SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
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/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Tennant Company
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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and 0-11
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[LETTERHEAD]
TENNANT COMPANY
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
MAY 6, 1999
TO OUR SHAREHOLDERS:
The Annual Meeting of Shareholders of Tennant Company will be held at the
corporate headquarters of Tennant Company, 701 North Lilac Drive, Minneapolis,
Minnesota, on Thursday, May 6, 1999, at 10:30 a.m., Central Daylight Time, for
the following purposes:
(1) To elect directors for a three-year term;
(2) To approve and ratify the Tennant Company 1999 Stock Incentive Plan;
(3) To approve and ratify amendments to and the restatement of the
Restricted Stock Plan for Nonemployee Directors;
(4) To ratify the appointment of KPMG Peat Marwick LLP as independent
auditors of the Company; and
(5) To act upon any other business that may properly come before the
meeting.
Only holders of Common Stock of record at the close of business on March 8,
1999, will be entitled to vote at the meeting or any adjournment thereof.
You are cordially invited to attend the meeting. Whether or not you plan
to come to the meeting, please sign, date and return your Proxy in the reply
envelope provided. Your cooperation in promptly signing and returning your
Proxy will help avoid further solicitation expense.
March 25, 1999 Bruce J. Borgerding, Secretary
TENNANT COMPANY
E S T A B L I S H E D 1 8 7 0
701 N. LILAC DRIVE, P.O. BOX 1452, MINNEAPOLIS, MINN. 55440
[LETTERHEAD]
TENNANT COMPANY
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by
Tennant Company (the "Company"), on behalf of its Board of Directors, of Proxies
for the Annual Meeting of Shareholders to be held Thursday, May 6, 1999, and any
adjournment thereof. Stock represented by Proxies will be voted. Where
specification is made in the Proxy, the stock will be voted in accordance
therewith. Where no specification is made in the Proxy, the stock will be voted
for all proposals. Proxies may be revoked at any time before being voted by
giving written notice of revocation at the mailing address noted or at the
meeting, or by a later-dated Proxy delivered to an officer of the Company.
Personal attendance and voting in person does not revoke a written Proxy.
There were outstanding on March 8, 1999, the record date for shareholders
entitled to vote at the meeting, 9,086,619 shares of Common Stock, each share
being entitled to one vote.
Expenses in connection with the solicitation of Proxies will be paid by the
Company. Solicitation of Proxies will be principally by mail. In addition,
several of the officers or employees of the Company may solicit Proxies, either
personally or by telephone, or by special letter, from some of the shareholders.
The Company also will make arrangements with brokerage houses and other
custodians, nominees and fiduciaries to send Proxies and proxy material to their
principals, and will reimburse them for their expenses in so doing.
The mailing address of the principal executive office of the Company is 701
North Lilac Drive, P.O. Box 1452, Minneapolis, Minnesota 55440. This Proxy
Statement and form of Proxy enclosed are being mailed to shareholders commencing
March 25, 1999.
1
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of February 28, 1999, certain
information with respect to all shareholders known to the Company to have been
beneficial owners of more than 5% of its Common Stock, and information with
respect to the Company's Common Stock beneficially owned by directors (and
director nominees) of the Company, the executive officers of the Company
included in the Summary Compensation Table set forth under the caption
"Executive Compensation" below and all directors and executive officers of the
Company as a group. Except as otherwise indicated, the shareholders listed in
the table have sole voting and investment powers with respect to the Common
Stock owned by them.
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP COMMON STOCK
- -------------------- -------------------- ------------
U.S. Bank National Association(1) 930,435 shares(2) 10.3%
Minneapolis, MN
U.S. Bank National Association has
sole voting authority for
742 shares, shared voting
authority for 929,693(2) shares,
sole investment authority for
142 shares, and shared investment
authority for 929,293(2) shares.
Trimark Financial Corporation(1) 852,100 shares 9.4%
Toronto, Ontario
U.S. Bank National Association(3) 659,360 shares 7.3%
Minneapolis, MN
Roger L. Hale 485,748 shares(4)(5) 5.3%
Richard A. Snyder 57,377 shares(5)(6) *
Janet M. Dolan 46,587 shares(5)(7) *
Douglas R. Hoelscher 44,610 shares(5)(8) *
Keith D. Payden 23,410 shares(5)(9) *
Andrew P. Czajkowski 7,029 shares(10) *
David C. Cox 6,771 shares(11) *
William I. Miller 5,877 shares(12) *
Delbert W. Johnson 5,535 shares(13) *
Arthur D. Collins, Jr. 4,676 shares(14) *
Edwin L. Russell 2,282 shares(15) *
Pamela K. Knous 587 shares *
All directors and executive officers as a 907,459 shares(5)(16) 9.8%
group (18 persons)
* An asterisk in the column listing the percentage of shares beneficially
owned indicates the person owns less than 1% of total.
2
( 1) The information set forth above as to the Amount and Nature of
Beneficial Ownership is based upon a Schedule 13G statement filed with
the Securities and Exchange Commission reflecting beneficial ownership
as of December 31, 1998.
( 2) This number includes 593,175 shares held in the "unallocated" account,
as of December 31, 1998, of the Tennant Company Profit Sharing and
Employee Stock Ownership Plan and Trust, as to which U.S. Bank
National Association acts as trustee. The number of "allocated"
shares held in such trust (1,068,308 shares as of December 31, 1998)
is not included in this number. The Securities and Exchange
Commission has taken the position, with respect to similar plans, that
the plan trustee is the beneficial owner of shares held in an
unallocated reserve pending allocation to participants' accounts. The
plan trustee disclaims that it or the Trust is the beneficial owner of
shares held in the unallocated account.
( 3) All shares are being held in trust for the Pennock family. George T.
Pennock, who passed away in February 1998, was a former Chief
Executive Officer of Tennant Company.
( 4) Of these shares, Mr. Hale has an interest in 144,074 shares in a trust
established under the will of his mother, of which he is a
beneficiary. Includes 20,036 shares owned by or held in trust for
members of his family, in which he disclaims any beneficial ownership.
Also includes 117,821 shares covered by currently exercisable options
granted to Mr. Hale.
( 5) Includes shares allocated to the individual or group under the Tennant
Company Profit Sharing and Employee Stock Ownership Plan.
( 6) Includes 17,729 shares held in trust for Mr. Snyder's wife, in which
he disclaims any beneficial ownership. Also includes 26,462 shares
covered by currently exercisable options granted to Mr. Snyder.
( 7) Includes 20,797 shares covered by currently exercisable options
granted to Ms. Dolan.
( 8) Includes 13,988 shares covered by currently exercisable options
granted to Mr. Hoelscher.
( 9) Includes 7,889 shares covered by currently exercisable options granted
to Mr. Payden.
(10) Includes 1,000 shares covered by currently exercisable options granted
to Mr. Czajkowski.
(11) Includes 1,000 shares covered by currently exercisable options granted
to Mr. Cox.
(12) Includes 1,000 shares covered by currently exercisable options granted
to Mr. Miller.
(13) Includes 1,000 shares covered by currently exercisable options granted
to Mr. Johnson.
(14) Includes 1,000 shares covered by currently exercisable options granted
to Mr. Collins.
(15) Includes 500 shares covered by currently exercisable options granted
to Mr. Russell.
(16) Of these shares, 2,108 shares are held in the name of the wife of an
executive officer, and 166,558 shares are held in trusts for various
family members, in which such officer disclaims beneficial ownership.
Includes 181,631 shares covered by currently exercisable options
granted to eleven executive officers of the Company due to the
retirement of Richard A. Snyder as of December 31, 1998.
3
DIRECTORS
ELECTION OF DIRECTORS
Pursuant to the Restated Articles of Incorporation of the Company,
directors are elected for staggered terms of three years, with approximately
one-third of the directors to be elected each year.
At the meeting, three directors are to be elected. The Board of Directors
has designated Janet M. Dolan, Roger L. Hale, and Delbert W. Johnson as nominees
for election to serve three-year terms ending at the time of the Annual Meeting
in 2002 and until their successors are elected and have qualified. Note that
Mr. Hale will be retiring from the Board effective December 31, 1999. All of
the nominees are currently directors of the Company, and Mr. Hale and
Mr. Johnson have previously been elected by the shareholders. The nominees have
indicated a willingness to serve, but in case any of the nominees is not a
candidate at the Annual Meeting, it is the intention of the persons named in the
enclosed form of Proxy to vote in favor of the other nominees named and to vote
for a substitute nominee in their discretion.
The affirmative vote of a majority of the outstanding shares of Common
Stock present and entitled to vote in person or by proxy on the election of
directors is necessary to elect each nominee. For this purpose, a shareholder
voting through a Proxy who abstains with respect to the election of directors is
considered to be present and entitled to vote on the election of directors at
the meeting, and is in effect a negative vote; but a shareholder (including a
broker) who does not give authority to a Proxy to vote, or withholds authority
to vote, on the election of directors shall not be considered present and
entitled to vote on the election of directors.
The following information is furnished with respect to each nominee for
election as a director and for each director whose term of office will continue
after the meeting:
NOMINEES FOR ELECTION FOR TERMS EXPIRING IN 2002 (CLASS I DIRECTORS):
[PHOTO] JANET M. DOLAN, 49 Director Since 1998
Ms. Dolan was named President and Chief Operating Officer of the
Company in April 1998. Ms. Dolan will become Chief Executive
Officer of the Company effective April 5, 1999. She previously
served as Executive Vice President from September 1996 to April
1998 and as Senior Vice President and General Counsel from
December 1994 to September 1996. Ms. Dolan has served in a number
of senior executive positions with the Company from 1986 to 1996.
Ms. Dolan also serves as a director of Donaldson Company, Inc. and
as a Trustee of the William Mitchell College of Law.
[PHOTO] ROGER L. HALE (1), 64 Director Since 1969
Mr. Hale has been Chief Executive Officer of the Company since May
1976 and was elected Chairman in April 1998. Mr. Hale will be
retiring as Chief Executive Officer of the Company effective
April 5, 1999, and will remain as Chairman. He previously served
as President from January 1975 to April 1998; Chief Operating
Officer from January 1975 to May 1976; and as Vice President from
April 1969 to December 1974. Mr. Hale is a director of U.S.
Bancorp, and was formerly a director of Dayton Hudson Corporation,
The St. Paul Companies, Inc., Donaldson Company, Inc., and The
Valspar Corporation. His community activities include serving as
Chairman of the Minneapolis Neighborhood Employment Network, as
Chair of Public Radio International, and as a Board member of
Walker Art Center. Mr. Hale serves as Chair of the Executive
Committee.
(1) Roger L. Hale, a director and executive officer of the Company, is a first
cousin of Richard M. Adams, a Vice President of the Company.
4
[PHOTO] DELBERT W. JOHNSON, 60 Director Since 1993
Mr. Johnson is Chairman and Co-Chief Executive Officer of Pioneer
Metal Finishing, one of the largest metal finishing companies in the
United States. He joined Pioneer Metal Finishing in 1965 and was
elected to his present position in 1978. From 1987 through 1993,
Mr. Johnson served on the Board of Directors of the Federal Reserve
Bank of Minneapolis and, in 1989, was named Chairman. He serves as
a director of Ault Inc., U.S. Bancorp, Safeguard Scientifics Inc.,
and CompuCom Systems, Inc. He also serves on the Advisory Boards of
Hospitality House and Turning Point, Inc. Mr. Johnson serves as a
member of the Audit Committee and the Board Affairs Committee.
DIRECTORS WHOSE TERMS EXPIRE IN 2000 (CLASS II DIRECTORS):
[PHOTO] DAVID C. COX, 61 Director Since 1991
Mr. Cox retired in March 1998 as President and Chief Executive
Officer of Cowles Media Company, in which capacity he had served
since 1985. Mr. Cox joined Cowles Media in 1982 and served as
Executive Vice President, Chief Operating Officer, Treasurer and
Corporate Secretary prior to being named as President in 1984. Mr.
Cox also serves as a director of National Computer Systems, Inc. and
ReliaStar Financial Corp. His community activities include serving
as a director of United Way of Minneapolis and of the Newspaper
Association of America. Mr. Cox serves as Chair of the Board
Affairs Committee and as a member of the Executive Committee and the
Executive Compensation Committee.
[PHOTO] WILLIAM I. MILLER, 42 Director Since 1994
Mr. Miller became Chairman in 1990 and has been a director since
1985 of Irwin Financial Corporation, a publicly traded diversified
financial services company. He was President of Irwin Management
Company, a family investment management company, from 1984 to 1990.
Mr. Miller continues to serve as Chairman of the Board of Irwin
Management Company and as Chairman of the Board of Tipton Lakes
Company, a real estate development firm. Mr. Miller also serves as
a director of Cummins Engine Company, Inc. and New Perspective Fund,
Inc. and as a Trustee of the EuroPacific Growth Fund (both are
mutual funds). Mr. Miller also is a Trustee of The Taft School, a
director of Public Radio International, and a member of the Yale
University Investment Committee. Mr. Miller serves as a member of
the Executive Committee and the Executive Compensation Committee.
[PHOTO] EDWIN L. RUSSELL, 54 Director Since 1997
Mr. Russell was named Chairman, President and Chief Executive
Officer in 1996 after joining Minnesota Power, Inc. as President in
1995. Mr. Russell was previously Group Vice President of J. M.
Huber Corporation, a broadly diversified manufacturing and natural
resources company. Mr. Russell also serves as a director for
Minnesota Power, Capital Re Corporation, Minnesota Public Radio,
Edison Electric Institute, Duluth's Great Lakes Aquarium at Lake
Superior Center, and The United Way. Mr. Russell serves as a member
of the Audit Committee and the Executive Compensation Committee.
5
DIRECTORS WHOSE TERMS EXPIRE IN 2001 (CLASS III DIRECTORS):
[PHOTO] ARTHUR D. COLLINS, JR., 51 Director since 1995
Mr. Collins is President and Chief Operating Officer of Medtronic,
Inc., a leading medical device company. Mr. Collins joined
Medtronic in 1992. He was elected to his present position in 1996
and previously served as Chief Operating Officer, Corporate
Executive Vice President, and President of Medtronic International.
Prior to joining Medtronic, Mr. Collins served in a number of senior
executive positions with Abbott Laboratories from 1978 through 1992,
most recently as Corporate Vice President responsible for worldwide
diagnostic business units. He serves as a director of Medtronic,
Inc. and U.S. Bancorp. He is also a member of the Board of
Overseers of the Wharton School at the University of Pennsylvania
and on numerous civic organizations, including the Walker Art
Center. Mr. Collins serves as Chair of the Executive Compensation
Committee and as a member of the Board Affairs Committee.
[PHOTO] ANDREW P. CZAJKOWSKI, 63 Director Since 1992
Mr. Czajkowski is Chief Executive Officer of Blue Cross and Blue
Shield of Minnesota and Aware Integrated Inc., a non-profit holding
company. Mr. Czajkowski was a founder, President and Chair of the
Minnesota Comprehensive Health Association, the state-administered
risk pool for those individuals unable to afford private health
coverage. He served as Chairman of the Board for Blue Cross and
Blue Shield Association from 1991 through 1994. Mr. Czajkowski
serves as Chair of the Audit Committee and as a member of the Board
Affairs Committee and the Executive Committee.
[PHOTO] PAMELA K. KNOUS, 45 Director Since 1998
Ms. Knous has served as Executive Vice President and Chief Financial
Officer of SUPERVALU INC. since September 1997. Before joining
SUPERVALU, Ms. Knous served in a number of senior executive
positions with The Vons Companies, Inc. from 1991 to 1997, most
recently as Executive Vice President, Chief Financial Officer and
Treasurer. Ms. Knous was employed by the accounting firm of KPMG
Peat Marwick LLP for 14 years prior to assuming her position at
Vons. Ms. Knous also serves as a director of the Minnesota
Orchestral Association. Ms. Knous serves as a member of the Audit
Committee.
During 1998, the Board of Directors met on eight occasions. The Board of
Directors has an Audit Committee composed of Mr. Czajkowski, Mr. Johnson,
Ms. Knous, and Mr. Russell which met on three occasions during 1998. The
primary function of the Audit Committee is to assist the Board in fulfilling its
fiduciary responsibilities relating to the Company's internal control procedures
and accounting, financial and reporting practices. The Board has an Executive
Compensation Committee composed of Messrs. Collins, Cox, Miller, and Russell
which met on five occasions during 1998. The primary function of the Executive
Compensation Committee is to review and develop executive compensation plans of
the Company and determine the compensation of officers. The Board has
designated an Executive Committee composed of Messrs. Hale, Cox, Czajkowski, and
Miller, which met once during 1998. The primary function of the Executive
Committee is to exercise the authority of the Board of Directors and the
management of the business of the Company in the intervals between meetings of
the Board of Directors. The Board has designated a Board Affairs Committee
composed of Messrs. Cox, Collins, Czajkowski, and Johnson, which met twice in
1998. The primary function of the Board Affairs Committee is to set Board
compensation and recommend nominees for election to the Board. Shareholders who
wish to suggest qualified candidates to the Committee should write to Bruce J.
Borgerding, Secretary of the Company, at 701 North Lilac Drive, P.O. Box 1452,
Minneapolis, Minnesota 55440, stating in detail the candidate's qualifications
for consideration by the Committee. If a shareholder wishes to nominate a
director other than a person nominated by or on behalf of the Board of
Directors, he or she must comply with certain procedures set out in the
Company's Restated Articles of Incorporation. Under the Company's Restated
Articles of Incorporation, no person (other than a person nominated by or on
behalf of the Board of Directors) shall be eligible for election as a director
at any
6
annual or special meeting of shareholders unless a written request that his or
her name be placed in nomination is received from a shareholder of record by the
Secretary of the Company not less than 75 days prior to the date fixed for the
meeting, together with the written consent of such person to serve as a
director. All incumbent directors attended more than 75% of the aggregate
number of meetings of the Board and committees on which they served during 1998.
Under the Company's Restated Articles of Incorporation, no person (other
than a person nominated by or on behalf of the Board of Directors) shall be
eligible for election as a director at any annual or special meeting of
shareholders unless a written request that his or her name be placed in
nomination is received from a shareholder of record by the Secretary of the
Company not less than 75 days prior to the date fixed for the meeting, together
with the written consent of such person to serve as a director.
COMPENSATION OF DIRECTORS
Each nonemployee director of the Company received $750 for each attended
meeting or committee meeting of the Board of Directors during 1998. In
addition, nonemployee directors were entitled to an annual retainer in the
designated amount of $14,000. Pursuant to the Tennant Company Restricted Stock
Plan for Nonemployee Directors (the "Director Plan"), the annual retainer is
paid in the form of Restricted Stock. Restricted Stock for this purpose is
generally issued once every three Board Years (as defined in the Director Plan),
in an amount equal to 1.5 times the designated annual retainer for the Board
Year then commencing and the next two succeeding Board Years, based on the then
Fair Market Value (as defined in the Director Plan) of such Restricted Stock.
On May 3, 1996, each nonmanagement director was issued 2,564 shares of
Restricted Stock, based on a Fair Market Value of $24.57 per share, in payment
of the annual retainer for the three Board years commencing May 3, 1996. At
that time, the designated amount of the annual retainer for nonemployee
directors was $14,000; and the 2,564 shares of Restricted Stock had an aggregate
value of approximately $63,000, which was 1.5 times the aggregate annual
retainers for such three Board Years.
The Director Plan provides that the restrictions on the Restricted Stock
will lapse only upon the first to occur of (a) the death of the director,
(b) the disability of the director preventing continued service on the Board,
(c) retirement of the director from the Board in accordance with any policy on
retirement of Board members then in effect, (d) the termination of service as a
director by reason of resignation at the request of the Board, the director's
failure to have been nominated for reelection to the Board or to have been
re-elected by the shareholders, or the director's removal by the shareholders,
or (e) a change in control of the Company (as defined in the Director Plan). In
no event will the restrictions lapse prior to six months after the date of
issuance. Upon the occurrence of an event causing the restrictions to lapse,
Restricted Stock issued to the director in payment of the retainer for Board
Years commencing following the occurrence of the event is forfeited and returned
to the Company.
Effective January 1, 1999, the nonemployee director compensation package
was revised; and nonemployee directors are now compensated solely with
Restricted Stock and stock options. To effect the changed nonemployee directors
compensation package, the Board has adopted, subject to shareholder approval,
certain amendments to and restatement of the Director Plan, described under
"Approval of Amendments to and Restatement of Restricted Stock Plan for
Nonemployee Directors."
Pursuant to the Tennant Company Non-Employee Director Stock Option Plan,
each nonemployee director received an option grant for 1,000 shares at Fair
Market Value of $27.50 per share on January 1, 1997; an option grant for
2,000 shares at Fair Market Value of $28.00 per share on May 2, 1997; and an
option grant for 2,000 shares at Fair Market Value of $43.00 per share on May 8,
1998. Each nonemployee director will receive an option grant for 2,000 shares
at Fair Market Value on May 7, 1999.
7
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERVIEW AND PHILOSOPHY. The Executive Compensation Committee of the Board
of Directors is composed entirely of outside directors and is responsible for
reviewing and developing executive compensation plans of the Company. In
addition, the Executive Compensation Committee, pursuant to authority delegated
by the Board, determines on an annual basis the compensation to be paid to the
Chief Executive Officer and each of the other executive officers of the Company.
The objectives of the Company's executive compensation program are to:
- Motivate executives to achieve corporate goals by placing a
significant portion of pay at risk.
- Provide a strong link between the Company's short- and long-term
goals and executive compensation.
- Provide competitive total compensation in order to attract and
retain high-caliber key executives critical to the long-term
success of the Company.
- Align the executives' interests with those of the shareholders by
providing a significant portion of compensation in Company Common
Stock.
The executive compensation program is intended to provide an overall level
of compensation opportunity that is competitive with other U.S. durable goods
manufacturing companies. To determine competitiveness, the Committee annually
uses sales volume adjusted data from a top-management compensation survey. This
data is verified every three to four years through the use of an outside
consultant which compares all aspects of the Company's executive compensation
with that of other similar companies. Actual compensation levels may be greater
or less than average competitive levels depending on annual and long-term
Company performance, individual performance against goals set at the beginning
of the year, and scope of responsibilities as compared to a similar position
within the surveys. The Executive Compensation Committee uses its discretion to
set executive compensation at levels warranted in its judgment by external,
internal or individual circumstances.
The Company currently has a general policy with respect to the limit under
Internal Revenue Code Section 162(m) on the deductibility of the qualifying
compensation paid to its executives. Certain of the Company's compensation
plans should qualify for exemption from the deduction limitations under this
Section.
EXECUTIVE COMPENSATION PROGRAM. The Company's executive compensation
program is comprised of base salary, annual cash incentive compensation and
long-term incentive compensation in the form of cash-based awards, stock awards,
Restricted Stock grants, and stock options. The long-term plans have a
significant portion of their payout in Company Common Stock. In addition,
executives receive various benefits, including medical and retirement plans,
generally available to employees of the Company.
BASE SALARY. Base salary levels for the Company's executives are
competitively set relative to the average of other U.S. durable goods
manufacturing companies of similar size. In determining salaries, the Executive
Compensation Committee also takes into account individual experience,
performance, and scope of responsibility, although no particular weight is given
to any one factor.
ANNUAL CASH INCENTIVE COMPENSATION. The purpose of the annual cash
incentive program is to provide a direct financial incentive in the form of
annual cash incentives to executives to achieve their business units' and/or the
Company's annual goals. Target incentive awards are set at a level consistent
with the averages of other U.S. durable goods manufacturers, after adjusting for
sales volume. In fiscal 1998, the following performance measures and weightings
were generally used: Company economic profit(1) - 80%; company or business unit
sales growth - 10%; and business unit profitability - 10%. Economic profit is
based on the Company's net operating profit after taxes less a charge for assets
used in the business. Executives can earn incentive compensation based on both
the level of economic profit in the current year and the change in economic
profit from the prior year.
(1) Economic profit is a new metric that the Company put into place January 1,
1998, as a means to create a closer alignment with shareholder value
creation.
8
STOCK INCENTIVE PLANS. The stock incentive plans are the Company's
long-term incentive plans for executive officers and key managers. The
objectives of the program are to align executive and shareholder long-term
interests by creating a strong and direct link between executive pay and
shareholder return, and to enable executives to develop and maintain a
significant, long-term ownership position in the Company's Common Stock. In
order to better define for executives the minimum amount of stock that should be
held, the Executive Compensation Committee established in 1993 executive stock
holding guidelines. These guidelines, which were revised late in 1997, identify
the amount of stock (restricted and unrestricted) each executive should hold as
a multiple of his or her base pay. The current guidelines are: CEO - 6 x base
salary; Vice Presidents - 3 x base salary; Operating Management - 1 x base
salary. Each year the Committee reviews the progress of each executive towards
those goals. As of December 31, 1998, the Company's Chief Executive Officer was
significantly above his stockholding goals with the other two groups, on
average, approximately at goal level.
The Executive Compensation Committee annually grants a variety of
stock-based awards under the Company's stock incentive plans. The amount of the
awards increases as a function of higher salary and position in the Company.
The award amounts, as a percent of base salary, are reviewed and adjusted, as
necessary, every three to four years to ensure their competitiveness. The last
review, conducted in 1997, showed that the Company's executive pay was below
market average for similar sized companies. In reaction to this, and in keeping
with the Committee's goal of more closely aligning executive pay with
shareholder returns, the Committee changed the mix of the executive compensation
package. Commencing with fiscal 1998, the Committee reduced cash compensation,
i.e., base and bonus, and increased the size of stock option grants.
During 1998, the following types of awards were granted:
- Management Incentive Plan
Awards earned under this plan are placed in a bank and are paid
out 1/3 per year.
- Restricted Stock
These grants vest 100% at the end of the restriction period.
- Stock Options
These options permit executives to purchase Company stock during
a ten-year period at the price in effect at the beginning of that
period.
CHIEF EXECUTIVE OFFICER COMPENSATION. Mr. Hale's fiscal 1998 base salary
and incentive award were determined by the Committee in accordance with the
methodology described above.
Base Salary - Mr. Hale's total base salary for fiscal 1998 was $463,697,
with $115,925 of this being deferred, yielding $347,772 in
actual salary paid (see note 1 on page 11). This total
amount approximates the market average for durable goods
manufacturing companies of similar size.
Annual Incentive - Mr. Hale's cash incentive award for fiscal 1998 was
$274,384.
Long-Term Performance Grants - Mr. Hale received in 1998 a Management
Incentive Plan equal to 50% of his total
base salary, a Restricted Stock grant
equal to 10% of his total base salary,
and a stock option grant equal to
2.3 times his total base salary.
Arthur D. Collins, Chairman William I. Miller
David C. Cox Edwin L. Russell
Members of the Executive Compensation Committee
9
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and noncash compensation for each
of the last three fiscal years awarded to or earned by the Chief Executive
Officer of the Company and the four other most highly compensated executive
officers of the Company (the "named executive officers").
LONG-TERM COMPENSATION
---------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
- ---------------------------------------------------------------------------------------------------------------------
RESTRICTED ALL OTHER
NAME AND STOCK LTIP COMPEN-
PRINCIPAL POSITION YEAR SALARY(1) BONUS AWARD(S)(2) OPTIONS PAYOUTS(3) SATION(4)
($) ($) ($) (#) ($) ($)
- ---------------------------------------------------------------------------------------------------------------------
Roger L. Hale 1998 463,697 274,384 46,538 48,793 771,249 29,806
Chairman and 1997 327,132 202,805 42,319 59,407 521,324 23,538
Chief Executive Officer 1996 327,132 187,025 31,853 26,100 308,603 18,222
Janet M. Dolan 1998 288,003 166,358 28,288 21,696 218,388 18,463
President and 1997 256,584 130,437 26,349 19,046 120,315 16,530
Chief Operating Officer 1996 223,248 71,731 20,111 11,460 66,013 10,397
Richard A. Snyder 1998 234,800 166,831(5) 23,543 15,310 811,183(6) 43,181
Vice President, 1997 173,880 57,235 16,926 3,780 86,234 24,624
Treasurer and 1996 173,880 65,533 16,965 5,800 51,504 26,282
Chief Financial Officer
Douglas R. Hoelscher 1998 233,006 111,344 23,397 10,977 273,761 40,547
Senior Vice President 1997 182,436 83,129 21,989 12,269 189,270 30,480
1996 182,436 62,842 17,763 6,520 85,191 24,129
Keith D. Payden 1998 191,326 79,274 19,199 6,437 133,094 34,112
Vice President 1997 176,853 76,748 18,003 6,873 128,280 30,965
1996 176,856 56,180 17,228 3,080 58,120 24,763
(1) A deferral plan is provided for Tennant executives which allows them to
defer a portion of their salary. In 1996 and 1997, the deferral was in the
form of a performance share grant and, therefore, the amounts shown in the
above table for such years do not include these deferral amounts. For
1998, a new plan was put into place which provides for a cash deferral in
lieu of such performance shares. As a result, the amounts shown in the
above table for 1998 include the deferral.
Under the new plan, executives may elect to defer up to 25% of their
current year salary. Payout is made in cash within ten years of
termination of employment. Interest is paid on these deferred amounts at a
rate set annually by the Executive Compensation Committee. For 1999, the
interest rate has been set at 6% of the amounts deferred. Of the total
1998 salaries shown in the table, the following deferrals have been made:
Mr. Hale, $115,925; Ms. Dolan, $28,200; Mr. Snyder, $58,700; Mr. Hoelscher,
$58,250; and Mr. Payden, $23,009.
(2) The value of the Restricted Stock awards was determined by multiplying the
fair market value of the Company's Common Stock on the date of grant by the
number of shares awarded. As of December 31, 1998, and using the fair
market value of the Company's Common Stock as of that date, the number and
value of aggregate Restricted Stock award holdings were as follows:
1,275 shares ($51,159) by Mr. Hale; 775 shares ($31,097) by Ms. Dolan; 645
shares ($25,881) by Mr. Snyder; 641 shares ($25,720) by Mr. Hoelscher; and
526 shares ($21,106) by Mr. Payden. These shares of Restricted Stock have
a two-year vesting period, from respective dates of issuance. Dividends
are paid on Restricted Stock awards at the same time and rate as paid to
all shareholders.
10
(3) Amounts represent the dollar value of Performance Shares paid out in each
fiscal year. Performance Shares were paid in Common Stock on a
share-for-share basis with respect to a minimum of 50% of the Performance
Shares earned (valued, for this purpose, as of December 31 of the
respective years of payment), and the balance was paid in cash.
Participants may elect to defer such payouts, and if so elected, payout is
made, in cash, within ten years of termination of employment. Interest is
paid on these deferred amounts at a rate set annually by the Executive
Compensation Committee. For 1999, the interest rate has been set at 6% of
the amounts deferred. Payments thus deferred are reported in the table for
the year in which they would have been paid but for such deferral election.
Of the total LTIP payouts set forth in the table, the following amounts
were deferred: Mr. Hale, $771,249; Mr. Snyder, $811,183; Mr. Hoelscher,
$273,761; and Mr. Payden, $133,094.
(4) Amounts represent payments under the Company's Profit Sharing and Employee
Stock Ownership Plan and the Company's Excess Benefit Plan as follows: (a)
Profit Sharing Contributions (up to 5% of certified earnings, the first 2%
of which are contributed to participants' accounts through the allocation
of Company Common Stock from the unallocated ESOP reserve, with the
remainder (if any) of such contributions paid to the participants in cash)
were paid as follows for 1996, 1997, and 1998, respectively: $3,535.24,
$8,941.34, and $8,913.49 to Mr. Hale; $3,307.07, $7,392.98, and $6,717.21
to Ms. Dolan; $3,240.59, $5,901.33, and $5,878.55 to Mr. Snyder; $4,696.63,
$6,077.14, and $5,865.62 to Mr. Hoelscher; and $3,242.59, $5,947.55, and
$5,293.87 to Mr. Payden; (b) employer Matching Contributions relating to
employee Individual Shelter Contributions (Internal Revenue Code Section
401(k) contributions) were paid as follows for 1996, 1997, and 1998,
respectively, through the allocation of Company Common Stock from the
unallocated ESOP reserve: $2,100.00, $2,240.00, and $2,240.00 to Mr. Hale;
$2,100.00, $2,240.00, and $2,240.00 to Ms. Dolan; $2,100.00, $2,239.98, and
$2,240.00 to Mr. Snyder; $900.00, $960.00, and $960.00 to Mr. Hoelscher;
and $2,100.00, $2,240.00, and $2,240.00 to Mr. Payden; (c) Profit Related
Retirement Contributions were paid as follows for 1996, 1997, and 1998,
respectively: $10,650.00, $12,544.00, and $13,520 to Mr. Snyder;
$10,650.00, $12,544.00, and $13,520 to Mr. Hoelscher; and $10,650.00,
$12,544.00, and $13,520 to Mr. Payden; and (d) Excess Benefit Plan payments
were made as follows for 1996, 1997, and 1998, respectively: $12,586.53,
$12,356.96, and $18,652.66 to Mr. Hale; $4,990.29, $6,896.82, and $9,505.58
to Ms. Dolan; $8,633.20, $9,786.47, and $21,542.79 to Mr. Snyder;
$9,324.03, $10,899.31, and $20,201.41 to Mr. Hoelscher; and $8,770.83,
$10,233.15, and $13,057.80 to Mr. Payden.
(5) Amounts represent 1998 bonuses and Management Incentive Plan payouts.
Mr. Snyder is the only named executive officer to receive a payout from the
Management Incentive Plan in 1998 due to his December 31, 1998, retirement.
The first payout for the rest of the named executive officers will occur
after 1999 fiscal year-end. Mr. Snyder's bonus for 1998 was $111,221, and
his 1998 Management Incentive Plan payout was $55,610.
(6) This represents a pro rata payout of Mr. Snyder's outstanding Performance
Share grants due to his December 31, 1998, retirement.
11
STOCK OPTION AWARDS IN LAST FISCAL YEAR
The following table summarizes Stock Option awards made during the last
fiscal year under the Tennant Company 1995 Stock Incentive Plan (the "Plan") for
the named executive officers.
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL RATES
% OF TOTAL OF STOCK PRICE
OPTIONS APPRECIATION
GRANTED TO FOR THE OPTION TERM
NAME EMPLOYEES -----------------------
OPTIONS DURING EXERCISE
GRANTED FISCAL PRICE EXPIRATION 5%(4) 10%(4)
(#) YEAR ($/sh)(3) DATE ($) ($)
- ------------------------------------------------------------------------------------------------------------
Roger L. Hale 29,100(1) 15.0 36.7500 2/26/08 672,556 1,704,388
6,966(2) 3.6 36.7500 2/10/05 104,218 242,872
4,727(2) 2.4 36.7500 2/21/06 82,942 198,661
8,000(2) 4.1 36.7500 2/26/07 162,090 399,237
------
48,793
Janet M. Dolan 11,600(1) 6.0 36.7500 2/26/08 268,098 679,412
1,189(2) 0.6 36.7500 2/10/05 17,789 41,455
1,218(2) 0.6 36.7500 2/21/06 21,372 51,189
883(2) 0.5 36.7500 8/26/06 15,494 37,110
3,406(2) 1.8 36.7500 2/26/07 69,010 169,975
3,400(1) 1.8 42.7500 5/7/08 91,410 231,650
------
21,696
Richard A. Snyder 7,100(1) 3.7 36.7500 2/26/08 164,094 415,847
1,056(2) 0.5 36.7500 2/10/05 15,799 36,818
652(2) 0.3 36.7500 2/21/06 11,440 27,402
1,402(2) 0.7 36.7500 2/26/07 28,406 69,966
5,100(3) 2.6 36.2500 11/18/08 113,060 286,515
------
15,310
Douglas R. Hoelscher 7,000(1) 3.6 36.7500 2/26/08 161,783 409,990
1,059(2) 0.5 36.7500 2/10/05 15,844 36,922
1,162(2) 0.6 36.7500 2/21/06 20,389 48,835
1,756(2) 0.9 36.7500 2/26/07 35,579 87,632
------
10,977
Keith D. Payden 4,200(1) 2.2 36.7500 2/26/08 97,070 245,994
629(2) 0.3 36.7500 2/10/05 9,410 21,930
604(2) 0.3 36.7500 2/21/06 10,598 25,384
1,004(2) 0.5 36.7500 2/26/07 20,342 50,104
------
6,437
(1) All such options granted under the Plan are nonqualified options, and are
exercisable 25% per year, on a cumulative basis, beginning one year after
the date of the grant. Such options become immediately exercisable,
however, upon (a) death, disability, or retirement of the holder, or (b) a
change of control (defined as certain changes in the Company's Board of
Directors, certain concentrations of voting power, certain mergers, sales
of corporate assets, statutory share exchanges or similar transactions, or
liquidation or dissolution of the Company). The holder is permitted to pay
the exercise price and withholding taxes due upon exercise with either
cash, shares of Common Stock, a reduction in the number of shares delivered
to the holder, or a combination of these alternatives.
(2) Reload option grants contain the same features mentioned in (1) except that
they are immediately exercisable. Their exercise period is the remainder
of the initial ten-year option period.
(3) This option was granted as payment for Mr. Snyder's services as a
Contractor during the first quarter of 1999.
12
(4) The exercise price of such options is not less than the Fair Market Value
(as defined in the Plan) of a share of Common Stock at the time of grant.
(5) The hypothetical potential appreciation shown in these columns reflects the
required calculations at annual rates of 5% and 10% set by the Securities
and Exchange Commission, and therefore are not intended to represent either
historical appreciation or anticipated future appreciation of the Company's
Common Stock price.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES(1)
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED ON VALUE UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
EXERCISE REALIZED(2) OPTIONS AT FISCAL YEAR-END (#) FISCAL YEAR-END ($)(3)
------------------------------ --------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -----------------------------------------------------------------------------------------------------------------------
Roger L. Hale 8,036 295,350 42,700 78,800 356,927 823,358
Janet M. Dolan 2,555 93,919 10,942 34,660 76,205 320,537
Richard A. Snyder 1,243 45,688 6,556 15,580 107,763 256,096
Douglas R. Hoelscher 1,610 59,188 8,046 18,020 64,794 184,241
Keith D. Payden 865 31,825 4,410 10,280 72,489 168,978
(1) Last fiscal year ended December 31, 1998.
(2) Value realized equals the number of shares exercised multiplied by the
difference between market price and option price, before any provision for
taxes.
(3) Market value of underlying securities at fiscal year-end minus the exercise
price.
MANAGEMENT AGREEMENTS
The Company is a party to management agreements (the "Agreements") with
certain of the executive officers of the Company. The purpose of each of the
Agreements is to encourage the executive (a) to continue to carry out his or her
duties in the event of the possibility of a change in control of the Company,
and (b) to remain in the service of the Company in order to facilitate an
orderly transition in the event of an actual change in control of the Company.
Under the terms of each of the Agreements, if, between the occurrence of a
change in control of the Company and the three-year anniversary date of such
occurrence, an executive's employment is involuntarily terminated (for any
reason other than death, disability, or for cause), the executive will be
entitled to receive severance compensation. If an executive resigns after
certain changes in the executive's duties, compensation, benefits or work
location, the executive shall be deemed to have been involuntarily terminated.
Severance compensation is payable also if the termination occurs before the
change of control but after steps to change control have been taken. Severance
compensation consists of three times the executive's average annual taxable
compensation during the five taxable years preceding the change in control plus
the continuation of certain insurance benefits, minus $1.00, subject to
reduction for payments under employee benefit plans of the Company contingent
upon a change in control of the Company and for the amount of any other
severance compensation paid by the Company to the executive under any other
agreement of the Company providing compensation in the event of involuntary
termination. As of the date of this Proxy Statement, the total severance
compensation for Mr. Hale would be $2,305,003; Ms. Dolan, $1,121,585;
Mr. Hoelscher, $1,069,571; and Mr. Payden, $791,680. The Company also will
reimburse an executive for legal fees and expenses incurred in resolving
disputes under the Agreement.
13
TENNANT COMPANY DEFINED BENEFIT RETIREMENT PLAN
The Tennant Company Defined Benefit Retirement Plan provides fixed
retirement benefits for certain employees of the Company. Based upon certain
assumptions, including continuation of the Retirement Plan as of January 1,
1999, without amendment, the following table shows the annual retirement
benefits (including the additional retirement benefits described in the second
sentence under "Tennant Company Excess Benefit Plan" below) which would be
payable as a straight life annuity commencing at age 65 to persons at various
salary levels after specified years of service.
YEARS OF SERVICE
ANNUAL -----------------------------------------------------------------
COMPENSATION 10 15 20 25 30
------------ ------- -------- -------- -------- --------
$ 50,000 $ 5,104 $ 7,656 $ 10,208 $ 12,761 $ 15,313
100,000 12,104 18,156 24,208 30,261 36,313
150,000 19,104 28,656 38,208 47,761 57,313
200,000 26,104 39,156 52,208 65,261 78,313
250,000 33,104 49,656 66,208 82,761 99,313
300,000 40,104 60,156 80,208 100,261 120,313
350,000 47,104 70,656 94,208 117,761 141,313
400,000 54,104 81,156 108,208 135,261 162,313
450,000 61,104 91,656 122,208 152,761 183,313
500,000 68,104 102,156 136,208 170,261 204,313
550,000 75,104 112,656 150,208 187,761 225,313
600,000 82,104 123,156 164,208 205,261 246,313
650,000 89,104 133,656 178,208 222,761 267,313
700,000 96,104 144,156 192,208 240,261 288,313
750,000 103,104 154,656 206,208 257,761 309,313
Under the Retirement Plan, benefits are payable based upon a percentage of
a participant's final average pay excluding bonus, overtime, or other special
forms of remuneration. Currently under ERISA, as amended, the maximum annual
amount that can be paid during 1999 to any individual is $130,000. Amounts in
excess of that maximum as well as amounts based on compensation that is excluded
from the Plan formula by ERISA or the terms of the Plan are covered under the
Tennant Company Excess Benefit Plan. The years of credited service under the
Retirement Plan for the named executive officers are: Mr. Hale 17 years and
Ms. Dolan 13 years. Were Mr. Hale or Ms. Dolan to retire currently, the final
average pay used by the Plan to determine benefits payable pursuant to the above
table as of December 31, 1998, would be $615,747 for Mr. Hale and $322,077 for
Ms. Dolan.
The figures above are not subject to deductions for Social Security or
other offset amounts.
TENNANT COMPANY EXCESS BENEFIT PLAN
An Excess Benefit Plan provides additional retirement benefits for highly
compensated employees participating in the Tennant Company Profit Sharing and
Employee Stock Ownership Plan or the Retirement Plan. Employees participating
in the Excess Benefit Plan will receive a retirement benefit equal to the
additional benefits which would have been provided under the Retirement Plan if
(a) the limitations imposed by Sections 401(a)(17) and 415 of the Internal
Revenue Code were not applicable, and (b) management bonuses were included in
certified earnings for the year in which they were earned, and (c) deferred
salary increases were included in certified earnings for the plan year in which
such amounts would have been paid in the absence of the deferral. Employees
participating in the Excess Benefit Plan also receive cash payments of amounts
which would have been contributed by the Company to the Tennant Company Profit
Sharing and Employee Stock Ownership Plan as Profit Related Retirement
Contributions or Matching Contributions if various limitations imposed by the
Internal Revenue Code were not applicable.
14
COMPARATIVE STOCK PERFORMANCE
The graph below compares the cumulative total shareholder return on the
Common Stock of the Company for the last five fiscal years with the cumulative
total return over the same period on the following indexes:
- Overall Stock Market Performance (Media General Composite Index)
- Industry Index (Media General Industry Groups Index 62 - Industrial
Goods, Manufacturing)
This assumes an investment of $100 in the Company's Common Stock, the Media
General Composite Index and the Media General Industry Index on December 31,
1993, with reinvestment of all dividends.
Previous Proxies contained graph information identified as Media General
Industry Group Index 28 - Heavy Machinery. The current graph includes Industry
Media General Industry Groups Index 62 - Industrial Goods, Manufacturing. The
old groups are no longer available. The only changes to the data with this new
group are the classification codes of the companies, the name of the industry
groups and the aggregate data for the entire industry.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
[GRAPH]
ASSUMES $100 INVESTED ON DECEMBER 31, 1993, WITH DIVIDENDS REINVESTED.
- ------------------------------------------------------------------------------------------------------------
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ------------------------------------------------------------------------------------------------------------
Tennant Company 100.00 105.75 107.51 127.36 172.27 193.66
- ------------------------------------------------------------------------------------------------------------
Overall Stock Market 100.00 99.17 128.58 155.28 201.64 246.49
Performance Index (Media General)
- ------------------------------------------------------------------------------------------------------------
Industry Index (Media General) 100.00 98.84 116.38 136.75 163.32 140.92
- ------------------------------------------------------------------------------------------------------------
15
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange Commission.
Directors and executive officers are required by Commission regulations to
furnish the Company with copies of all Section 16(a) forms they file. Based
solely on a review of the copies of such forms furnished to the Company and
written representations from the Company's directors and executive officers, all
Section 16(a) filing requirements were met for the year ended December 31, 1998.
APPROVAL OF 1999 STOCK INCENTIVE PLAN
INTRODUCTION
The Company's Board of Directors, following approval by the Executive
Compensation Committee of the Board, authorized the adoption of the Tennant
Company 1999 Stock Incentive Plan (the "1999 Plan") effective as of January 1,
1999, subject to the approval of the 1999 Plan by the shareholders no later than
May 31, 1999. A copy of the 1999 Plan is attached as Appendix A to this Proxy
Statement, and this discussion is qualified in its entirety by reference to the
full text of the 1999 Plan.
The Executive Compensation Committee and the Board of Directors believe
that stock-based compensation programs are a key element in achieving the
Company's continued financial and operational success. The Company's
compensation programs have been designed to motivate key personnel to produce a
superior shareholder return.
The 1999 Plan does not replace the Company's 1992 and 1995 Stock Incentive
Plans, under which approximately 288,278 shares of Company Common Stock remain
available for awards. Notwithstanding approval of the 1999 Plan by the
shareholders, additional awards may be made under the 1992 Stock Incentive Plan
(which provides that no award may be made pursuant to it after December 31,
1999, and the 1995 Stock Incentive Plans and the Company's Restricted Stock Plan
for Nonemployee Directors (the "Director Plan") and, assuming shareholder
approval of amendments to and restatement of the Director Plan (see "Approval of
Amendments to and Restatement of Restricted Stock Plan for Nonemployee
Directors"), under the Director Plan as so amended and restated (the "Restated
Director Plan"). Grants and awards heretofore or hereafter made under such
plans will be governed by such plans.
The 1999 Plan has been designed to meet the requirements of Section 162(m)
of the Internal Revenue Code of 1986, as amended (the "Code"), regarding
deductibility of executive compensation. The basic features of the Plan are
summarized below:
PURPOSE
The purpose of the 1999 Plan is to motivate key personnel to produce a
superior return to the shareholders of the Company by offering such individuals
an opportunity to realize stock appreciation, by facilitating stock ownership,
and by rewarding them for achieving a high level of corporate performance. The
1999 Plan is also intended to facilitate recruiting and retaining key personnel
of outstanding ability.
16
ADMINISTRATION
The 1999 Plan will be administered by a committee (the "Committee") of
three or more directors who are "non-employee directors" within the meaning of
Rule 16b-3 ("Exchange Act Rule 16b-3") under the Securities Exchange Act of 1934
(the "Exchange Act"). The Company currently expects that the Executive
Compensation Committee of the Board of Directors will be the Committee that
administers the 1999 Plan, all of whose members are both "non-employee
directors" for purposes of Exchange Act Rule 16b-3 and "outside directors" for
purposes of Section 162(m) of the Code. The Committee will have the exclusive
power to make awards under the 1999 Plan, to determine when and to whom awards
will be granted, and to fix the form, amount, and other terms and conditions of
each award, subject to the provisions of the 1999 Plan. The Committee will have
the authority to interpret the 1999 Plan and any award or agreement made under
the 1999 Plan, to establish, amend, waive, and rescind any rules and regulations
relating to the administration of the 1999 Plan, to determine the terms and
provisions of any agreements entered into under the 1999 Plan (not inconsistent
with the 1999 Plan), and to make all other determinations necessary or advisable
for the administration of the 1999 Plan. The Committee may delegate all or part
of its responsibilities under the 1999 Plan to persons who are not "non-employee
directors" within the meaning of Exchange Act Rule 16b-3 for purposes of
determining and administering awards solely to employees who are not then
subject to the reporting requirements of Section 16 of the Exchange Act.
ELIGIBILITY AND NUMBER OF SHARES
All employees of the Company and its affiliates will be eligible to receive
awards under the 1999 Plan at the discretion of the Committee. Awards other
than incentive stock options (see "Types of Awards" below) also may be awarded
by the Committee to individuals who are not employees but who provide services
to the Company or its affiliates in the capacity of an independent contractor.
The Company and its affiliates currently have approximately 2,127 full-time
employees.
As of January 1, 1999, the effective date of the 1999 Plan, the total
number of shares of Company Common Stock available for distribution under the
1999 Plan was 500,000 (subject to adjustment for future stock splits, stock
dividends, and similar changes in the capitalization of the Company). No
participant may receive any combination of options and stock appreciation rights
relating to more than 50,000 shares in the aggregate in any year under the 1999
Plan. No participant may receive performance shares relating to more than
50,000 shares pursuant to awards in any year under the 1999 Plan. No more than
25% of all shares subject to the 1999 Plan may be granted in the aggregate
pursuant to restricted stock and other stock-based awards (as defined in "Types
of Awards" below).
The 1999 Plan provides that all awards are to be evidenced by written
agreements containing the terms and conditions of the awards. Such agreements
are subject to amendment, including unilateral amendment by the Company (with
the approval of the Committee), provided that no amendment that is deemed by the
Committee to be materially adverse to the participant may be made unilaterally
unless it is required by law. Any shares of Company Common Stock subject to an
award under the 1999 Plan which are not used because the award expires without
all shares subject thereto having been issued or because the terms and
conditions of the award are not met may again be used for an award under the
1999 Plan. Any shares that are the subject of awards which are subsequently
forfeited to the Company pursuant to the restrictions applicable to such award
also may again be used for an award under the 1999 Plan. Moreover, if a
participant exercises a stock appreciation right, any shares covered by the
stock appreciation right in excess of the number of shares issued (or, in the
case of a settlement in cash or any other form of property, in excess of the
number of shares equal in value to the amount of such settlement, based on the
fair market value, as defined in the 1999 Plan, of such shares on the date of
such exercise) may again be used for an award under the 1999 Plan. If, in
accordance with the 1999 Plan, a participant uses shares to pay a purchase or
exercise price, including an option exercise price, or to satisfy tax
withholdings, such shares may again be used for an award under the 1999 Plan.
17
TYPES OF AWARDS
The types of awards that may be granted under the 1999 Plan include
incentive and nonqualified stock options, stock appreciation rights, restricted
stock, performance shares, and other stock-based awards (awards of, or based on,
stock other than options, stock appreciation rights, restricted stock or
performance shares). Subject to certain restrictions applicable to incentive
stock options, awards will be exercisable by the recipients at such times as are
determined by the Committee, but in no event may the term of an award be longer
than ten years after the date of grant.
In addition to the general characteristics of all of the awards described
in this Proxy Statement, the basic characteristics of awards that may be granted
under the 1999 Plan are as follows:
INCENTIVE AND NONQUALIFIED STOCK OPTIONS. Both incentive and nonqualified
stock options may be granted to recipients at such exercise prices as the
Committee may determine but not less than 100% of their fair market value (as
defined in the 1999 Plan) as of the date the option is granted. Stock options
may be granted and exercised at such times as the Committee may determine,
except that, unless applicable federal tax laws are modified, (a) no incentive
stock options may be granted more than ten years after the effective date of the
1999 Plan; (b) an incentive stock option shall not be exercisable more than ten
years after the date of grant; and (c) the aggregate fair market value of the
shares of Company Common Stock with respect to which incentive stock options may
first become exercisable in any calendar year for any employee may not exceed
$100,000 under the 1999 Plan or any other plan of the Company. Additional
restrictions apply to an incentive stock option granted to an individual who
beneficially owns more than 10% of the combined voting power of all classes of
stock of the Company.
The purchase price payable upon exercise of options may be paid in cash,
or, if the Committee permits, by reducing the number of shares delivered to the
participant or by delivering stock already owned by the participant (where the
fair market value of the shares withheld or delivered on the date of exercise is
equal to the option price of the stock being purchased), or in a combination of
cash and such stock, unless otherwise provided in the related agreement. The
participants may simultaneously exercise options and sell the stock purchased
upon such exercise pursuant to brokerage or similar relationships and use the
sale proceeds to pay the purchase price. The agreement relating to any option
may provide for the issuance of "reload" options pursuant to which, subject to
the terms and conditions established by the Committee and any applicable
requirements of Exchange Act Rule 16b-3 or any other applicable law, the
participant will, either automatically or subject to subsequent Committee
approval, be granted a new option when the payment of the exercise price of the
original option, or the payment of tax withholdings, is made through the
delivery to the Company of shares held by such participant. The reload option
will be a fully vested option to purchase the number of shares provided as
consideration for the exercise price and in payment of taxes in connection with
the exercise of the original option, will have a per share exercise price equal
to the fair market value of a share as of the date of exercise of the original
option, and will otherwise have terms and conditions as contained in the
original option.
STOCK APPRECIATION RIGHTS AND PERFORMANCE SHARES. The value of a stock
appreciation right granted to a recipient is determined by the appreciation in
Company Common Stock, subject to any limitations upon the amount or percentage
of total appreciation that the Committee may determine at the time the right is
granted. The recipient receives all or a portion of the amount by which the
fair market value of a specified number of shares, as of the date the stock
appreciation right is exercised, exceeds a price specified by the Committee at
the time the right is granted. The price specified by the Committee must be at
least 100% of the fair market value of the specified number of shares of Company
Common Stock to which the right relates determined as of the date the stock
appreciation right is granted. A stock appreciation right may be granted in
connection with a previously or contemporaneously granted option, or independent
of any option.
Performance shares entitle the recipient to payment in amounts
determined by the Committee based upon the achievement of specified
performance targets during a specified term. With respect to recipients who
are "covered employees" under Section 162(m) of the Code, such performance
targets will consist of one or any combination of two or more of earnings or
earnings per share before income tax (profit before taxes), net earnings or
net earnings per share (profits after taxes), inventory, total, or net
operating asset turnover, operating income, total shareholder return, return
on equity, pre-tax and pre-interest expense return on average invested
capital, which may be expressed on a current value basis, or sales growth,
and any such targets may relate to one or any
18
combination of two or more of corporate, group, unit, division, affiliate, or
individual performance. The value in dollars is determined when the award is
earned based on the fair market value of a share on the last day of the
performance period.
Payments with respect to stock appreciation rights and performance shares
may be paid in cash, shares of Company Common Stock or a combination of cash and
shares as determined by the Committee. The Committee may require or permit
participants to defer the issuance of shares or the settlement of awards in cash
under such rules and procedures as it may establish under the 1999 Plan.
RESTRICTED STOCK AND OTHER STOCK-BASED AWARDS. Company Common Stock
granted to recipients may contain such restrictions as the Committee may
determine, including provisions requiring forfeiture and imposing restrictions
upon stock transfer. Awards of restricted stock may, in the discretion of the
Committee, provide the participant with dividends and voting rights prior to
vesting. No award of restricted stock may vest earlier than one year from the
date of grant, except in the circumstances provided in the applicable agreement.
The Committee may also from time to time grant awards of unrestricted stock or
other stock-based awards such as awards denominated in stock units, securities
convertible into stock, and phantom securities.
TRANSFERABILITY
During the lifetime of a participant to whom an award is granted, only such
participant (or such participant's legal representative or, if so provided in
the applicable agreement in the case of a nonqualified stock option, a permitted
transferee as hereafter described) may exercise an option or stock appreciation
right or receive payment with respect to performance shares or any other award.
No award of restricted stock (prior to the expiration of the restrictions),
options, stock appreciation rights, performance shares, or other award (other
than an award of stock without restrictions) may be sold, assigned, transferred,
exchanged, or otherwise encumbered, and any attempt to do so will not be
effective, except that an agreement may provide that: (a) an award may be
transferable to a successor in the event of a participant's death and (b) a
nonqualified stock option may be transferable to any member of a participant's
"immediate family" (as such term is defined in Rule 16a-1(e) under the Exchange
Act) or to a trust whose beneficiaries are members of such participant's
"immediate family" or partnerships in which such family members are the only
partners, provided that the participant receives no consideration for the
transfer and such transferred nonqualified stock option will remain subject to
the same terms and conditions as were applicable to such option immediately
prior to its transfer.
ACCELERATION OF AWARDS, LAPSE OF RESTRICTIONS
The Committee may accelerate vesting requirements, performance periods, and
the expiration of the applicable term or restrictions, and adjust performance
targets and payments, upon such terms and conditions as are set forth in the
participant's agreement, or otherwise in the Committee's discretion, which may
include, without limitation, acceleration resulting from a "change in control"
or a "fundamental change" (as those terms are defined in the 1999 Plan), or the
participant's death, disability, or retirement.
DURATION, ADJUSTMENTS, MODIFICATIONS, TERMINATIONS
The 1999 Plan will remain in effect until all stock subject to it is
distributed or all awards have expired or lapsed, whichever occurs later, or the
1999 Plan is terminated as described below.
In the event of a "fundamental change," recapitalizations, stock dividends,
stock splits, or other relevant changes, the Committee has the discretion to
adjust the number and type of shares available for awards or the number and type
of shares and amount of cash subject to outstanding awards, the option exercise
price of outstanding options, and outstanding awards of performance shares and
payments with regard thereto. Adjustments in performance targets and payments
on performance shares are also permitted upon the occurrence of such events as
may be specified in the related agreements, which may include a "change in
control."
The 1999 Plan also gives the Board the right to amend, modify, terminate or
suspend the Plan, except that amendments to the Plan are subject to shareholder
approval if needed to comply with Exchange Act Rule 16b-3, the incentive stock
option provisions of the Code, their successor provisions, or any other
applicable law or regulation.
19
Under the 1999 Plan, the Committee may cancel outstanding options and stock
appreciation rights generally in exchange for cash payments to the recipients in
the event of a "fundamental change" (defined as certain dissolutions,
liquidations, mergers, consolidations, statutory share exchanges, or other
similar events involving the Company).
FEDERAL TAX CONSIDERATIONS
The Company has been advised by its counsel that awards made under the 1999
Plan generally will result in the following tax events for United States
citizens under current United States federal income tax laws.
INCENTIVE STOCK OPTIONS. A recipient will realize no taxable income, and
the Company will not be entitled to any related deduction, at the time an
incentive stock option is granted under the 1999 Plan. If certain statutory
employment and holding period conditions are satisfied before the recipient
disposes of shares acquired pursuant to the exercise of such an option, then no
taxable income will result upon the exercise of such option, and the Company
will not be entitled to any deduction in connection with such exercise. Upon
disposition of the shares after expiration of the statutory holding periods, any
gain or loss realized by a recipient will be a capital gain or loss, long-term
or short-term, based upon how long the shares are held. The Company will not be
entitled to a deduction with respect to a disposition of the shares by a
recipient after the expiration of the statutory holding periods.
Except in the event of death, if shares acquired by a recipient upon the
exercise of an incentive stock option are disposed of by such recipient before
the expiration of the statutory holding periods (a "disqualifying disposition"),
such recipient will be considered to have realized as compensation, taxable as
ordinary income in the year of disposition, an amount, not exceeding the gain
realized on such disposition, equal to the difference between the exercise price
and the fair market value of the shares on the date of exercise of the option.
The Company will be entitled to a deduction at the same time and in the same
amount as the recipient is deemed to have realized ordinary income. Any gain
realized on the disposition in excess of the amount treated as compensation or
any loss realized on the disposition will constitute capital gain or loss,
respectively. If the recipient pays the option price with shares that were
originally acquired pursuant to the exercise of an incentive stock option and
the statutory holding periods for such shares have not been met, the recipient
will be treated as having made a disqualifying disposition of such shares, and
the tax consequence of such disqualifying disposition will be as described
above.
The foregoing discussion applies only for regular tax purposes. For
alternative minimum tax purposes, an incentive stock option will be treated as
if it were a nonqualified stock option, the tax consequences of which are
discussed below.
NONQUALIFIED STOCK OPTIONS. A recipient will realize no taxable income,
and the Company will not be entitled to any related deduction, at the time a
nonqualified stock option is granted under the 1999 Plan. At the time of
exercise of a nonqualified stock option, the recipient will realize ordinary
income, and the Company will be entitled to a deduction, equal to the excess of
the fair market value of the stock on the date of exercise over the option
price. Upon disposition of the shares, any additional gain or loss realized by
the recipient will be taxed as a capital gain or loss, long-term or short-term,
based upon how long the shares are held.
STOCK APPRECIATION RIGHTS AND PERFORMANCE SHARES. Generally: (a) the
recipient will not realize income upon the grant of a stock appreciation right
or performance share award; (b) the recipient will realize ordinary income, and
the Company will be entitled to a corresponding deduction, in the year cash,
shares of Common Stock, or a combination of cash and shares are delivered to the
recipient upon exercise of a stock appreciation right or in payment of the
performance share award; and (c) the amount of such ordinary income and
deduction will be the amount of cash received plus the fair market value of the
shares of Common Stock received on the date of issuance. The federal income tax
consequences of a disposition of unrestricted shares received by the recipient
upon exercise of a stock appreciation right or in payment of a performance share
award are the same as described below with respect to a disposition of
unrestricted shares.
RESTRICTED AND UNRESTRICTED STOCK. Unless the recipient files an election
to be taxed under Section 83(b) of the Code: (a) the recipient will not realize
income upon the grant of restricted stock; (b) the recipient will realize
ordinary income, and the Company will be entitled to a corresponding deduction,
when the restrictions have been removed or expire; and (c) the amount of such
ordinary income and deduction will be the fair market value of the
20
restricted stock on the date the restrictions are removed or expire. If the
recipient files an election to be taxed under Section 83(b) of the Code, the tax
consequences to the recipient and the Company will be determined as of the date
of the grant of the restricted stock rather than as of the date of the removal
or expiration of the restrictions.
With respect to awards of unrestricted stock: (a) the recipient will
realize ordinary income, and the Company will be entitled to a corresponding
deduction upon the grant of the unrestricted stock and (b) the amount of such
ordinary income and deduction will be the fair market value of such unrestricted
stock on the date of grant.
When the recipient disposes of restricted or unrestricted stock, the
difference between the amount received upon such disposition and the fair market
value of such shares on the date the recipient realizes ordinary income will be
treated as a capital gain or loss, long-term or short-term, based upon how long
the shares are held.
WITHHOLDING
The 1999 Plan permits the Company to withhold from awards an amount
sufficient to cover any required withholding taxes. In lieu of cash, the
Committee may permit a participant to cover withholding obligations through a
reduction in the number of shares to be delivered to such participant or by
delivery of shares already owned by the participant.
NEW PLAN BENEFITS
No awards have yet been made pursuant to the 1999 Plan. The closing sale
price of a share of the Company's Common Stock on the NASDAQ National Market
System on March 8, 1999, was $36.75 per share.
VOTING REQUIREMENTS; RECOMMENDATION
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock of the Company entitled to vote on this item and present in
person or by proxy at the Annual Meeting is required for approval of the 1999
Plan. Proxies solicited by the Board of Directors will be voted for approval of
the 1999 Plan unless shareholders specify otherwise in their proxies.
For this purpose, a shareholder voting through a Proxy who abstains with
respect to approval of the 1999 Plan is considered to be present and entitled to
vote on the approval of the 1999 Plan at the Annual Meeting, and is in effect a
negative vote, but a shareholder (including a broker) who does not give
authority to a Proxy to vote or withholds authority to vote, on the approval of
the 1999 Plan, shall not be considered present and entitled to vote on the
proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE 1999 STOCK
INCENTIVE PLAN.
APPROVAL OF AMENDMENTS TO AND RESTATEMENT OF
RESTRICTED STOCK PLAN FOR NONEMPLOYEE DIRECTORS
The Board of Directors of the Company adopted, and the shareholders
approved effective May 7, 1993, and amended May 4, 1995, the Tennant Company
Restricted Stock Plan for Nonemployee Directors (the "Director Plan"). The
Board has adopted, effective January 1, 1999, subject to shareholder approval,
certain amendments to and restatement of the Director Plan (the "Restated
Director Plan"). A copy of the Restated Director Plan is attached hereto as
Appendix B, and the following discussion is qualified in its entirety by
reference to the full text of the Restated Director Plan. The object of the
Restated Director Plan is to align Directors' interests with those of the
Shareholders' by providing compensation in Company Common Stock. Seven of the
Company's nine current directors are not employees of the Company.
The designated amount of the annual retainer for nonemployee directors for
the Board Year (defined in the Director Plan and the Restated Director Plan as
the period beginning on the date following each annual meeting and ending on the
day of the next succeeding annual meeting) commencing in 1999 is $31,500. This
annual
21
retainer is intended to compensate nonemployee directors for all services,
including attendance at meetings. Beginning January 1, 1999, the Company
decided to no longer pay meeting fees to its nonemployee directors. The
Director Plan provided that each participant would receive all of his or her
annual retainer in the form of shares of restricted stock ("Restricted Shares").
The Restricted Shares were to be awarded on the first business day of a cycle of
three Board Years commencing in 1993, and on the first business day of each
three year cycle of Board Years thereafter through the Board Year commencing in
2002. Each award of Restricted Shares under the Director Plan was to equal 150%
(100% for periods prior to January 1, 1995) of the anticipated amount of the
annual retainer for the next three successive years following the issuance date.
The number of Restricted Shares to be issued was based upon the Fair Market
Value of such Restricted Shares, which is defined by both the Director Plan and
the Restated Director Plan as the average closing price of shares of Company
Common Stock on the NASDAQ National Market System on the last ten trading days
preceding the day on which such Restricted Shares are issued. Under the
Director Plan, nonemployee directors who were elected or appointed to the Board
on a date other than a regular issuance date (i.e., the first business day of
the Board Years commencing in 1993, 1996, 1999, and 2002) would receive a
prorated number of Restricted Shares.
The Restated Director Plan increases the number of Restricted Shares
available for issuance pursuant to the Plan to 125,000, extends the Plan for six
years so that grants will be made on the first business day of the Board Years
commencing in 2005 and 2008, and reduces the Fair Market Value of the Restricted
Shares issued in lieu of the annual retainer from 150% to 100% of the amount of
the annual retainer.
Under the Restated Director Plan: each nonemployee director elected to the
Board at the annual meetings of shareholders of the Company in 1999, 2002, 2005,
and 2008 will be issued, on the day following such meeting date, in lieu of his
or her annual retainer and meeting fees for the next three successive years
following the issuance date, Restricted Shares having a Fair Market Value equal
to 100% of the anticipated aggregate amount of the annual retainers for such
three-year period; and each nonemployee director first elected or appointed to
the Board after January 1, 1999, and on a date other than a regular issuance
date will be issued, in lieu of his or her annual retainer for the period from
such election or appointment through the end of the Board Year ending on the
date of the Annual Meeting of Shareholders of the Company immediately preceding
the next regular issuance date, Restricted Shares having a Fair Market Value
equal to 100% of the anticipated amount of the annual retainer for such period.
In order to compensate nonemployee directors for meeting fees that
otherwise would have been paid during the period from January 1, 1999, through
the date of the annual meeting held in 1999, the Restated Director Plan provides
that, subject to shareholder approval, each nonemployee director be issued
Restricted Shares having a Fair Market Value of $3,500 as of January 1, 1999.
Each of the seven nonemployee directors of the Company was issued, subject to
shareholder approval, 89 Restricted Shares (a total of 623 shares) valued at
$39.3625 per share, which was the average closing price of a share of Common
Stock of the Company on the NASDAQ National Market System for the ten trading
days preceding January 1, 1999.
As did the Director Plan, the Restated Director Plan provides that the
restrictions on the Restricted Shares will lapse upon the first of the following
events: (a) death of the participant; (b) disability of the participant
preventing continued service on the Board; (c) retirement of the participant
from the Board in accordance with the policy, if any, on retirement of Board
members then in effect; (d) termination of service as a director by reason of:
(i) resignation at the request of the Board; (ii) the director's failure to have
been nominated for reelection to the Board or to have been reelected by the
shareholders of the Company; or (iii) the director's removal by the shareholders
of the Company; or (e) a change in control (described below) of the Company
shall occur. Under both the Director Plan and the Restated Director Plan:
during the restriction period, the participant has the right to vote the
Restricted Shares, the right to receive dividends and all other rights as a
shareholder with respect to the Restricted Shares but may not transfer or
encumber the Restricted Shares; upon the occurrence of an event causing the
restrictions on the Restricted Shares to lapse, Restricted Shares issued to the
participant in payment of the annual retainer for Board Years commencing
following the occurrence of the event shall be forfeited and revert to the
Company; and if a participant ceases to be a director of the Company for any
reason, other than one of the events set forth above, all Restricted Shares
issued to the participant shall be forfeited and revert to the Company.
The definition of change in control, as well as the consequences of the
occurrence of such an event, are the same in the Director Plan and the Restated
Director Plan. Both provide that upon the occurrence of a change in control,
the restrictions on the Restricted Shares issued for the then-current and all
previous Board Years shall
22
lapse, and the balance of the Restricted Shares, if any, shall be forfeited and
revert to the Company. A change in control includes beneficial ownership of 30%
or more of the outstanding voting stock of the Company by any persons or group
(other than the Company or a subsidiary); the majority of the directors of the
Company being persons other than persons for whose election proxies shall have
been solicited by the Board of Directors, subject to certain exceptions; or
approval by the shareholders of a merger or consolidation of the Company with or
into another corporation (other than a merger or consolidation with a subsidiary
or a merger in which the Company survives and its outstanding voting stock is
not converted or its shareholders have more than 70% of the voting interest and
Common Stock interest in the surviving corporation or its parent), a disposition
of substantially all assets of the Company, a liquidation or dissolution of the
Company, or a statutory exchange of voting stock of the Company held by
then-existing shareholders.
Both the Director Plan and the Restated Director Plan provide that the
Company shall have the right to require participants to remit to the Company an
amount sufficient to satisfy any applicable federal, state, and local
withholding state requirements.
The Restated Director Plan provides that if the annual retainer is
decreased, there shall be no adjustment in the number of Restricted Shares
previously issued pursuant to the Restated Director Plan. If the annual
retainer is increased effective as of any date other than a regular issuance
date, then each then-incumbent nonemployee director (other than a nonemployee
director first elected or appointed to the Board on the day immediately
preceding the date such increased annual retainer became effective) shall be
issued, in lieu of such increased amount of annual retainer for the period from
the date such increased annual retainer became effective until the next regular
issuance date, Restricted Shares having a Fair Market Value equal to 100% of the
amount by which the annual retainer for such period was increased. For this
purpose, the annual retainer for any fraction of a Board Year shall be prorated.
The Director Plan provided that no Restricted Shares would be issued
pursuant thereto in payment of any annual retainer for any period commencing
after the annual meeting of the Company's shareholders in 2005. The Restated
Director Plan provides that no Restricted Shares shall be issued in lieu of any
annual retainer for any period commencing after the annual meeting of the
Company's shareholders in 2011. Under the Restated Director Plan, nonemployee
directors elected to the Board at the annual meeting of Company's shareholders
in 2008 will be issued Restricted Shares in lieu of the annual retainer for the
full three Board Year period commencing on the day following the date of the
annual meeting of the Company's shareholders in 2008.
The Restated Director Plan provides that the number of shares available for
issuance pursuant thereto shall be adjusted in the event of stock dividends,
stock splits, and other recapitalizations, mergers, and similar corporate
changes. An aggregate of 125,000 shares (less shares previously issued) will be
available for issuance pursuant to the Restated Director Plan. To date, 33,897
Restricted Shares have been issued under the Director Plan, and an additional
623 Restricted Shares have been issued, subject to shareholder approval, under
the Restated Director Plan.
See "Approval of 1999 Stock Incentive Plan" for a current market price of
the Company's Common Stock.
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock of the Company entitled to vote on this item and present in
person or by proxy at the Annual Meeting is required for approval of the
amendment to and restatement of the Director Plan. Proxies solicited by the
Board of Directors will be voted for approval of the amendment and restatement
of the Director Plan, unless shareholders specify otherwise in their proxies.
For this purpose, a shareholder voting through a Proxy who abstains with
respect to approval of the amendment and restatement of the Director Plan is
considered to be present and entitled to vote on the approval of the amendment
and restatement of the Director Plan at the Annual Meeting and is in effect a
negative vote, but a shareholder (including a broker) who does not give
authority to a Proxy to vote, or withholds authority to vote, on the approval of
the amendment and restatement of the Director Plan shall not be considered
present and entitled to vote on the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO
AND RESTATEMENT OF THE RESTRICTED STOCK PLAN FOR NONEMPLOYEE DIRECTORS.
23
APPOINTMENT OF AUDITORS
At the meeting, a vote will be taken on a proposal to ratify the
appointment of KPMG Peat Marwick LLP as independent auditors of the Company for
the year ending December 31, 1999. KPMG Peat Marwick LLP are independent
accountants and auditors who have audited the accounts of the Company annually
since 1954. The Company has been advised that a representative of the firm will
attend the shareholders' meeting. The representative will be available to
respond to appropriate questions and will be given the opportunity to make a
statement if the firm desires to do so.
SHAREHOLDER PROPOSALS
Any shareholder proposal intended to be presented at the year 2000 Annual
Meeting should be sent to the Secretary of the Company at 701 North Lilac Drive,
P.O. Box 1452, Minneapolis, Minnesota 55440, and must be received on or before
November 22, 1999, to be eligible for inclusion in the Company's Proxy Statement
and form of Proxy relating to that meeting. If notice of any other shareholder
proposal intended to be presented at the year 2000 Annual Meeting but not
intended to be included in the Company's Proxy Statement and form of Proxy for
such meeting is not received by the Company on or before February 8, 2000, the
Proxy solicited by the Board of Directors of the Company for use in connection
with that meeting may confer authority on the Proxies named to vote in their
discretion on such proposal without any discussion in the Company's Proxy
Statement for that meeting of either the proposal or how such Proxies intend to
exercise their voting discretion.
See "Directors-Election of Directors" with regard to certain requirements
for nomination of persons for election as directors.
OTHER MATTERS
So far as the management is aware, no matters other than those described in
this Proxy Statement will be acted upon at the meeting. If, however, any other
matters properly come before the meeting, it is the intention of the persons
named in the enclosed Proxy to vote the same in accordance with their judgment
on such other matters.
March 25, 1999 By Order of the Board of Directors
Bruce J. Borgerding, Secretary
24
APPENDIX A
TENNANT COMPANY
1999 STOCK INCENTIVE PLAN
(EFFECTIVE JANUARY 1, 1999)
1. PURPOSE. The purpose of this 1999 Stock Incentive Plan (the "Plan")
is to motivate key personnel to produce a superior return to the shareholders
of Tennant Company (the "Company") and its Affiliates by offering such
individuals an opportunity to realize Stock appreciation, by facilitating
Stock ownership, and by rewarding them for achieving a high level of
corporate performance. This Plan is also intended to facilitate recruiting
and retaining key personnel of outstanding ability.
2. DEFINITIONS. The capitalized terms used in this Plan have the
meanings set forth below.
(a) "Affiliate" means any corporation that is a "parent corporation"
or "subsidiary corporation" of the Company, as those terms are defined
in Sections 424(e) and (f) of the Code, or any successor provision,
and, for purposes other than the grant of Incentive Stock Options, any
joint venture in which the Company or any such "parent corporation" or
"subsidiary corporation" owns an equity interest.
(b) "Agreement" means a written contract entered into between the
Company or an Affiliate and a Participant containing the terms and
conditions of an Award in such form (not inconsistent with this Plan)
as the Committee approves from time to time, together with all
amendments thereof, which amendments may be unilaterally made by the
Company (with the approval of the Committee) unless such amendments
are deemed by the Committee to be materially adverse to the
Participant and are not required as a matter of law.
(c) "Award" means a grant made under this Plan in the form of
Options, Stock Appreciation Rights, Restricted Stock, Performance
Shares or any Other Stock-Based Award.
(d) "Board" means the Board of Directors of the Company.
(e) "Change in Control" means:
(i) a majority of the directors of the Company shall be persons
other than persons
(A) for whose election proxies shall have been solicited by
the Board or
(B) who are then serving as directors appointed by the
Board to fill vacancies on the Board caused by death or
resignation (but not by removal) or to fill newly-created
directorships,
(ii) 30% or more of the (1) combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors ("Outstanding Company
Voting Securities") or (2) the then outstanding Shares of Stock
("Outstanding Company Common Stock") is directly or indirectly
acquired or beneficially owned (as defined in Rule 13d-3 under
the Exchange Act, or any successor rule thereto) by any
individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act), provided, however,
that the following acquisitions and beneficial ownership shall
not constitute Changes in Control pursuant to this paragraph
2(e)(ii):
A-1
(A) any acquisition or beneficial ownership by the Company
or a Subsidiary, or
(B) any acquisition or beneficial ownership by any employee
benefit plan (or related trust) sponsored or maintained by
the Company or one or more of its Subsidiaries,
(C) any acquisition or beneficial ownership by the
Participant or any group that includes the Participant, or
(D) any acquisition or beneficial ownership by a Parent or
its wholly-owned subsidiaries, as long as they shall remain
wholly-owned subsidiaries, of 100% of the Outstanding
Company Voting Securities as a result of a merger or
statutory share exchange which complies with paragraph
2(e)(iii)(A)(2) or the exception in paragraph 2(e)(iii)(B)
hereof in all respects,
(iii) the shareholders of the Company approve a definitive
agreement or plan to
(A) merge or consolidate the Company with or into another
corporation (other than (1) a merger or consolidation with a
Subsidiary or (2) a merger in which
(a) the Company is the surviving corporation,
(b) no Outstanding Company Voting Securities or
Outstanding Company Common Stock (other than fractional
shares) held by shareholders of the Company immediately
prior to the merger is converted into cash, securities,
or other property (except (i) voting stock of a Parent
owning directly or indirectly through wholly-owned
subsidiaries, both beneficially and of record 100% of
the Outstanding Company Voting Securities immediately
after the Merger or (ii) cash upon the exercise by
holders of Outstanding Company Voting Securities of
statutory dissenters' rights),
(c) the persons who were the beneficial owners,
respectively, of the Outstanding Company Voting
Securities and Outstanding Company Common Stock
immediately prior to such merger beneficially own,
directly or indirectly, immediately after the merger,
more than 70% of, respectively, the then outstanding
common stock and the voting power of the then
outstanding voting securities of the surviving
corporation or its Parent entitled to vote generally in
the election of directors, and
(d) if voting securities of the Parent are exchanged
for Outstanding Company Voting Securities in the
merger, all holders of any class or series of
Outstanding Company Voting Securities immediately prior
to the merger have the right to receive substantially
the same per share consideration in exchange for their
Outstanding Company Voting Securities as all other
holders of such class or series),
(B) exchange, pursuant to a statutory share exchange,
Outstanding Company Voting Securities of any one or more
classes or series held by shareholders of the Company
immediately prior to the exchange for cash, securities or
other property, except for (a) voting stock of a Parent
A-2
owning directly, or indirectly through wholly-owned
subsidiaries, both beneficially and of record 100% of the
Outstanding Company Voting Securities immediately after the
statutory share exchange if (i) the persons who were the
beneficial owners, respectively, of the Outstanding Company
Voting Securities and Outstanding Company Common Stock
immediately prior to such statutory share exchange own,
directly or indirectly, immediately after the statutory
share exchange more than 70% of, respectively, the then
outstanding common stock and the voting power of the then
outstanding voting securities of such Parent entitled to
vote generally in the election of directors, and (ii) all
holders of any class or series of Outstanding Company Voting
Securities immediately prior to the statutory share exchange
have the right to receive substantially the same per share
consideration in exchange for their Outstanding Company
Voting Securities as all other holders of such class or
series or (b) cash with respect to fractional shares of
Outstanding Company Voting Securities or payable as a result
of the exercise by holders of Outstanding Company Voting
Securities of statutory dissenters' rights,
(C) sell or otherwise dispose of all or substantially all
of the assets of the Company (in one transaction or a series
of transactions), or
(D) liquidate or dissolve the Company, except that it shall
not constitute a Change in Control with respect to any
Participant if a majority of the voting stock (or the voting
equity interest) of the surviving corporation or its parent
corporation or of any corporation (or other entity)
acquiring all or substantially all of the assets of the
Company (in the case of a merger, consolidation or
disposition of assets) or the Company or its Parent (in the
case of a statutory share exchange) is, immediately
following the merger, consolidation, statutory share
exchange or disposition of assets, beneficially owned by the
Participant or a group of persons, including the
Participant, acting in concert.
(f) "Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, or any successor statute.
(g) "Committee" means three or more Non-Employee Directors designated
by the Board to administer this Plan under Section 3 hereof and
constituted so as to permit this Plan to comply with Exchange Act Rule
16b-3.
(h) "Company" means Tennant Company, a Minnesota corporation, or any
successor to all or substantially all of its businesses by merger,
consolidation, purchase of assets or otherwise.
(i) "Disability" means the disability of a Participant such that the
Participant is considered disabled under any retirement plan of the
Company which is qualified under Section 401 of the Code, or as
otherwise determined by the Committee.
(j) "Employee" means any full-time or part-time employee (including
an officer or director who is also an employee) of the Company or an
Affiliate. Except with respect to grants of Incentive Stock Options,
"Employee" shall also include other individuals and entities who are
not "employees" of the Company or an Affiliate but who provide
services to the Company or an Affiliate in the capacity of an
independent contractor. References in this Plan to "employment" and
related terms shall include the providing of services in any such
capacity.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended; "Exchange Act Rule 16b-3" means Rule 16b-3 promulgated by the
Securities and
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Exchange Commission under the Exchange Act as in effect with respect
to the Company or any successor regulation.
(l) "Fair Market Value" as of any date means, unless otherwise
expressly provided in this Plan:
(i) the closing sale price of a Share (A) on the National
Association of Securities Dealers, Inc. Automated Quotation
System National Market System, or (B) if the Shares are not
traded on such system, on the composite tape for New York Stock
Exchange ("NYSE") listed shares, or (C) if the Shares are not
quoted on the NYSE composite tape, on the principal United States
securities exchange registered under the Exchange Act on which
the Shares are listed, in any case on the date immediately
preceding that date, or, if no sale of Shares shall have occurred
on that date, on the next preceding day on which a sale of Shares
occurred, or
(ii) if clause (i) is not applicable, what the Committee
determines in good faith to be 100% of the fair market value of a
Share on that date.
However, if the applicable securities exchange or system has closed
for the day at the time the event occurs that triggers a determination
of Fair Market Value, all references in this paragraph to the "date
immediately preceding that date" shall be deemed to be references to
"that date." In the case of an Incentive Stock Option, if such
determination of Fair Market Value is not consistent with the then
current regulations of the Secretary of the Treasury, Fair Market
Value shall be determined in accordance with said regulations. The
determination of Fair Market Value shall be subject to adjustment as
provided in Section 12(f) hereof.
(m) "Fundamental Change" means a dissolution or liquidation of the
Company, a sale of substantially all of the assets of the Company, a
merger or consolidation of the Company with or into any other
corporation, regardless of whether the Company is the surviving
corporation, or a statutory share exchange involving capital stock of
the Company.
(n) "Incentive Stock Option" means any Option designated as such and
granted in accordance with the requirements of Section 422 of the Code
or any successor to such section.
(o) "Non-Employee Director" means a member of the Board who is
considered a non-employee director within the meaning of Exchange Act
Rule 16b-3.
(p) "Non-Qualified Stock Option" means an Option other than an
Incentive Stock Option.
(q) "Other Stock-Based Award" means an Award of Stock or an Award
based on Stock other than Options, Stock Appreciation Rights,
Restricted Stock or Performance Shares.
(r) "Option" means a right to purchase Stock, including both
Non-Qualified Stock Options and Incentive Stock Options.
(s) "Parent" means a "parent corporation", as that term is defined in
Section 424(e) of the Code, or any successor provision.
(t) "Participant" means an Employee to whom an Award is made.
(u) "Performance Period" means the period of time as specified in an
Agreement over which Performance Shares are to be earned.
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(v) "Performance Shares" means a contingent award of a specified
number of Performance Shares, with each Performance Share equivalent
to one Share, a variable percentage of which may vest depending upon
the extent of achievement of specified performance objectives during
the applicable Performance Period.
(w) "Plan" means this 1999 Stock Award Plan, as amended and in effect
from time to time.
(x) "Restricted Stock" means Stock granted under Section 10 hereof so
long as such Stock remains subject to one or more restrictions.
(y) "Retirement" means termination of employment on or after age 55,
provided the Employee has been employed by the Company and/or one or
more Affiliates for at least ten years, or termination of employment
on or after age 62, provided in either case that the Employee has
given the Company at least six months' prior written notice of such
termination, or as otherwise determined by the Committee.
(z) "Share" means a share of Stock.
(aa) "Stock" means the common stock, $.375 par value per share (as
such par value may be adjusted from time to time), of the Company.
(bb) "Stock Appreciation Right" means a right, the value of which is
determined relative to appreciation in value of Shares pursuant to an
Award granted under Section 8 hereof.
(cc) "Subsidiary" means a "subsidiary corporation," as that term is
defined in Section 424(f) of the Code, or any successor provision.
(dd) "Successor" with respect to a Participant means the legal
representative of an incompetent Participant and, if the Participant
is deceased, the legal representative of the estate of the Participant
or the person or persons who may, by bequest or inheritance, or under
the terms of an Award or of forms submitted by the Participant to the
Committee under Section 12(i) hereof, acquire the right to exercise an
Option or Stock Appreciation Right or receive cash and/or Shares
issuable in satisfaction of an Award in the event of a Participant's
death.
(ee) "Term" means the period during which an Option or Stock
Appreciation Right may be exercised or the period during which the
restrictions placed on Restricted Stock or any other Award are in
effect.
Except when otherwise indicated by the context, reference to the
masculine gender shall include, when used, the feminine gender and any
term used in the singular shall also include the plural.
3. ADMINISTRATION.
(a) AUTHORITY OF COMMITTEE. The Committee shall administer this
Plan. The Committee shall have exclusive power to make Awards and to
determine when and to whom Awards will be granted, and the form,
amount and other terms and conditions of each Award, subject to the
provisions of this Plan. The Committee may determine whether, to what
extent and under what circumstances Awards may be settled, paid or
exercised in cash, Shares or other Awards or other property, or
canceled, forfeited or suspended. The Committee shall have the
authority to interpret this Plan and any Award or Agreement made under
this Plan, to establish, amend, waive and rescind any rules and
regulations relating to the administration of this Plan, to determine
the terms and provisions of any Agreements entered into hereunder (not
inconsistent with this Plan), and to make all other determinations
necessary or advisable for the administration of this
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Plan. The Committee may correct any defect, supply any omission or
reconcile any inconsistency in this Plan or in any Award in the manner
and to the extent it shall deem desirable. The determinations of the
Committee in the administration of this Plan, as described herein,
shall be final, binding and conclusive.
(b) DELEGATION OF AUTHORITY. The Committee may delegate all or any
part of its authority under this Plan to persons who are not
Non-Employee Directors for purposes of determining and administering
Awards solely to Employees who are not then subject to the reporting
requirements of Section 16 of the Exchange Act.
(c) RULE 16b-3 COMPLIANCE. It is intended that this Plan and all
Awards granted pursuant to it shall be administered by the Committee
so as to permit this Plan and Awards to comply with Exchange Act Rule
16b-3. If any provision of this Plan or of any Award would otherwise
frustrate or conflict with the intent expressed in this Section 3(c),
that provision to the extent possible shall be interpreted and deemed
amended in the manner determined by the Committee so as to avoid such
conflict. To the extent of any remaining irreconcilable conflict with
such intent, the provision shall be deemed void as applicable to
Participants who are then subject to the reporting requirements of
Section 16 of the Exchange Act to the extent permitted by law and in
the manner deemed advisable by the Committee.
(d) INDEMNIFICATION. To the full extent permitted by law, each
member and former member of the Committee and each person to whom the
Committee delegates or has delegated authority under this Plan shall
be entitled to indemnification by the Company against and from any
loss, liability, judgment, damage, cost and reasonable expense
incurred by such member, former member or other person by reason of
any action taken, failure to act or determination made in good faith
under or with respect to this Plan.
4. SHARES AVAILABLE; MAXIMUM PAYOUTS.
(a) SHARES AVAILABLE. The number of Shares available for
distribution under this Plan is 500,000, based upon the authorized
shares of the Company on January 1, 1999, the effective date of this
Plan (subject to adjustment under Section 12(f) hereof).
(b) SHARES AGAIN AVAILABLE. Any Shares subject to the terms and
conditions of an Award under this Plan which are not used because the
Award expires without all Shares subject to such Award having been
issued or because the terms and conditions of the Award are not met
may again be used for an Award under this Plan. Any Shares that are
the subject of Awards which are subsequently forfeited to the Company
pursuant to the restrictions applicable to such Award may again be
used for an Award under this plan. If a Participant exercises a Stock
Appreciation Right, any Shares covered by the Stock Appreciation Right
in excess of the number of Shares issued (or, in the case of a
settlement in cash or any other form of property, in excess of the
number of Shares equal in value to the amount of such settlement,
based on the Fair Market Value of such Shares on the date of such
exercise) may again be used for an Award under this Plan. If, in
accordance with the Plan, a Participant uses Shares to (i) pay a
purchase or exercise price, including an Option exercise price, or
(ii) satisfy tax withholdings, such Shares may again be used for an
Award under this Plan.
(c) UNEXERCISED AWARDS. Any unexercised or undistributed portion of
any terminated, expired, exchanged, or forfeited Award or any Award
settled in cash in lieu of Shares (except as provided in Section 4(b)
hereof) shall be available for further Awards.
(d) NO FRACTIONAL SHARES. No fractional Shares may be issued under
this Plan; fractional Shares will be rounded to the nearest whole
Share.
(e) MAXIMUM PAYOUTS. No more than 25% of all Shares subject to this
Plan may be granted in the aggregate pursuant to Restricted Stock and
Other Stock-Based Awards.
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5. ELIGIBILITY. Awards may be granted under this Plan to any Employee at
the discretion of the Committee.
6. GENERAL TERMS OF AWARDS.
(a) AWARDS. Awards under this Plan may consist of Options (either
Incentive Stock Options or Non-Qualified Stock Options), Stock
Appreciation Rights, Performance Shares, Restricted Stock and Other
Stock-Based Awards. Awards of Restricted Stock may, in the discretion
of the Committee, provide the Participant with dividends or dividend
equivalents and voting rights prior to vesting (whether vesting is
based on a period of time, the attainment of specified performance
conditions or otherwise).
(b) AMOUNT OF AWARDS. Each Agreement shall set forth the number of
Shares of Restricted Stock, Stock or Performance Shares subject to
such Agreement, or the number of Shares to which the Option applies or
with respect to which payment upon the exercise of the Stock
Appreciation Right is to be determined, as the case may be, together
with such other terms and conditions applicable to the Award (not
inconsistent with this Plan) as determined by the Committee in its
sole discretion.
(c) TERM. Each Agreement, other than those relating solely to Awards
of Stock without restrictions, shall set forth the Term of the Award
and any applicable Performance Period for Performance Shares, as the
case may be, but in no event shall the Term of an Award or the
Performance Period be longer than ten years after the date of grant.
An Agreement with a Participant may permit acceleration of vesting
requirements and of the expiration of the applicable Term upon such
terms and conditions as shall be set forth in the Agreement, which
may, but need not, include, without limitation, acceleration resulting
from the occurrence of a Change in Control, a Fundamental Change, or
the Participant's death, Disability or Retirement. Acceleration of
the Performance Period of Performance Shares shall be subject to
Section 9(b) hereof.
(d) AGREEMENTS. Each Award under this Plan shall be evidenced by an
Agreement setting forth the terms and conditions, as determined by the
Committee, which shall apply to such Award, in addition to the terms
and conditions specified in this Plan.
(e) TRANSFERABILITY. During the lifetime of a Participant to whom an
Award is granted, only such Participant (or such Participant's legal
representative or, if so provided in the applicable Agreement in the
case of a Non-Qualified Stock Option, a permitted transferee as
hereafter described) may exercise an Option or Stock Appreciation
Right or receive payment with respect to Performance Shares or any
other Award. No Award of Restricted Stock (prior to the expiration of
the restrictions), Options, Stock Appreciation Rights, Performance
Shares or other Award (other than an award of Stock without
restrictions) may be sold, assigned, transferred, exchanged, or
otherwise encumbered, and any attempt to do so shall be of no effect.
Notwithstanding the immediately preceding sentence, (i) an Agreement
may provide that an Award shall be transferable to a Successor in the
event of a Participant's death and (ii) an Agreement may provide that
a Non-Qualified Stock Option shall be transferable to any member of a
Participant's "immediate family" (as such term is defined in Rule
16a-1(e) promulgated under the Exchange Act, or any successor rule or
regulation) or to one or more trusts whose beneficiaries are members
of such Participant's "immediate family" or partnerships in which such
family members are the only partners; provided, however, that the
Participant receives no consideration for the transfer. Any
Non-Qualified Stock Option held by a permitted transferee shall
continue to be subject to the same terms and conditions that were
applicable to such Non-Qualified Stock Option immediately prior to its
transfer and may be exercised by such permitted transferee as and to
the extent that such Non-Qualified Stock Option has become exercisable
and has not terminated in accordance with the provisions of this Plan
and the applicable Agreement. For purposes of any provision of this
Plan relating to notice to a Participant or to vesting or termination
of a Non-Qualified Stock Option upon the termination of employment of
a Participant, the
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references to "Participant" shall mean the original grantee of the
Non-Qualified Stock Option and not any permitted transferee.
(f) TERMINATION OF EMPLOYMENT. Except as otherwise determined by the
Committee or provided by the Committee in an applicable Agreement, in
case of termination of employment, the following provisions shall
apply:
(1) OPTIONS AND STOCK APPRECIATION RIGHTS.
(i) DEATH. If a Participant who has been granted an
Option or Stock Appreciation Rights shall die before such
Option or Stock Appreciation Rights have expired, the Option
or Stock Appreciation Rights shall become exercisable in
full, and may be exercised by the Participant's Successor at
any time, or from time to time, within five years after the
date of the Participant's death.
(ii) DISABILITY OR RETIREMENT. If a Participant's
employment terminates because of Disability or Retirement,
the Option or Stock Appreciation Rights shall become
exercisable in full, and the Participant may exercise his or
her Options or Stock Appreciation Rights at any time, or
from time to time, within (x) five years after the date of
such termination if such termination results from the
Participant's disability or (y) within three months, or such
longer period as the Committee may permit, after the date of
such termination if such termination results from the
Participant's Retirement.
(iii) REASONS OTHER THAN DEATH, DISABILITY OR RETIREMENT.
If a Participant's employment terminates for any reason
other than death, Disability or Retirement, the unvested or
unexercised portion of any Award held by such Participant
shall terminate at the date of termination of employment.
(iv) EXPIRATION OF TERM. Notwithstanding the foregoing
paragraphs (i)-(iii), in no event shall an Option or a Stock
Appreciation Right be exercisable after expiration of the
Term of such Award.
(2) PERFORMANCE SHARES. If a Participant's employment with the
Company or any of its Affiliates terminates during a Performance
Period because of death, Disability or Retirement, or under other
circumstances provided by the Committee in its discretion in the
applicable Agreement or otherwise, the Participant shall be
entitled to a payment of Performance Shares at the end of the
Performance Period based upon the extent to which achievement of
performance targets was satisfied at the end of such period (as
determined at the end of the Performance Period) and prorated for
the portion of the Performance Period during which the
Participant was employed by the Company or any Affiliate. Except
as provided in this Section 6(f)(2) or in the applicable
Agreement, if a Participant's employment terminates with the
Company or any of its Affiliates during a Performance Period,
then such Participant shall not be entitled to any payment with
respect to that Performance Period.
(3) RESTRICTED STOCK. Unless otherwise provided in the
applicable Agreement, in case of a Participant's death,
Disability or Retirement, the Participant shall be entitled to
receive that number of shares of Restricted Stock under
outstanding Awards which has been pro rated for the portion of
the Term of the Awards during which the Participant was employed
by the Company or any Affiliate, and with respect to such Shares
all restrictions shall lapse. Any shares of Restricted Stock as
to which restrictions do not lapse under the preceding sentence
shall
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terminate at the date of the Participant's termination of
employment and such shares of Restricted Stock shall be forfeited
to the Company.
(g) RIGHTS AS SHAREHOLDER. A Participant shall have no rights as a
shareholder with respect to any securities covered by an Award until
the date the Participant becomes the holder of record.
7. STOCK OPTIONS.
(a) TERMS OF ALL OPTIONS. Each Option shall be granted pursuant to
an Agreement as either an Incentive Stock Option or a Non-Qualified
Stock Option. Only Non-Qualified Stock Options may be granted to
Employees who are not employees of the Company or an Affiliate. The
purchase price of each Share subject to an Option shall be determined
by the Committee and set forth in the Agreement, but shall not be less
than 100% of the Fair Market Value of a Share as of the date the
Option is granted. The purchase price of the Shares with respect to
which an Option is exercised shall be payable in full at the time of
exercise, provided that, to the extent permitted by law, Participants
may simultaneously exercise Options and sell the Shares thereby
acquired pursuant to a brokerage or similar relationship and use the
proceeds from such sale to pay the purchase price of such Shares. The
purchase price may be paid in cash or, if the Committee so permits,
through a reduction of the number of Shares delivered to the
Participant upon exercise of the Option or delivery or tender to the
Company of Shares held by such Participant (in each case, such Shares
having a Fair Market Value as of the date the Option is exercised
equal to the purchase price of the Shares being purchased pursuant to
the Option), or a combination thereof, unless otherwise provided in
the Agreement. If the Committee so determines, the Agreement relating
to any Option may provide for the issuance of "reload" Options
pursuant to which, subject to the terms and conditions established by
the Committee and any applicable requirements of Exchange Act Rule
16b-3 or any other applicable law, the Participant will, either
automatically or subject to subsequent Committee approval, be granted
a new Option when the payment of the exercise price of the original
Option, or the payment of tax withholdings pursuant to Section 12(d)
hereof, is made through the delivery or tender to the Company of
Shares held by such Participant, such new "reload" Option (i) being an
Option to purchase the number of Shares provided as consideration for
the exercise price and in payment of taxes in connection with the
exercise of the original Option, and (ii) having a per Share exercise
price equal to the Fair Market Value as of the date of exercise of the
original Option. Each Option shall be exercisable in whole or in part
on the terms provided in the Agreement. In no event shall any Option
be exercisable at any time after its Term. When an Option is no
longer exercisable, it shall be deemed to have lapsed or terminated.
No Participant may receive any combination of Options and Stock
Appreciation Rights relating to more than 50,000 Shares in the
aggregate pursuant to Awards in any year under this Plan.
(b) INCENTIVE STOCK OPTIONS. In addition to the other terms and
conditions applicable to all Options:
(i) the aggregate Fair Market Value (determined as of the date
the Option is granted) of the Shares with respect to which
Incentive Stock Options held by an individual first become
exercisable in any calendar year (under this Plan and all other
incentive stock option plans of the Company and its Affiliates)
shall not exceed $100,000 (or such other limit as may be required
by the Code), if such limitation is necessary to qualify the
Option as an Incentive Stock Option, and to the extent an Option
or Options granted to a Participant exceed such limit, such
Option or Options shall be treated as a Non-Qualified Stock
Option;
(ii) an Incentive Stock Option shall not be exercisable and the
Term of the Award shall not be more than ten years after the date
of grant (or such other limit
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as may be required by the Code) if such limitation is necessary
to qualify the Option as an Incentive Stock Option;
(iii) the Agreement covering an Incentive Stock Option shall
contain such other terms and provisions which the Committee
determines necessary to qualify such Option as an Incentive Stock
Option; and
(iv) notwithstanding any other provision of this Plan to the
contrary, no Participant may receive an Incentive Stock Option
under this Plan if, at the time the Award is granted, the
Participant owns (after application of the rules contained in
Section 424(d) of the Code, or its successor provision) Shares
possessing more than ten percent of the total combined voting
power of all classes of stock of the Company or its subsidiaries,
unless (A) the option price for such Incentive Stock Option is at
least 110% of the Fair Market Value of the Shares subject to such
Incentive Stock Option on the date of grant and (B) such Option
is not exercisable after the date five years from the date such
Incentive Stock Option is granted.
8. STOCK APPRECIATION RIGHTS. An Award of a Stock Appreciation Right
shall entitle the Participant, subject to terms and conditions determined by the
Committee, to receive upon exercise of the Stock Appreciation Right all or a
portion of the excess of (i) the Fair Market Value of a specified number of
Shares as of the date of exercise of the Stock Appreciation Right over (ii) a
specified price which shall not be less than 100% of the Fair Market Value of
such Shares as of the date of grant of the Stock Appreciation Right. A Stock
Appreciation Right may be granted in connection with a previously or
contemporaneously granted Option, or independent of any Option. If issued in
connection with an Option, the Committee may impose a condition that exercise of
a Stock Appreciation Right cancels the Option with which it is connected and
exercise of the connected Option cancels the Stock Appreciation Right. Each
Stock Appreciation Right may be exercisable in whole or in part on the terms
provided in the Agreement. No Stock Appreciation Right shall be exercisable at
any time after its Term. When a Stock Appreciation Right is no longer
exercisable, it shall be deemed to have lapsed or terminated. Except as
otherwise provided in the applicable Agreement, upon exercise of a Stock
Appreciation Right, payment to the Participant (or to his or her Successor)
shall be made in the form of cash, Stock or a combination of cash and Stock as
promptly as practicable after such exercise. The Agreement may provide for a
limitation upon the amount or percentage of the total appreciation on which
payment (whether in cash and/or Stock) may be made in the event of the exercise
of a Stock Appreciation Right. As specified in Section 7(a) hereof, no
Participant may receive any combination of Options and Stock Appreciation Rights
relating to more than 50,000 Shares in the aggregate pursuant to Awards in any
year under this Plan.
9. PERFORMANCE SHARES.
(a) INITIAL AWARD. An Award of Performance Shares shall entitle a
Participant (or a Successor) to future payments based upon the
achievement of performance targets established in writing by the
Committee. Payment shall be made in Stock, or a combination of cash
and Stock, as determined by the Committee. With respect to those
Participants who are "covered employees" within the meaning of Section
162(m) of the Code and the regulations thereunder, such performance
targets shall consist of one or any combination of two or more of
earnings or earnings per share before income tax (profit before
taxes), net earnings or net earnings per share (profit after tax),
inventory, total, or net operating asset turnover, operating income,
total shareholder return, return on equity, pre-tax and pre-interest
expense return on average invested capital, which may be expressed on
a current value basis, or sales growth, and any such targets may
relate to one or any combination of two or more of corporate, group,
unit, division, Affiliate or individual performance. The Agreement
may establish that a portion of the maximum amount of a Participant's
Award will be paid for performance which exceeds the minimum target
but falls below the maximum target applicable to such Award. The
Agreement shall also provide for the timing of such payment.
Following the conclusion or acceleration of each Performance Period,
the Committee shall determine the extent to
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which (i) performance targets have been attained, (ii) any other terms
and conditions with respect to an Award relating to such Performance
Period have been satisfied, and (iii) payment is due with respect to a
Performance Share Award. No Participant may receive Performance
Shares relating to more than 50,000 Shares pursuant to Awards in any
year under this Plan.
(b) ACCELERATION AND ADJUSTMENT. The Agreement may permit an
acceleration of the Performance Period and an adjustment of
performance targets and payments with respect to some or all of the
Performance Shares awarded to a Participant, upon such terms and
conditions as shall be set forth in the Agreement, upon the occurrence
of certain events, which may, but need not, include without limitation
a Change in Control, a Fundamental Change, the Participant's death,
Disability or Retirement, a change in accounting practices of the
Company or its Affiliates, or, with respect to payments in Stock for
Performance Share Awards, a reclassification, stock dividend, stock
split or stock combination as provided in Section 12(f) hereof.
(c) VALUATION. Each Performance Share earned after conclusion of a
Performance Period shall have a value equal to the Fair Market Value
of a Share on the last day of such Performance Period.
10. RESTRICTED STOCK. Subject to Section 4(e), Restricted Stock may be
granted in the form of Shares registered in the name of the Participant but held
by the Company until the end of the Term of the Award. Any employment
conditions, performance conditions and the Term of the Award shall be
established by the Committee in its discretion and included in the applicable
Agreement. The Committee may provide in the applicable Agreement for the lapse
or waiver of any such restriction or condition based on such factors or criteria
as the Committee, in its sole discretion, may determine. No Award of Restricted
Stock may vest earlier than one year from the date of grant, except as provided
in the applicable Agreement.
11. OTHER STOCK-BASED AWARDS. Subject to Section 4(e) the Committee may
from time to time grant Awards of Stock, and other Awards under this Plan
(collectively herein defined as "Other Stock-Based Awards"), including without
limitation those Awards pursuant to which Shares may be acquired in the future,
such as Awards denominated in Stock units, securities convertible into Stock and
phantom securities. The Committee, in its sole discretion, shall determine the
terms and conditions of such Awards provided that such Awards shall not be
inconsistent with the terms and purposes of this Plan. The Committee may, in
its sole discretion, direct the Company to issue Shares subject to restrictive
legends and/or stop transfer instructions which are consistent with the terms
and conditions of the Award to which such Shares relate.
12. GENERAL PROVISIONS.
(a) EFFECTIVE DATE OF THIS PLAN. This Plan shall become effective
as of January 1, 1999, provided that this Plan is approved and
ratified by the affirmative vote of the holders of a majority of
the outstanding Shares of Stock present or represented and entitled
to vote in person or by proxy at a meeting of the shareholders of
the Company no later than May 31, 1999. If this plan is not so
approved by such holders, any Awards granted under this Plan
subject to such approval shall be cancelled and be null and void.
(b) DURATION OF THIS PLAN. This Plan shall remain in effect until
all Stock subject to it shall be distributed or all Awards have
expired or lapsed, whichever is latest to occur, or this Plan is
terminated pursuant to Section 12(e) hereof. No Award of an Incentive
Stock Option shall be made more than ten years after the effective
date provided in Section 12(a) hereof (or such other limit as may be
required by the Code) if such limitation is necessary to qualify the
Option as an Incentive Stock Option. The date and time of approval by
the Committee of the granting of an Award shall be considered the date
and time at which such Award is made or granted, notwithstanding the
date of any Agreement with respect to such Award; provided, however,
that the Committee may
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grant Awards other than Incentive Stock Options to be effective and
deemed to be granted on the occurrence of certain specified
contingencies.
(c) RIGHT TO TERMINATE EMPLOYMENT. Nothing in this Plan or in any
Agreement shall confer upon any Participant who is an Employee the
right to continue in the employment of the Company or any Affiliate or
affect any right which the Company or any Affiliate may have to
terminate or modify the employment of the Participant with or without
cause.
(d) TAX WITHHOLDING. The Company may withhold from any payment of
cash or Stock to a Participant or other person under this Plan an
amount sufficient to cover any required withholding taxes, including
the Participant's social security and Medicare taxes (FICA) and
federal, state and local income tax with respect to income arising
from payment of the Award. The Company shall have the right to
require the payment of any such taxes before issuing any Stock
pursuant to the Award. In lieu of all or any part of a cash payment
from a person receiving Stock under this Plan, the Committee may, in
the applicable Agreement or otherwise, permit a person to cover all or
any part of the required withholdings, and to cover any additional
withholdings up to the amount needed to cover the person's full FICA
and federal, state and local income tax with respect to income arising
from payment of the Award, through a reduction of the number of Shares
delivered to such person or a delivery or tender to the Company of
Shares held by such person, in each case valued in the same manner as
used in computing the withholding taxes under applicable laws.
(e) AMENDMENT, MODIFICATION AND TERMINATION OF THIS PLAN. Except as
provided in this Section 12(e), the Board may at any time amend,
modify, terminate or suspend this Plan. Except as provided in this
Section 12(e), the Committee may at any time alter or amend any or all
Agreements under this Plan to the extent permitted by law. Amendments
are subject to approval of the shareholders of the Company only if
such approval is necessary to maintain this Plan in compliance with
the requirements of Exchange Act Rule 16b-3, Section 422 of the Code,
their successor provisions, or any other applicable law or regulation.
No termination, suspension or modification of this Plan may materially
and adversely affect any right acquired by any Participant (or a
Participant's legal representative) or any Successor or permitted
transferee under an Award granted before the date of termination,
suspension or modification, unless otherwise provided in an Agreement
or otherwise or required as a matter of law. It is conclusively
presumed that any adjustment for changes in capitalization provided
for in Section 9(b) or 12(f) hereof does not adversely affect any
right of a Participant or other person under an Award.
(f) ADJUSTMENT FOR CHANGES IN CAPITALIZATION. Appropriate
adjustments in the aggregate number and type of securities available
for Awards under this Plan, in the limitations on the number and type
of securities that may be issued to an individual Participant, in the
number and type of securities and amount of cash subject to Awards
then outstanding, in the Option exercise price as to any outstanding
Options and, subject to Section 9(b) hereof, in outstanding
Performance Shares and payments with respect to outstanding
Performance Shares may be made by the Committee in its sole discretion
to give effect to adjustments made in the number or type of Shares
through a Fundamental Change (subject to Section 12(g) hereof),
recapitalization, reclassification, stock dividend, stock split, stock
combination, spin-off or other relevant change, provided that
fractional Shares shall be rounded to the nearest whole Share.
(g) FUNDAMENTAL CHANGE. In the event of a proposed Fundamental
Change:
(a) involving a merger, consolidation or statutory share
exchange, unless appropriate provision shall be made (which the
Committee may, but shall not be obligated to, make) for the
protection of the outstanding Options and Stock Appreciation
Rights by the substitution of options, stock appreciation rights
and
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appropriate voting common stock of the corporation surviving any
such merger or consolidation or, if appropriate, the Parent of
such surviving corporation, to be issuable upon the exercise of
Options or used to calculate payments upon the exercise of Stock
Appreciation Rights in lieu of Options, Stock Appreciation Rights
and capital stock of the Company, or
(b) involving the dissolution or liquidation of the Company,
the Committee may, but shall not be obligated to, declare, at
least twenty days prior to the occurrence of the Fundamental
Change, and provide written notice to each holder of an Option or
Stock Appreciation Right of the declaration, that each
outstanding Option and Stock Appreciation Right, whether or not
then exercisable, shall be canceled at the time of, or
immediately prior to the occurrence of, the Fundamental Change in
exchange for payment to each holder of an Option or Stock
Appreciation Right, within 20 days after the Fundamental Change,
of cash equal to (i) for each Share covered by the canceled
Option, the amount, if any, by which the Fair Market Value (as
defined in this Section 12(g)) per Share exceeds the exercise
price per Share covered by such Option or (ii) for each Stock
Appreciation Right, the price determined pursuant to Section 8
hereof, except that Fair Market Value of the Shares as of the
date of exercise of the Stock Appreciation Right, as used in
clause (i) of Section 8, shall be deemed to mean Fair Market
Value for each Share with respect to which the Stock Appreciation
Right is calculated determined in the manner hereinafter referred
to in this Section 12(g). At the time of the declaration
provided for in the immediately preceding sentence, each Stock
Appreciation Right and each Option shall immediately become
exercisable in full and each person holding an Option or a Stock
Appreciation Right shall have the right, during the period
preceding the time of cancellation of the Option or Stock
Appreciation Right, to exercise the Option as to all or any part
of the Shares covered thereby or the Stock Appreciation Right in
whole or in part, as the case may be. In the event of a
declaration pursuant to this Section 12(g), each outstanding
Option and Stock Appreciation Right that shall not have been
exercised prior to the Fundamental Change shall be canceled at
the time of, or immediately prior to, the Fundamental Change, as
provided in te declaration. Notwithstanding the foregoing, no
person holding an Option or Stock Appreciation Right shall be
entitled to the payment provided for in this Section 12(g) if
such Option or Stock Appreciation Right shall have terminated,
expired or been cancelled. For purposes of this Section 12(g)
only, "Fair Market Value" per Share means the cash plus the fair
market value, as determined in good faith by the Committee, of
the non-cash consideration to be received per Share by the
shareholders of the Company upon the occurrence of the
Fundamental Change, notwithstanding anything to the contrary
provided in this Plan.
(h) OTHER BENEFIT AND COMPENSATION PROGRAMS. Payments and other
benefits received by a Participant under an Award shall not be deemed
a part of a Participant's regular, recurring compensation for purposes
of any termination, indemnity or severance pay laws and shall not be
included in, nor have any effect on, the determination of benefits
under any other employee benefit plan, contract or similar arrangement
provided by the Company or an Affiliate, unless expressly so provided
by such other plan, contract or arrangement or the Committee
determines that an Award or portion of an Award should be included to
reflect competitive compensation practices or to recognize that an
Award has been made in lieu of a portion of competitive cash
compensation.
(i) BENEFICIARY UPON PARTICIPANT'S DEATH. To the extent that the
transfer of a Participant's Award at death is permitted by this Plan
or under an Agreement, (i) a Participant's Award shall be transferable
to the beneficiary, if any, designated on forms prescribed by and
filed with the Committee and (ii) upon the death of the Participant,
such beneficiary shall succeed to the rights of the Participant to the
extent permitted by law and this Plan. If no such designation of a
beneficiary has been made, the
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Participant's legal representative shall succeed to the Awards, which
shall be transferable by will or pursuant to laws of descent and
distribution to the extent permitted by this Plan or under an
Agreement.
(j) UNFUNDED PLAN. This Plan shall be unfunded and the Company shall
not be required to segregate any assets that may at any time be
represented by Awards under this Plan. Neither the Company, its
Affiliates, the Committee, nor the Board shall be deemed to be a
trustee of any amounts to be paid under this Plan nor shall anything
contained in this Plan or any action taken pursuant to its provisions
create or be construed to create a fiduciary relationship between the
Company and/or its Affiliates, and a Participant or Successor. To the
extent any person acquires a right to receive an Award under this
Plan, such right shall be no greater than the right of an unsecured
general creditor of the Company.
(k) LIMITS OF LIABILITY.
(i) Any liability of the Company to any Participant with
respect to an Award shall be based solely upon contractual
obligations created by this Plan and the Agreement.
(ii) Except as may be required by law, neither the Company nor
any member or former member of the Board or of the Committee, nor
any other person participating (including participation pursuant
to a delegation of authority under Section 3(b) hereof) in any
determination of any question under this Plan, or in the
interpretation, administration or application of this Plan, shall
have any liability to any party for any action taken, or not
taken, in good faith under this Plan.
(l) COMPLIANCE WITH APPLICABLE LEGAL REQUIREMENTS. No certificate
for Shares distributable pursuant to this Plan shall be issued and
delivered unless the issuance of such certificate complies with all
applicable legal requirements including, without limitation,
compliance with the provisions of applicable state securities laws,
the Securities Act of 1933, as amended and in effect from time to time
or any successor statute, the Exchange Act and the requirements of the
exchanges, if any, on which the Company's Shares may, at the time, be
listed.
(m) DEFERRALS AND SETTLEMENTS. The Committee may require or permit
Participants to elect to defer the issuance of Shares or the
settlement of Awards in cash under such rules and procedures as it may
establish under this Plan. It may also provide that deferred
settlements include the payment or crediting of interest on the
deferral amounts.
13. GOVERNING LAW. To the extent that federal laws do not otherwise
control, this Plan and all determinations made and actions taken pursuant to
this Plan shall be governed by the laws of Minnesota and construed accordingly.
14. SEVERABILITY. In the event any provision of this Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of this Plan, and this Plan shall be construed and enforced
as if the illegal or invalid provision had not been included.
15. PRIOR PLANS. Notwithstanding the adoption of this Plan by the Board
and approval of this Plan by the Company's shareholders as provided by Section
12(a) hereof, the Company's 1992 Stock Incentive Plan and 1995 Stock Incentive
Plan, as the same may have been amended from time to time (the "Prior Plans"),
shall remain in effect and the Committee may continue to make grants of
performance shares, restricted stock and any other awards pursuant to and
subject to the limitations of the Prior Plans. All grants and awards heretofore
or hereafter made under the Prior Plans shall be governed by the terms of the
Prior Plans.
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APPENDIX B
TENNANT COMPANY
("CORPORATION")
RESTRICTED STOCK PLAN FOR NONEMPLOYEE DIRECTORS
("PLAN")
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1999)
1. COMPENSATION.
Members of the Corporation's board of directors (the "Board") who are
not employees of the Corporation ("Nonemployee Directors") have historically
been compensated by means of fees including: (i) an annual retainer designated
as a fixed dollar amount ("Annual Retainer") for the year which commences on the
day immediately after the date of each Annual Meeting of the Corporation's
shareholders and ends on the day of the next succeeding Annual Meeting ("Board
Year"); and (ii) meeting fees for attendance at meetings of the Board and
committees thereof. Commencing January 1, 1999, the Company will no longer pay
meeting fees to Nonemployee Directors but will compensate them solely by the
issuance of Restricted Shares (as hereinafter defined) pursuant to this Plan.
For the Board Year commencing on the day following the Annual Meeting of the
Corporation's Shareholders held in 1999, the Annual Retainer, which is intended
to compensate Nonemployee Directors for their services as directors, including
attendance at meetings, shall be $31,500.
2. PURPOSE; DEFINITIONS.
The purpose of the Plan is to provide for the issuance of shares of
the Corporation's common stock ("Shares") in lieu of the Annual Retainer, such
Shares generally to be subject to the restrictions provided herein and to be
issued at the beginning of cycles consisting of three Board Years in lieu of the
Annual Retainers for the three succeeding Board Years.
For purposes of the Plan: (i) the first business day of the Board
Years commencing in 1993, 1996, 1999, 2002, 2005 and 2008 shall each be referred
to as a "Regular Issuance Date"; and (ii) the Annual Retainers for the two
Board Years succeeding the Board Year in which a Regular Issuance Date occurs
shall be assumed to be in an amount equal to the Annual Retainer for the Board
Year in which such Regular Issuance Date occurs.
3. ISSUANCE OF RESTRICTED SHARES.
(a) In lieu of the Annual Retainers for the Board Year commencing in
1993 and the next two succeeding Board Years: (i) on the first
business day of the Board Year commencing in 1993, the Corporation
shall issue to each then incumbent Nonemployee Director, Restricted
Shares (as hereinafter defined) having a Fair Market Value (as
hereinafter defined) equal to 100% of the Annual Retainers for such
three Board Years; and (ii) on the first business day of January 1995,
the Corporation shall issue to each then incumbent Nonemployee
Director Restricted Shares having a fair market value equal to 50% of
the Annual Retainers for the remaining portion (pro-rated based on the
number of days remaining in such Board Year) of the Board Year
commencing in 1994 and the Board Year commencing in 1995.
(b) On the Regular Issuance Date in the year 1996, the Corporation
shall issue to each then incumbent Nonemployee Director, in lieu of
the Annual Retainers for the Board Year then commencing and the next
two succeeding Board Years, Restricted Shares having a Fair Market
Value equal to 150% of the Annual Retainers for such three Board
Years.
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(c) On the Regular Issuance Date in the years 1999, 2002, 2005, and
2008, the Corporation shall issue to each then incumbent Nonemployee
Director, in lieu of the Annual Retainers for the Board Year then
commencing and the next two succeeding Board Years, Restricted Shares
having a Fair Market Value equal to 100% of the Annual Retainers for
such three Board Years.
(d) With respect to any Nonemployee Director who is first elected or
appointed to the Board on a date other than the date of the Annual
Meeting of the Corporation's shareholders immediately preceding a
Regular Issuance Date, the Corporation shall issue to such Nonemployee
Director on the date following the date such Nonemployee Director's
service commences, in lieu of the Annual Retainer or Annual Retainers
for the period from the date such Nonemployee Director's service
commences until the next Regular Issuance Date, Restricted Shares
having a Fair Market Value equal to either (i) 100% of the Annual
Retainer or Annual Retainers for such period with respect to
Nonemployee Directors first elected or appointed to the Board after
the Regular Issuance Date in 1993 and on or before January 1, 1995, or
(ii) 150% of the Annual Retainer or Annual Retainers for such period
with respect to Nonemployee Directors first elected or appointed to
the Board after January 1, 1995, and before January 1, 1999, or
(iii) 100% of the Annual Retainer or Annual Retainers for such period
with respect to Nonemployee Directors first elected or appointed to
the Board on or after January 1, 1999. For this purpose, the Annual
Retainer for any fraction of a Board Year shall be pro-rated based on
the portion of the Board Year occurring from and after the date that
the Nonemployee Director's service commences.
(e) The Board may from time to time increase or decrease the
designated fixed dollar amount of the Annual Retainer, provided that
the Board shall not change the amount of the Annual Retainer for
purposes of the Plan more frequently than once every six months. For
purposes of the Plan, unless the Board designates a subsequent
effective date, any such increase or decrease in the Annual Retainer
shall be considered to be effective on the business day immediately
following the date on which the Board action was taken resulting in
such increase or decrease. If the Annual Retainer is decreased, there
shall be no adjustment in the number of Restricted Shares previously
issued pursuant to the Plan. If the Annual Retainer is increased
effective as of any date other than a Regular Issuance Date, then the
Corporation shall, on the date such increased Annual Retainer becomes
effective, issue to each then incumbent Nonemployee Director (other
than a Nonemployee Director first elected or appointed to the Board on
the date preceding the date such increased Annual Retainer became
effective), in lieu of such increased amount of Annual Retainer for
the period from the date such increased Annual Retainer became
effective until the next Regular Issuance Date, Restricted Shares
having a Fair Market Value equal to, (i) with respect to any increased
Annual Retainer for periods prior to January 1, 1999, 150% of the
amount, and (ii) with respect to any increased Annual Retainer for
periods on or after January 1, 1999, 100% of the amount by which the
Annual Retainer or Annual Retainers for such period was increased.
For this purpose, the annual retainer for any fraction of a Board Year
shall be pro-rated based on the portion of the Board Year occurring
from and after the date that the increased Annual Retainer became
effective.
(f) In order to compensate Nonemployee Directors for meeting fees
that would otherwise have been paid between January 1, 1999, and the
date of the Annual Meeting of the Corporation's Shareholders held in
1999, each
B-2
Nonemployee Director shall be issued Restricted Shares having a fair
market value as of January 1, 1999, equal to $3,500.
4. FAIR MARKET VALUE.
For purposes of converting dollar amounts to a number of Restricted
Shares: the Fair Market Value of each Restricted Share shall be equal to the
average closing price of one share of the Corporation's Shares on the NASDAQ
National Market System on the ten trading days preceding the date on which such
Restricted Shares are issued; and Restricted Shares shall be rounded to the
nearest whole share.
5. RESTRICTED SHARES.
Shares issued under Section 3 shall be restricted ("Restricted
Shares") and may not be sold, assigned, pledged, hypothecated, transferred or
otherwise disposed of (including, without limitation, transfer by gift or
donation. Such restrictions shall lapse upon the first to occur of the
following events (but only as to that number of Restricted Shares that were
issued to a Nonemployee Director in payment of the Annual Retainer for Board
Years commencing prior to such event):
(a) Death of the Nonemployee Director;
(b) Disability of the Nonemployee Director preventing continued
service on the Board;
(c) Retirement of the Nonemployee Director from the Board in
accordance with the policy of the Corporation, if any, on retirement
of Nonemployee Directors then in effect;
(d) Termination of service as a director by reason of (i) resignation
at the request of the Board, (ii) the director's failure to have been
nominated for re-election to the Board or to have been re-elected by
the shareholders of the Corporation or (iii) the director's removal by
the shareholders of the Corporation; or
(e) A change in control (as defined in Section 6) of the Corporation
shall occur.
The certificates for Shares which are subject to this Section may, at
the option of the Secretary of the Corporation, be held by the
Corporation until the lapse of restrictions as provided in this
Section, provided, however, the Nonemployee Director shall be
entitled to all voting, dividend and distribution rights for such
Shares.
Upon the occurrence of an event causing the restrictions on Restricted
Shares held by a Nonemployee Director to lapse, those Restricted
Shares held by such Nonemployee Director as to which the restrictions
do not lapse (that is, the number of Restricted Shares issued to such
Nonemployee Director in payment of the Annual Retainer for Board
Years commencing on or after the occurrence of such event) shall be
forfeited and revert to the Corporation.
6. CHANGE IN CONTROL.
For purposes of this Plan, "change in control" means:
B-3
(a) A majority of the directors of the Corporation shall be persons
other than persons
(i) For whose election proxies shall have been solicited by the
Board, or
(ii) Who are then serving as directors appointed by the Board to
fill vacancies on the Board caused by death or resignation (but
not by removal) or to fill newly-created directorships,
(b) 30% or more of the outstanding voting stock of the Corporation is
acquired or beneficially owned (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended, or any successor rule
thereto) by any person (other than the Corporation or a subsidiary of
the Corporation) or group of persons acting in concert (other than the
acquisition and beneficial ownership by a parent corporation or its
wholly-owned subsidiaries, as long as they remain wholly-owned
subsidiaries, of 100% of the outstanding voting stock of the
Corporation as a result of a merger which complies with
paragraph (c)(i) (2) hereof in all respects), or
(c) The shareholders of the Corporation approve a definitive
agreement or plan to
(i) Merge or consolidate the Corporation with or into another
corporation other than
(1) a merger or consolidation with a subsidiary of the
Corporation or
(2) a merger in which
(A) the Corporation is the surviving corporation,
(B) no outstanding voting stock of the Corporation
(other than fractional shares) held by shareholders
immediately prior to the merger is converted into cash,
securities, or other property (except (I) voting stock
of a parent corporation owning directly, or indirectly
through wholly-owned subsidiaries, both beneficially
and of record 100% of the voting stock of the
Corporation immediately after the merger and (II) cash
upon the exercise by holders of voting stock of the
Corporation of statutory dissenters' rights),
(C) the persons who were the beneficial owners,
respectively, of the outstanding common stock and
outstanding voting stock of the Corporation immediately
prior to such merger beneficially own, directly or
indirectly, immediately after the merger, more than 70%
of, respectively, the then outstanding common stock and
the then outstanding voting stock of the surviving
corporation or its parent corporation, and
(D) if voting stock of the parent corporation is
exchanged for voting stock of the Corporation in the
B-4
merger, all holders of any class or series of voting
stock of the Corporation immediately prior to the
merger have the right to receive substantially the same
per share consideration in exchange for their voting
stock of the Corporation as all other holders of such
class or series,
(ii) exchange, pursuant to a statutory exchange of shares of
voting stock of the Corporation held by shareholders of the
Corporation immediately prior to the exchange, shares of one or
more classes or series of voting stock of the Corporation for
cash, securities, or other property,
(iii) sell or otherwise dispose of all or substantially all of
the assets of the Corporation (in one transaction or a series of
transactions), or
(iv) liquidate or dissolve the Corporation.
7. FORFEITURE.
In addition to the forfeiture provided for in the final paragraph of
Section 5 hereof, if a Nonemployee Director ceases to be a Director of the
Corporation within six months after the date of an issuance of Restricted Shares
for any reason or thereafter for any reason other than upon the occurrence of
one of the events described in Section 5, then all Restricted Shares issued to
such Nonemployee Director pursuant to this Plan shall be forfeited and revert to
the Corporation.
8. FRACTIONS OF SHARES.
The Corporation shall not be required to issue fractions of Shares.
Whenever under the terms of the Plan a fractional Share would be required to be
issued, an amount in lieu thereof shall be paid in cash for such fractional
Share based upon the same Fair Market Value as was utilized to determine the
number of Shares to be issued on the relevant issuance date.
9. WITHHOLDING TAXES.
Whenever under the Plan Shares are to be issued, restrictions are to
be changed or eliminated or, in the judgment of the Corporation, it is
appropriate, the Corporation shall have the right to require the recipient to
remit to the Corporation an amount in cash sufficient to satisfy any applicable
federal, state and local withholding tax requirements.
10. GENERAL RESTRICTION.
The issuance of Shares or the delivery of certificates for such Shares
to Nonemployee Directors hereunder shall be subject to the requirement that, if
at any time the Secretary of the Corporation shall reasonably determine, in his
or her discretion, that the listing, registration or qualification of such
Shares upon any securities exchange or under any state or federal law, or the
consent or approval of any government regulatory body, is necessary or desirable
as a condition of, or in connection with, such issuance or delivery hereunder,
such issuance or delivery shall not take place unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not reasonably acceptable to the Secretary.
B-5
11. AMENDMENT; TERM; SHARES AVAILABLE.
The Board may, at any time, amend or terminate the Plan; provided that
no amendment or termination shall, without the consent of a Nonemployee
Director, reduce such Nonemployee Director's rights in respect of Restricted
Shares previously granted. No Shares shall be issued pursuant to this Plan in
lieu of any Annual Retainer for any period commencing after the Annual Meeting
of the Corporation's shareholders in 2011. Not more than 125,000 Shares may be
issued under this Plan; provided, that in the event of a recapitalization,
reclassification, stock dividend, stock split, stock combination, or other
relevant change affecting the capitalization of the Corporation, the number of
shares issuable under this Plan shall be appropriately adjusted. If at any time
there are not sufficient Shares available under this Plan to permit the issuance
of all of the Restricted Shares to be issued at such time pursuant to Section 3,
then this Plan shall automatically terminate and no further Shares shall be
issued hereunder.
12. RIGHTS UNDER PLAN.
The Plan confers no right to be nominated or elected to the Board nor
does it confer any rights to continue to serve on the Board independent of the
Corporation's by-laws and applicable public law. Prior to actual issuance of
Shares, no rights to dividends or voting rights are conferred by the Plan.
13. CONSTRUCTION AND ADMINISTRATION.
The Plan shall be construed and interpreted in accordance with
Minnesota law. The ministerial duties of administering this Plan are delegated
to the Secretary.
14. EFFECTIVENESS.
The Plan originally became effective on May 7, 1993, and was amended
and restated effective January 1, 1995. The further amendment and restatement
of the Plan, shall be effective January 1, 1999; provided, however, that the
amendment and restatement of the Plan effective January 1, 1999, and the
issuance of additional shares pursuant thereto shall be subject to approval by
the Corporation's shareholders at the Annual Meeting thereof in the year 1999.
If the Plan, as amended and restated effective January 1, 1999, is not approved
by the shareholders of the Corporation at the Annual Meeting thereof in the year
1999, then the amendment and restatement of the Plan effective January 1, 1999,
shall be null and void and any additional Restricted Shares issued pursuant
thereto, together with any dividends or distributions thereon, shall be
forfeited and revert to the Corporation.
B-6
TENNANT COMPANY
[LOGO] 701 NORTH LILAC DRIVE
P.O. BOX 1452
PROXY MINNEAPOLIS, MN
55440
TENNANT COMPANY
[LOGO] 701 NORTH LILAC DRIVE
P.O. BOX 1452
PROXY MINNEAPOLIS, MN
55440
- -------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Roger L. Hale, David C. Cox, and Andrew P.
Czajkowski, and each of them, as Proxies, each with the power to appoint his
substitute, and hereby authorizes them or any of them to represent and to vote,
as designated below, all the shares of Common Stock of Tennant Company held of
record by the undersigned on March 8, 1999, at the Annual Meeting of
Shareholders to be held on May 6, 1999, or any adjoumment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ALL PROPOSALS.
SEE REVERSE FOR VOTING INSTRUCTIONS.
---------------
COMPANY #
CONTROL #
---------------
THERE ARE TWO WAYS TO VOTE YOUR PROXY
YOUR TELEPHONE VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES IN THE SAME
MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
VOTE BY PHONE -- TOLL FREE -- 1-800-240-6326 -- QUICK***EASY***IMMEDIATE
- - Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a
week.
- - You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which are located above.
- - Follow the simple instructions the Voice provides you.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid
envelope we've provided or return it to Tennant Company, c/o Shareowner
Services,-SM- P.O. Box 64873, St. Paul, MN 55164-9397.
IF YOU VOTE BY PHONE, PLEASE DO NOT MAIL YOUR PROXY CARD
PLEASE DETACH HERE
1. TO ELECT DIRECTORS: 01 Janet M. Dolan 03 Delbert W. Johnson
02 Roger L. Hale
/ / FOR all nominees / / WITHHOLD AUTHORITY
To vote for all nominees
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED NOMINEE, WRITE
THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX PROVIDED TO THE RIGHT.)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
If elected, the nominees will serve for a term of three years.
2. TO APPROVE AND RATIFY THE TENNANT COMPANY 1999 STOCK INCENTIVE PLAN.
/ / For / / Against / / Abstain
3. TO APPROVE AND RATIFY AMENDMENTS TO AND THE RESTATEMENT OF THE TENNANT
COMPANY RESTRICTED STOCK PLAN FOR NONEMPLOYEE DIRECTORS.
/ / For / / Against / / Abstain
4. TO RATIFY THE APPOINTMENT OF KPMG PEAT MARWICK LLP as the Independent
public accountants of the corporation.
/ / For / / Against / / Abstain
5. IN THEIR DISCRETION, the PROXIES are authorized to vote upon such other
business as may property come before the meeting.
Address Change? Mark Box / /
Indicate Changes Below.
Date , 1999
-------------------
-----------------------------
-----------------------------
Signature(s) In Box
Please sign exactly as name appears to the left. When shares are held by joint
tenants, both should sign. If a corporation, please sign in full corporate name
by President or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
TENANT COMPANY
[LOGO] 701 NORTH LILAC DRIVE
P.O. BOX 1452
PROXY MINNEAPOLIS, MN
55440
TENANT COMPANY
[LOGO] 701 NORTH LILAC DRIVE
P.O. BOX 1452
PROXY MINNEAPOLIS, MN
55440
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TENNANT COMPANY PROFIT SHARING AND EMPLOYEE
STOCK OWNERSHIP PLAN VOTING INSTRUCTIONS TO TRUSTEE
I hereby instruct U.S. Bank National Association, as Trustee of the Tennant
Company Profit Sharing and Employee Stock Ownership Plan, to "vote", in the
manner specified in the Plan, at the Annual Meeting of the Shareholders of
Tennant Company (the "Company") to be held on May 6, 1999, and at any and all
adjournments of said meeting, all shares of Common Stock of the Company held in
the Plan with respect to which I have authority to direct voting.
I understand that if I complete this card and return it to the Trustee by April
16, 1999, the Trustee will vote, in accordance with my instructions, the shares
of the Company's Common Stock allocated to my account under the Plan.
The Trustee is hereby instructed to vote as indicated below on the following
proposals which are more fully described in the Company's Notice of Annual
Meeting of Shareholders and Proxy Statement dated March 25, 1999.
THESE INSTRUCTIONS, WHEN PROPERLY EXECUTED, WILL BE FOLLOWED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED PARTICIPANT. IF NO DIRECTION IS MADE, THE
TRUSTEE IS INSTRUCTED TO VOTE FOR ALL PROPOSALS.
The undersigned understands that, in accordance with the terms of the Plan,
these instructions shall be held in the strictest confidence by the Trustee and
shall not be divulged or released to any person, including officers or employees
of Tennant Company.
SEE REVERSE FOR VOTING INSTRUCTIONS.
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COMPANY #
CONTROL #
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THERE ARE TWO WAYS TO VOTE YOUR PROXY
YOUR TELEPHONE VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES IN THE SAME
MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
VOTE BY PHONE -- TOLL FREE -- 1-800-240-6326 -- QUICK***EASY***IMMEDIATE
- - Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a
week.
- - You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which are located above.
- - Follow the simple instructions the Voice provides you.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid
envelope we've provided or return it to Tennant Company, c/o Shareowner
Services,-SM- P.O. Box 64873, St. Paul, MN 55164-9397.
IF YOU VOTE BY PHONE, PLEASE DO NOT MAIL YOUR PROXY CARD
PLEASE DETACH HERE
1. TO ELECT DIRECTORS: 01 Janet M. Dolan 03 Delbert W. Johnson
02 Roger L. Hale
/ / FOR all nominees / / WITHHOLD AUTHORITY
To vote for all nominees
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED NOMINEE, WRITE
THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX PROVIDED TO THE RIGHT.)
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If elected, the nominees will serve for a term of three years.
2. TO APPROVE AND RATIFY THE TENNANT COMPANY 1999 STOCK INCENTIVE PLAN.
/ / For / / Against / / Abstain
3. TO APPROVE AND RATIFY AMENDMENTS TO AND THE RESTATEMENT OF THE TENNANT
COMPANY RESTRICTED STOCK PLAN FOR NONEMPLOYEE DIRECTORS.
/ / For / / Against / / Abstain
4. TO RATIFY THE APPOINTMENT OF KPMG PEAT MARWICK LLP as the Independent
public accountants of the corporation.
/ / For / / Against / / Abstain
5. IN THEIR DISCRETION, the Trustee or the Trustee's representative is
authorized to vote upon such other business as may property come before
the meeting.
Address Change? Mark Box / /
Indicate changes below.
Date , 1999
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Signature(s) in Box
Please sign exactly as name appears to the left.