PRODUCTS LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Date: Wednesday, April 24, 2002
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 1, 2002 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
General Counsel and Secretary
March 15, 2002
PROXY STATEMENT
The Board of Directors of Tecumseh Products Company is soliciting proxies
to vote Class B shares at our 2002 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 2001 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 1, 2002 (the record date for the
meeting), 5,077,746 Class B shares were outstanding and entitled to vote, and
13,401,938 Class A shares were outstanding. To have a quorum, a majority of the
outstanding Class B shares 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 80). 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 59). 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.
1
David W. Kay (director since 2001, age 53). Vice President, Treasurer and
Chief Financial Officer of Tecumseh Products Company since 2001; Corporate
Controller of Tecumseh Products Company from 1999 to 2001; Corporate Controller
of RTI International Metals, Inc. (manufacturing) from 1986 to 1999. Mr. Kay
serves on our Pension and Investment Committee.
J. Russell Fowler (director since 1967, age 83). 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 68). 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. Miller, Canfield, Paddock and Stone, P.L.C.
served as our principal outside legal counsel during 2001 and is continuing to
do so this year.
Stephen L. Hickman (director since 1991, age 59). Chairman of the Board of
Directors and Chief Executive Officer of Brazeway, Inc. (manufacturer of
aluminum extrusions and fabricator of aluminum products) since 2001; also
President of Brazeway, Inc. until 2001. Mr. Hickman serves on our Governance and
Executive Compensation Committee.
Peter M. Banks (director since 1991, age 64). 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., Chaos
Technology, Inc., Urban Pixel, Inc., and Triformix, Inc. He serves on our
Governance and Executive Compensation Committee, Pension and Investment
Committee, and Nominating Committee.
Jon E. Barfield (director since 1993, age 50). 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, Granite Broadcasting Corporation, BMC Software, Inc.,
and Pantellos Group Limited Partnership, Inc. He also is a Trustee Emeritus 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, the Community Foundation for Southeastern
Michigan, and Detroit Renaissance. He serves on our Pension and Investment
Committee and our Audit Committee.
Ralph W. Babb, Jr. (director since 1998, age 53). President and Chief
Executive Officer of Comerica Incorporated and of its principal subsidiary,
Comerica Bank, since January 2002; Vice Chairman and Chief Financial Officer of
Comerica Incorporated and Comerica Bank from 1999 to January 2002; 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, Incorporated, 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.
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We also reimburse those directors for travel expenses.
DIRECTORS' MEETINGS AND STANDING COMMITTEES
We held ten board meetings during 2001. The Audit Committee met three times
during the year, the Governance and Executive Compensation Committee met four
times, and the Nominating Committee did not meet. 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,
General 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 was included as Appendix D to the
proxy statement for our 2001 annual meeting.
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, 2001 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.
While the composition of our committee meets NASD requirements, none of us
is professionally engaged in the practice of, or is an expert in, auditing or
accounting, including in respect of auditor independence. To meet our
responsibilities to the board of directors, we inquire of and rely on, without
independent verification, the information provided and representations made by
management and the independent accountants relative to auditor independence,
appropriateness of accounting and financial reporting principles, preparation
and audit of the financial statements in accordance with accounting or auditing
standards generally accepted in the United States, and compliance with
applicable laws and regulations. Accordingly, our committee's oversight does not
provide an independent basis to determine that management has maintained
appropriate accounting and financial reporting principles or appropriate
internal controls and procedures designed to assure compliance with accounting
standards and applicable laws and regulations. Furthermore, our committee's
considerations and discussions referred to above do not assure that the
financial statements are complete and accurate, that the audit of the financial
statements has been carried out in accordance with auditing standards generally
accepted in the United States, that the financial statements are presented in
accordance with accounting principles generally accepted in the United States,
or that the independent accountants are in fact "independent."
In reliance on the reviews and discussions referred to above, and subject
to the limitations on the role and responsibilities of our committee referred to
above and in our committee's charter, we recommended to the board of directors
(and the board of directors approved) that the audited financial statements for
the fiscal year ended December 31, 2001 be included in the annual report to
shareholders on Form 10-K for that year.
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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 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.
VOLUNTARY EARLY RETIREMENT PROGRAM AND RELATED TRANSITION
During 2001, we implemented a company-wide voluntary early retirement
program intended to reduce the expense associated with our salaried workforce.
Pursuant to that program, two of our executive officers, John H. Foss and James
E. Martinco, retired effective as of October 1, and as part of the related
management transition, the board appointed David W. Kay and Michael R. Forman as
executive officers, also effective as of October 1. In connection with his
retirement, Mr. Foss resigned from the board of directors, and Mr. Kay was
appointed to the board as his replacement.
During the latter part of 2000, the Governance and Executive Compensation
Committee established 2001 salaries for the persons serving as executive
officers at that time. Our CEO established the salaries paid to Mr. Kay and Mr.
Forman for the portion of the year before they became executive officers, and he
also established their salaries for the remainder of the year pursuant to
authority conferred on him by the board of directors at the time they were
appointed executive officers. The committee did not take any part in
establishing 2001 salaries for Mr. Kay or Mr. Forman.
The committee made all determinations relating to Management Incentive Plan
awards for 2001. Executive officers who retired during the year were not
eligible for consideration for those awards.
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.
4
- 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.
We did not grant any plan awards for 2001.
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 2001, 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.
For 2001, the company-wide criteria established for the Corporate Office
Group, which includes Todd W. Herrick, David W. Kay, and Michael R. Forman,
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. Under the plan as implemented for 2001,
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 2001 salary.
Tecumseh's 2001 performance was disappointing, both in terms of return on
equity
5
and cash return on assets for business units. Applying the criteria we
established at the beginning of the year to these measures of actual 2001
performance resulted in no plan awards. Nevertheless, we believe 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. While we believe that short-term
performance generally should not be the controlling factor with respect to
salaries, in view of Tecumseh's disappointing financial results in 2000, we
decided to follow the CEO's recommendation and leave all executive officers'
2001 salaries at the same levels as in 2000. We made our salary determinations
on the same basis for all executive officers.
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 2001, 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
BOARD OF DIRECTORS' REPORT ON SALARIES FOR NEW EXECUTIVE OFFICERS
When we appointed new executive officers effective as of October 1 in
connection with the retirements that were occurring under our voluntary early
retirement program, we assigned our CEO primary responsibility for managing the
transition. We decided it would not be worthwhile to convene the Governance and
Compensation Committee to consider the new executive officers' salaries for the
small portion of 2001 that remained, so we delegated authority to our CEO to set
their salaries for that period, bearing in mind that the committee would examine
all executive officers' salaries for 2002.
Mr. Foss took no part in our deliberations concerning the new executive
officers or their salaries, and Mr. Kay had not yet been elected to the board.
Presented by the following members of the Board of Directors
Ralph W. Babb, Jr.
Peter M. Banks
Jon E. Barfield
J. Russell Fowler
John W. Gelder
Kenneth G. Herrick
Todd W. Herrick
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 Vice President and Assistant to the President and CEO.
His 2001 compensation was $70,000.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Ciulla, Smith & Dale, LLP, our independent accountants for the fiscal year
ended December 31, 2001 and for many years before, will continue to serve for
the fiscal year ending December 31, 2002. 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 2001 and the reviews of
our quarterly financial statements included in our quarterly reports on Form
10-Q for that fiscal year were approximately $499,000.
ALL OTHER FEES
Ciulla, Smith & Dale, LLP billed us approximately $19,000 for all other
services it rendered in fiscal year 2001. 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 2003 PROXY STATEMENT
In order for shareholder proposals for the 2003 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 15, 2002. 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 23, 2003 and no earlier than January 24, 2003.
Management proxies for the 2003 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 $7,500 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, officers, and employees may solicit proxies in person or by
telephone, fax, or similar means.
YOUR VOTE IS VERY IMPORTANT.
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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,
/s/ DARYL P. McDONALD
Daryl P. McDonald
General Counsel and Secretary
Tecumseh, Michigan
March 15, 2002
8
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 and AXA (which is as of December 31, 2001) from the
Schedules 13G they filed with the SEC. The other information is as of March 1,
2002.
<Table>
<Caption>
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 26.9%
Kenneth G. Herrick
Tecumseh Products Co.
100 E. Patterson St
Tecumseh, MI 49286 888,113 888,113 888,113 17.5%
Comerica Bank
One Detroit Center
Detroit, MI 48275 6,954 11,944 1,209,695 1,204,705 1,216,649 24.0%
John W. Gelder
150 W. Jefferson
Suite 2500
Detroit, MI 48226 100 100 888,113 888,113 888,213 17.5%
AXA
25, Avenue Matignon
75008 Paris, France 252,180 346,180 346,180 6.8%
</Table>
Kenneth G. Herrick, Todd W. Herrick, and John W. Gelder, all of whom are
directors and nominees for director, and Michael A. Indenbaum, a principal in
Miller, Canfield, Paddock and Stone, P.L.C., are the 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.
The Schedule 13G filed by AXA and related entities states that AXA filed
its Schedule 13G as a parent holding company with respect to the holdings of AXA
Rosenberg Investment Management LLC. The Schedule 13G also states that AXA owns
AXA Financial, Inc. and that the following entities, as a group, control AXA:
AXA Conseil Vie Assurance Mutuelle, AXA Assurances I.A.R.D Mutuelle, AXA
Assurances Vie Mutuelle, and AXA Courtage Assurance Mutuelle.
A-1
MANAGEMENT'S BENEFICIAL OWNERSHIP
<Table>
<Caption>
SHARES BENEFICIALLY OWNED AS OF MARCH 1, 2002
----------------------------------------------------------------------------
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 *
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 45.9%
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 *
David W. Kay Class B............... -0- -0- -0- -0-
Class A............... -0- -0- -0- -0-
Michael R. Forman Class B............... -0- -0- -0- -0-
Class A............... -0- -0- -0- -0-
John H. Foss Class B............... -0- -0- -0- -0-
Class A............... -0- -0- -0- -0-
James E. Martinco Class B............... 10 -0- 10 *
Class A............... 30 -0- 30 *
All directors and current Class B............... 23,406 2,328,688 2,352,094 46.3%
executive officers as a
group Class A............... 2,059 1,015,765 1,018,124 7.6%
(10 persons)
---------------------
* less than 1%
</Table>
Mr. Babb holds his shares jointly with his wife.
Herrick Foundation, of which Kenneth G. Herrick, Todd W. Herrick, and John
W. Gelder are three of the four 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
A-2
power column includes those shares for Kenneth G. Herrick but not for Todd W.
Herrick. Both of them disclaim beneficial ownership of the shares.
Messrs. Foss and Martinco retired effective October 1, 2001. In connection
with his retirement, Mr. Foss also resigned from the board of directors.
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 2001 filing requirements were met.
A-3
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 at any time
during 2001 and whose total salary and bonus for that year exceeded $100,000.
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------------------------
Long-Term
Annual Compensation Compensation
Awards
Restricted
Stock All Other
Name and Principal Position Year Salary Bonus Award Compensation
- ---------------------------------------------------------------------------------------------------------------
Todd W. Herrick 2001 $475,000 $ -0- $ -0- $5,100
President & Chief 2000 475,000 16,783 33,066 4,800
Executive Officer 1999 435,000 -0- 273,543 4,800
David W. Kay 2001 $147,381 $ -0- $ -0- $4,024
Vice-President, Treasurer &
Chief Financial Officer
(since Oct. 1, 2001)
Michael R. Forman 2001 $108,004 $ -0- $ -0- $3,765
Vice-President & Director of
Corporate Human Resources
(since Oct. 1, 2001)
John H. Foss 2001 $258,756 $ -0- $ -0- $5,100
Vice-President, Treasurer & 2000 345,000 12,190 24,016 4,800
Chief Financial Officer 1999 315,000 -0- 198,265 4,800
(until Oct. 1, 2001)
James E. Martinco 2001 $142,506 $ -0- $ -0- $4,559
Group Vice President, 2000 190,000 1,647 3,244 4,800
Engine & Power Train 1999 160,000 -0- 89,091 4,800
Components (until Oct. 1,
2001)
- ---------------------------------------------------------------------------------------------------------------
</Table>
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. 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) 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
B-1
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.
As of December 31, 2001, 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 2001) as follows:
- Todd W. Herrick -- 9,416.69 share units valued at $476,767
- David W. Kay -- 221.60 share units valued at $11,220
- Michael R. Forman -- 2,086.43 share units valued at $105,636
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, 2002, our current executives named in the Summary Compensation
Table had the following years of credited service:
- Todd W. Herrick -- 37.5 years
- David W. Kay -- 2.2 years
- Michael R. Forman -- 11.9 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
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.
<Table>
<Caption>
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 55,663
150,000................... 28,769 38,359 47,948 57,538 68,788
175,000................... 34,394 45,859 57,323 68,788 81,913
200,000................... 40,019 53,359 66,698 80,038 95,038
225,000................... 45,644 60,859 76,073 91,288 108,163
250,000................... 51,269 68,359 85,448 102,538 121,288
275,000................... 56,894 75,859 94,823 113,788 134,413
300,000................... 62,519 83,359 104,198 125,038 147,538
400,000................... 85,019 113,359 141,698 170,038 200,038
450,000................... 96,269 128,359 160,448 192,538 226,288
500,000................... 107,519 143,359 179,198 215,038 252,538
550,000................... 118,769 158,359 197,948 237,538 278,788
600,000................... 130,019 173,359 216,698 260,038 305,038
</Table>
In accordance with the terms of our voluntary early retirement program, Mr.
Foss is receiving a pension (with a joint and survivor option for his wife) of
$10,662 per month, and Mr. Martinco is receiving a pension (with a joint and
survivor option for his wife) of $5,996 per month. In addition, as provided
under the program, the phantom stock units held by Messrs. Foss and Martinco
under our Management Incentive Plan became non-forfeitable and will be paid out
as originally scheduled, the same as if they had remained employed.
B-3
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 two Standard & Poor's
indexes: Consumer Discretionary: Household Appliances (70%) and Industrials:
Industrial Machinery (30%). The graph assumes an investment of $100 in the Class
B shares and in each index on December 31, 1996 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]
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------------------
1996 1997 1998 1999 2000 2001
- ---------------------------------------------------------------------------------------------------------
TECUMSEH PRODUCTS COMPANY $100.00 $ 87.88 $ 83.29 $ 78.82 $ 74.94 $ 97.44
- ---------------------------------------------------------------------------------------------------------
S&P 500 INDEX 100.00 133.36 171.48 207.56 188.66 166.24
- ---------------------------------------------------------------------------------------------------------
S&P COMPOSITE INDUSTRY INDEX 100.00 145.83 160.23 164.53 138.36 169.83
- ---------------------------------------------------------------------------------------------------------
</Table>
C-1
2002 ANNUAL MEETING OF SHAREHOLDERS
WEDNESDAY, APRIL 24, 2002
Tecumseh Country Club
5200 Milwaukee Road
Tecumseh, MI 49286
[TECUMSEH PRODUCTS COMPANY LOGO]
- --------------------------------------------------------------------------------
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
This method of voting is available for residents of the U.S. and Canada. On a
touch tone telephone, call TOLL FREE 1-877-260-0388, 24 hours a day, 7 days a
week. You will be asked to enter ONLY the CONTROL NUMBER shown below. Have your
proxy card ready, then follow the prerecorded instructions. 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 23, 2002.
INTERNET VOTING
Visit our Internet voting Website at HTTP://PROXY.GEORGESON.COM. Enter the
COMPANY NUMBER AND CONTROL NUMBER shown below and follow the instructions on
your screen. You will incur only your usual Internet charges. Available 24 hours
a day, 7 days a week until 5:00 p.m. Eastern time on April 23, 2002.
VOTING BY MAIL
Simply mark, sign and date your proxy card and return it in the postage-paid
envelope. If you are voting by telephone or the Internet, please do not mail
your proxy card.
-------------- --------------
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, David W. Kay, 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: , 2002
----------------------------
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.
- --------------------------------------------------------------------------------
PLEASE DETACH AT PERFORATION BEFORE MAILING
- --------------------------------------------------------------------------------
P R O X Y
TECUMSEH PRODUCTS COMPANY
THE BOARD OF DIRECTORS SOLICITS THIS PROXY FOR THE ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD APRIL 24, 2002
By signing on the reverse, I (or, if more than one person signs, we)--
- - 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 Products
Company to be held on Wednesday, April 24, 2002 and at any adjournments of
that meeting,
- - give each proxy full power to name another person to substitute for him as
proxy.
- - 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