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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement / / Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
A. O. Smith Corporation
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(Name of Registrant as Specified in Its Charter)
A. O. Smith Corporation
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(Name of Person(s) Filing Proxy Statement)Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X// / $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transactionstransaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:10-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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1 Set forth the amount on which the filing fee is calculated and state how it
was determined.
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LOGO
PROXY
P.O. BOX 23973
MILWAUKEE, WI 53223-0973
NOTICE AND PROXY STATEMENT
NOTICE OF 19941995 ANNUAL MEETING OF STOCKHOLDERS
PLEASE TAKE NOTICE that the annual meeting of the stockholders of A. O.
SMITH CORPORATION will be held on Wednesday, April 13, 19945, 1995 at 9:00 A.M. Eastern
Time, at the Hotel du Pont, 11th and Market Streets, Wilmington, Delaware for
the following purposes:
(1) To elect sixseven directors chosen by the holders of Class A Common Stock.
(2) To elect three directors chosen by the holders of Common Stock.
(3) To consider and act upon a proposal to amend the Restated Certificate
of Incorporation to increase the number of authorized shares of Class A
Common Stock from 7,000,000 to 14,000,000 shares and the number of
authorized shares of Common Stock reserved under and make certain other amendmentsfrom 24,000,000 to and
restate the 1990 Long-Term Executive Incentive Compensation Plan.60,000,000.
(4) To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for 1994.1995.
(5) To consider and vote on the stockholder proposalsproposal set forth in the proxy
statement, if properly presented at the meeting.
(6) To transact such other business and act upon such other matters which
may properly come before the meeting or any adjournments thereof.
Only holders of record of the Class A Common Stock and the Common Stock of
the Company at the close of business on February 23, 1994,22, 1995, will be entitled to
notice of and to vote at the meeting. The list of stockholders entitled to vote
at the meeting will be available as of April 1, 1994March 24, 1995 for examination by
stockholders for purposes related to the meeting at the offices of Morris,
Nichols, Arsht & Tunnell, 1201 North Market Street, Wilmington, Delaware.
YOU ARE INVITED TO ATTEND THE MEETING IN PERSON; HOWEVER, EVEN IF YOU PLAN
TO ATTEND THE MEETING IN PERSON, PLEASE TAKE A FEW MINUTES TO COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE. IF YOU
ATTEND THE MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON.
YOUR ATTENTION IS DIRECTED TO THE PROXY STATEMENT ENCLOSED WITHIN.
W. David Romoser
Secretary
March 3, 19941, 1995
3
LOGO
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P.O.P. O. BOX 23973
MILWAUKEE, WISCONSIN 53223-0973
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PROXY STATEMENT
GENERAL INFORMATION
This proxy statement is furnished to stockholders of A. O. Smith
Corporation (the "Company") in connection with the solicitation by its Board of
Directors of proxies for use at the annual meeting of stockholders of the
Company to be held on Wednesday, April 13, 19945, 1995 at 9:00 A.M., Eastern Time, at
Wilmington, Delaware.
The record date for stockholders entitled to notice of and to vote at the
meeting is the close of business on February 23, 199422, 1995 (the "Record Date"). As of
the Record Date, the Company had issued 6,084,7955,983,634 shares of Class A Common
Stock, par value $5 per share, 6,081,2975,980,174 shares of which were outstanding and
entitled to one vote each for Class A Common Stock directors and other matters.
As of the Record Date, the Company had issued 15,614,85515,716,016 shares of Common Stock,
par value $1 per share, 14,734,56914,933,247 shares of which were outstanding and entitled
to one vote each for Common Stock directors and one-tenth (1/( 1/10) vote each for
other matters.
The Notice of 19941995 Annual Meeting of Stockholders, this proxy statement,
form of proxy card and the Company's 19931994 Annual Report are being mailed on or
about March 3, 19941, 1995 to each stockholder of the Company at the holder's address
of record.
Under the Company's Restated Certificate of Incorporation, as long as the
number of outstanding shares of Common Stock is at least 10% of the aggregate
number of outstanding shares of Class A Common Stock, the holders of the Class A
Common Stock and holders of the Common Stock vote as separate classes in the
election of directors. Stockholders are entitled to one vote per share in the
election of directors for their class of stock.
A majority of the outstanding shares entitled to vote must be represented
in person or by proxy at the meeting in order to constitute a quorum for
purposes of holding the annual meeting. The voting by stockholders at the
meeting is conducted by the inspectors of election. Abstentions and broker
nonvotes are counted as present in determining whether the quorum requirement is
met.
Directors are elected by a plurality of the votes cast, by proxy or in
person, with the holders voting as separate classes. A plurality of votes means
that the nominees who receive the greatest number of votes cast are elected as
directors. Consequently, any shares which are not voted, whether by abstention,
broker nonvotes or otherwise, will have no effect on the election of directors.
With respect to the Company's proposal to amend the Restated Certificate of
Incorporation, the affirmative vote of the holders of a majority of the
outstanding shares of the Class A Common Stock and the Common Stock entitled to
vote at the meeting, each voting as a separate class, is needed for
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adoption of the proposed amendment. In addition, the proposal must be adopted by
the vote of the Class A Common Stock and the Common Stock voting together as a
single class in the manner described in the paragraph below.
For all other matters considered at the meeting, both classes of stock vote
together as a single class, with the Class A Common Stock entitled to one vote
per share and the Common Stock entitled to 1/10th vote per share. All such other
matters are decided by a majority of the votes cast. On such other 4 matters, an
abstention will have the same effect as a "no" vote but, because shares held by
brokers will not be considered to vote on matters as to which the brokers
withhold authority, a broker nonvote will have no effect on the vote.
The enclosed proxy is solicited by and on behalf of the Board of Directors
of the Company. A proxy may be revoked by the person giving it at any time
before the exercise thereof by written notice of revocation or a duly executed
proxy bearing a later date to the Secretary of the Company or by attending the
meeting and voting in person. All valid proxies not revoked will be voted unless
marked to abstain. Where a choice is specified on a proxy, the shares
represented by such proxy will be voted in accordance with the specification
made. If no instruction is indicated, the shares will be voted FOR proposals (1)
through (4) set forth in the accompanying notice and AGAINST the stockholder
proposalsproposal referenced in (5).
The cost of soliciting proxies, including preparing, assembling and mailing
the notice of meeting, proxy statement, form of proxy and other soliciting
materials, as well as the cost of forwarding such material to the beneficial
owners of stock, will be paid by the Company. In addition to solicitation by
mail, directors, officers, regular employees of the Company and others may also,
but without compensation other than their regular compensation, solicit proxies
personally or by telephone or other means of electronic communication. The
Company may reimburse brokers and others holding stock in their names or in the
names of nominees for their reasonable out-of-pocket expenses in sending proxy
material to principals and beneficial owners.
NOTE: ALL REFERENCES IN THIS PROXY STATEMENT TO NUMBER OF SHARES OUTSTANDING,
PRICE PER SHARE, STOCK OPTIONS AND EXERCISE PRICES REFLECT THE
TWO-FOR-ONE STOCK SPLIT IN THE FORM OF A 100% STOCK DIVIDEND, DECLARED BY
THE BOARD OF DIRECTORS ON JUNE 8, 1993, AND PAID ON AUGUST 16, 1993 TO
STOCKHOLDERS OF RECORD ON JULY 30, 1993.
PRINCIPAL STOCKHOLDERS
The following table shows persons who may be deemed to be beneficial owners
(within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934) of
more than 5% of any class of the Company's stock. Unless otherwise noted, the
table reflects beneficial ownership as of JanuaryDecember 31, 1994.
TITLE OF NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
CLASS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- ------------- ------------------------------------------------------------ -------------------- --------
Class A Smith Investment Company 5,378,168(1) 88.4%89.2%
Common Stock P.O. Box 23976
Milwaukee, WI 53223-0976
Common Stock Smith Investment Company 1,039,384(2) 7.1%7.0%(2)
P.O. Box 23976
Milwaukee, WI 53223-0976
Common Stock FMR Corp. and 2,665,050(3) 18.2%2,551,610(3) 17.16%
Edward C. Johnson 3d
82 Devonshire Street
Boston, MA 02109
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TITLE OF NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
CLASS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- ------------- -------------------------------- -------------------- --------
Common Stock Mitchell Hutchins Asset 755,400(4) 5.2%
ManagementInstitutional 1,261,100(4) 8.48%
Investors Inc.
1285 Avenue of the Americas
New York, NY 10019
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(1) Of the shares listed for Smith Investment Company ("SICO"), 200,000 of the
Class A Common Stock shares are held by SCAP Corporation, which is a
wholly-owned subsidiary of SICO. SICO and SCAP Corporation each have sole
voting and sole dispositive power with respect to the shares described
above.
(2) Pursuant to the Company's Restated Certificate of Incorporation dated
January 26, 1993, Class A Common Stock is convertible at any time at the
option of the holder into Common Stock on a share-for-share basis. For
purposes of computing beneficial ownership of SICO's Common Stock, assuming
that all Class A Common Stock held by SICO was converted into Common Stock,
SICO's beneficial ownership of the Common Stock is 6,417,552 shares, which
represents 32.0%31.7% of the class of Common Stock.
(3) FMR Corp. has sole voting power with respect to 570,750462,850 shares and sole
dispositive power with respect to 2,665,0502,551,610 shares and Edward C. Johnson 3d
has sole dispositive power with respect to 2,665,050 shares.2,551,610 shares, including
shares beneficially owned by Fidelity Management & Research Company (FMRC)
a subsidiary of FMR Corp., and Fidelity Magellan Fund, an investment
company for which FMRC acts as investment advisor.
(4) Mitchell Hutchins Asset ManagementInstitutional Investors Inc. has shared voting and shared
dispositive power with respect to all 755,4001,261,100 shares.
Information on beneficial ownership is based upon Schedules 13D or 13G
filed with the Securities and Exchange Commission as updated by FMR Corp. and
Mitchell Hutchins Asset Management Inc. on February 14, 1994, and any additional information
which may have been provided to the Company by any beneficial owners.
On JanuaryDecember 31, 1994, Arthur O. Smith owned beneficially 121,845 shares,
and his wife owned of record and beneficially 3,485 shares of the outstanding
capital stock of SICO; various trusts held 195,730 shares for the benefit of the
wife and issue of Arthur O. Smith. On JanuaryDecember 31, 1994, Lloyd B. Smith owned
beneficially 9,5027,002 shares of the outstanding capital stock of SICO; various
trusts held 303,503306,003 shares for the benefit of the wife and issue of Lloyd B.
Smith. In addition, Messrs. Smith were trustees of various trusts for the
benefit of persons other than themselves, their wives and issue, which trusts
held on JanuaryDecember 31, 1994 an aggregate of 524,460522,960 shares of the outstanding
capital stock of SICO. The shares of SICO held beneficially by Messrs. Smith and
their wives, together with shares held by Messrs. Smith in trust for others
comprised 69.5%69.4% of the 1,667,635 outstanding shares of capital stock of SICO on
JanuaryDecember 31, 1994. Messrs. Smith have shared investment and voting power on all
trusts for which they are co-trustees. On all other trusts, one or the other
shares trust powers with at least one other person. Messrs. Smith disclaim that
any of the foregoing interests in the capital stock of SICO constitute
beneficial ownership of any Common Stockcommon stock of the Company.
ELECTION OF DIRECTORS
NineTen directors are to be elected to serve until the next succeeding annual
meeting of stockholders and thereafter until their respective successors shall
be duly elected and qualified. Owners of Class A Common Stock are entitled to
elect 67 directors and owners of Common Stock are entitled to elect the 3
remaining directors.
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It is intended that proxies hereby solicited will be voted for the election
of the nominees named below. Proxies will not be voted for a greater number of
persons than the 910 nominees named below. All nominees have consented to being
named in the proxy statement and to serve if elected. If any nominee for
election as a director shall become unavailable to serve as a director, proxies
will be voted for such substitute nominee as may be nominated by the Board of
Directors.
Thomas F. Russell is retiring from the board and therefore will not
be standing for re-election as a director.
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The following information has been furnished to the Company by the
respective nominees for director. Each nominee has been principally engaged in
the employment indicated for the last 5 years unless otherwise stated. The Board
of Directors has designated Mr. Bruce M. Smith as a nominee for election as
director for the Class A Common Stock. All other nominees are currently serving
as directors of the Company.
NOMINEES -- CLASS A COMMON STOCK
TOM H. BARRETT -- Retired Chairman of the Board, President and Chief
Executive Officer, The Goodyear Tire & Rubber Company -- rubber products.
Mr. Barrett is 6364 years of age and has been a director of the Company since
1981. He is the chairman of the Personnel and Compensation Committee of the
Board. He was with Goodyear from 1953 to 1991. He is also a director of Air
Products and Chemicals, Inc., Fieldcrest Cannon, Inc. and Rubbermaid
Incorporated, as well as a Trustee of the Mutual Life Insurance Company of New
York and a partner in American Industrial Partners, a private investment
partnership.
GLEN R. BOMBERGER -- Executive Vice President and Chief Financial Officer.
Mr. Bomberger, 56,57, became a director and executive vice president and chief
financial officer in 1986. He is a member of the Investment Policy Committee of
the Board. Mr. Bomberger joined the Company in 1960. He is currently a director
and vice president-financepresident -- finance of SICO. He is a director of Portico Funds, Inc.
THOMAS I. DOLAN -- Retired Chairman of the Board.
Mr. Dolan, 66,67, retired as Chairman of the Board on March 31, 1992, a
position which he held since 1984. He is a member of the Audit Committee of the
Board. Mr. Dolan became chief executive officer of the Company in 1983 and
served in that capacity until 1989. He was elected president and a director in
1982. Mr. Dolan joined the Company in 1979. He is a trustee of Northwestern
Mutual Life Insurance Company.
ROBERT J. O'TOOLE -- Chairman of the Board, President and Chief Executive
Officer.
Mr. O'Toole, 53,54, became Chairman of the Board on March 31, 1992. He is a
member of the Investment Policy Committee of the Board. He was elected chief
executive officer in March 1989. He was elected president, chief operating
officer and a director in 1986. He also served as the head of the Automotive
Products Company, a division of the Company, from November 1990 until May 1992.
He was elected president, chief operating officer and a director in 1986.
Mr. O'Toole joined the Company in 1963. He is a director of Firstar Bank
Milwaukee, N.A.
DONALD J. SCHUENKE -- Retired Chairman of The Northwestern Mutual Life
Insurance Company.
Mr. Schuenke, 65,66, was elected a director of the Company in October, 1988.
He is Chairman of the Investment Policy Committee of the Board. Mr. Schuenke has
served as the chairman (non-executive)
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of Northern Telecom Limited since January, 1994, and he also serves as the
chairman (non-executive) of Northern Telecom, Inc. He was elected chairman of
The Northwestern Mutual Life Insurance Company in January 1990 and retired from
that position on January 31, 1994. He was chief executive officer of
Northwestern Mutual Life
Company from March 1983 to October 1993. Mr. Schuenke is an officer and director
of Northwestern Mutual Select Bond Fund, Inc., Northwestern Mutual Money Market
Fund, Inc., Northwestern Mutual Balanced Fund, Inc., Northwestern Mutual Capital
Appreciation Stock Fund, Inc., Northwestern Mutual Aggressive Growth Stock Fund,
Inc., Northwestern Mutual Index 500 Stock Fund, Inc., and Northwestern Mutual
Variable Life Series Fund, Inc. He is a director
of Allen-Edmonds Shoe Corporation, Badger Meter, Inc. and Federal Home Loan
Mortgage Corporation,
Northern Telecom Inc. and Northern Telecom Limited.
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7Corporation.
ARTHUR O. SMITH -- Director, Chairman and Chief Executive Officer of Smith
Investment Company.
Mr. Smith is 6364 years of age and has been a director of the Company since
1960. He is a member of the Personnel and Compensation Committee and the
Investment Policy Committee of the Board. He is chairman and chief executive
officer of SICO and the retired chairman of ASI Technologies, Inc. He was
president of SICO until July 1, 1993. Mr. Smith is the brotheruncle of Lloyd B.Bruce M. Smith,
who retired asnominee for director of the Class A Common Stock.
BRUCE M. SMITH -- President and Director of Smith Investment Company.
Mr. Smith, age 45, was elected president of SICO on July 1, 1993 and has
served as a director of SICO since July, 1983. Prior to that time he was
executive vice president of the Water Products Company, on April 7, 1993.a division of the
Company, from January, 1991 through June, 1993 and managing director of A. O.
Smith Electric Motors (Ireland) Ltd., a subsidiary of the Company, from March,
1988 through December, 1990. Mr. Smith originally joined the Company in 1978. He
is the nephew of Arthur O. Smith, a director of the Company.
NOMINEES -- COMMON STOCK
RUSSELL G. CLEARY -- Chairman and Chief Executive Officer, Cleary
Management Corporation -- a privately held business and real estate development
corporation.
Mr. Cleary is 6061 years of age and has been a director of the Company since
1984. He is a member of the Personnel and Compensation Committee of the Board.
Mr. Cleary has been chairman and chief executive officer of Cleary Management
since 1989. Formerly he was chairman, president and chief executive officer of
G. Heileman Brewing Company, Inc. and retired in December 1988. Mr. Cleary is a
director of Ecolab, Inc., Kohler Company, Heileman Holding Company and also Chairman of the
Board of First State Bancorp, Inc.
LEANDER W. JENNINGS -- Chairman and Chief Executive Officer, Jennings &
Associates -- financial management consulting.
Mr. Jennings is 6566 years of age and was elected a director of the Company
in 1987. He is a memberthe chairman of the Audit Committee of the Board. He has been
chairman and chief executive officer of Jennings & Associates since 1985. Mr.
Jennings retired as managing partner and senior operating committee member of
Peat, Marwick, Mitchell & Company in 1985. He is also a director of Fruit of the
Loom, Inc., Prime Capital Corporation, Alberto Culver Company and TEPPCO, Inc.
DR. AGNAR PYTTE -- President, Case Western Reserve UniversityUniversity.
Dr. Pytte, 61,62, was elected a director of the Company in February 1991. He
is a member of the Audit Committee of the Board. He became the president of Case
Western Reserve University in July 1987. Prior to July 1987, Dr. Pytte was the
provost at Dartmouth College where he held other academic positions since 1959.1958.
Dr. Pytte is also a director of The Goodyear Tire & Rubber Company.
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BOARD COMMITTEES
The Board of Directors of the Company serves as a committee of the whole
for designating nominees for election as director. The Board of Directors will
consider written recommendations directed to the Chairman from stockholders
concerning nominees for Director. The Board of Directors has 3 standing
committees, the Personnel and Compensation Committee, the Investment Policy
Committee and the Audit Committee. In 19931994 the Personnel and Compensation
Committee held 4 meetings, the Investment Policy Committee held 4 meetings and
the Audit Committee met 34 times. The Personnel and Compensation Committee is
responsible for establishing and administering the Company's compensation and
benefit plans for officers, executives and management employees, including the
determination of eligibility for participation in such plans. It determines the
compensation to be paid to officers and certain other selected executives. The
Investment Policy Committee is 5
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responsible for investment policy and certain
other matters for all Company retirement funds and other employee benefit funds.
The Audit Committee recommends the firm which will act as independent auditors
for the Company and has the responsibility to review audit procedures and the
internal controls of the Company.
DIRECTOR COMPENSATION
Directors other than employees of the Company, received $20,000 annually, plus expenses and $1,000 for
attendance at each Board meeting. Each Audit and Personnel and Compensation
Committee member receives $2,000 and the chairman of each receives $3,000
annually; Committee members are also entitled to $1,000 per meeting, plus
expenses. Each Investment Policy Committee member receives $2,000 and the
chairman receives $3,000 annually; Committee members are also entitled to $650$2,000
per meeting. Each member of the
Personnel and Compensation Committee receives $1,500 and the Chairman receives
$2,000 annually; Committee members are also entitled to $650 per meeting. Each
Investment Policy Committee member receives $1,500 and the chairman receives
$2,000 annually; Committee members are also entitled to $1,650 per meeting.meeting, plus expenses. Directors who are employees of the Company are not
compensated for service as directors or committee members or for attendance at
board or committee meetings. During 1993,1994, a total of 6 regular meetings of the
Board of Directors were held.
Each directorwas held; all directors attended at least 75% or more of the totalnumber
of allboard meetings held byand committee meetings, in the board and the committee(s)aggregate, on which the
director served.served as a member, with the exception of Mr. Dolan who attended 70% of
such meetings.
Certain directors have elected to defer payment of their fees under the
Corporate Directors' Deferred Compensation Plan (the "Directors' Plan"). The
Directors' Plan allows directors to defer all or a portion (not less than 50%)
of their fees until any date but not later than the year in which age 71 is
attained. Payments can be made in a lump sum or in not more than 10 annual
installments. Deferred fees earn interest based on an established prime rate.
The A. O. Smith Non-Employee Directors' Retirement Plan provides an annual
benefit for outside directors after 5 years of service and attainment of age 70.
The annual benefit amount, payable in quarterly installments, is the annual
retainer in effect at the time of retirement. Benefit payments continue for a
period equal to the number of years of service as a director, but not to exceed
10 years; all payments cease upon death of the director.
Under an agreement with the Company, Mr. Dolan is entitled to $87,500$81,250 of
term insurance in addition to the life insurance provided by the Company for its
retired salaried employees.
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SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table shows, as of JanuaryDecember 31, 1994, the Class A Common
Stock and Common Stock of the Company as well as the Class A Common Stock and
Common Stock options exercisable on or before AprilMarch 1, 1994,1995, and the common
stock of SICO beneficially owned by each Director, each Nominee for Director,
each named Executive Officer in the Summary Compensation Table and by all
Directors and Executive Officers as a group.
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COMPANY COMMON STOCK
PERCENT OF
TYPE OF AMOUNT AND NATURE OF SHARES
NAME STOCK BENEFICIAL OWNERSHIP(1) PERCENTOUTSTANDING
- ------------------------------------------------------------ ------------ ----------------------- -------------------
Tom H. Barrett -- -- --Common Stock 1,000 shares *
Glen R. Bomberger Common Stock 155,240144,540 shares(2) 1.06%*
Russell G. Cleary Common Stock 31,33232,332 shares(4) *
Thomas I. Dolan Common Stock 18,31818,118 shares *
Donald L. Dunaway Common Stock 97,710 shares(2) *
Leander W. Jennings Common Stock 1,000 shares *
Rodney A. LeMense Common Stock 10,268 shares *
Samuel Licavoli Common Stock 5,000 shares18,500 shares(2) *
Robert J. O'Toole Common Stock 418,928428,728 shares(2) 2.86%2.88%
Dr. Agnar Pytte Common Stock 2,000 shares *
Thomas F. RussellW. David Romoser Common Stock 900 shares27,055 shares(2) *
Donald J. Schuenke Common Stock 2,000 shares *
Arthur O. Smith(5) -- -- --
Lloyd B.Bruce M. Smith(5) -- -- --
All 23 Directors andMichael W. Watt Common Stock 943,5399,300 shares(2) 6.44%*
All 22 Directors, Nominees and Executive Common Stock 891,471 shares(2) 5.99%
Officers as a Group
*Represents less than one percent.
SICO COMMONCOMPANY STOCK
TITLETYPE OF AMOUNT AND NATURE OF PERCENT
NAME CLASS BENEFICIAL OWNERSHIPOWNERSHIP(1) OF CLASS
- ------------------------------------------------------------ ------------ ----------------------- -------------------
Arthur O. Smith Common Stock 121,845 shares(3) 7.31%
Lloyd B.Bruce M. Smith Common Stock 9,50220,137 shares(3) 0.57%1.20%
All 2322 Directors, Nominees and Common Stock 131,347141,982 shares 7.88%
and8.51%
Officers as a Group
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(1) Except as otherwise noted, all securities are held with sole voting and
sole dispositive power.
(2) Includes 391,800, 138,800, 75,400396,600, 128,100, 13,500, 9,300, 9,300 and 741,600720,600 shares of
Common Stock subject to options exercisable on or before AprilMarch 1, 1994,1995,
respectively for Messrs. O'Toole, Bomberger, Licavoli, Watt and DunawayRomoser and
for all Directors and Executive Officers as a group. Please refer to the
Option Grants and Option Exercise Tables for additional stock option
information.
(3) See also "Principal Stockholders." As of December 31, 1994, Mr. Bruce M.
Smith beneficially owned 17,337 shares of the outstanding capital stock of
SICO, which shares are held in a grantor trust which can be amended or
revoked by him at any time (but for which he does not have voting or
dispositive power), and his wife beneficially owned 2,800 shares of SICO as
sole custodian for the benefit of the issue of Mr. Smith. He disclaims that
any of the foregoing interests in the capital stock of SICO constitute
beneficial ownership of any common stock of the Company.
(4) Mr. Cleary has shared voting and shared dispositive power with respect to
his shares of Common Stock, including 9,04610,046 shares of Common Stock which
are held in a charitable foundation as to which Mr. Cleary disclaims any
beneficial ownership.
(5) Excludes shares beneficially owned by SICO.
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EXECUTIVE COMPENSATION
The SUMMARY COMPENSATION TABLE reflects all compensation awarded to, earned
by or paid to each of the Company's five most highly compensated Executive
Officers, including the chief executive officer, during fiscal year 1993,1994, as
well as all compensation awarded, earned or paid in the two previous fiscal
years.
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SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------
LONG TERM
COMPENSATION
------------
ANNUAL COMPENSATION COMPENSATION
- --------------------------------------------------------------------------------- ------------- AWARDS
OTHER ------------
ANNUAL OPTIONS ALL OTHER
NAME AND COMPENSATION GRANTED COMPENSATION
PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) ($)(2) (#)(3) (#)(5) ($)(2)(4)
- -------------------------------- ---- ------------- --------- ------------ ------------ ------------
Robert J. O'Toole 1994 514,992 760,000 33,764 57,800 113,762
Chairman, President and 1993 465,000 600,000 27,042 52,800 30,132
Chairman, President and98,102
Chief Executive Officer 1992 440,827 250,000 18,165 55,400 17,985
Chief Executive Officer 1991 387,510 40,000 N/A 83,000 N/A
Glen R. Bomberger 1994 292,008 295,000 25,702 17,800 53,599
Executive Vice President and 1993 282,000 265,000 22,899 16,300 18,274
Executive Vice President and47,626
Chief Financial Officer 1992 270,000 150,000 15,863 19,400 11,016
Chief Financial Officer 1991 245,016 20,000 N/A 29,000 N/A
RodneySamuel Licavoli 1994 235,000 215,000 20,930 14,700 27,340
President of A. LeMense 1993 282,000 250,000 18,616 16,300 18,274
Executive Vice President 1992 270,000 160,000 17,233 19,400 11,016
1991 245,016 80,000 N/A 29,000 N/A
Donald L. Dunaway 1993 282,000 175,000 21,165 16,300 18,274
Executive Vice President 1992 270,000 70,000 15,940 19,400 11,016
1991 245,016 15,000 N/A 29,000 N/A
Samuel LicavoliO. Smith 1993 218,335 190,000 13,167 13,500 14,148
President of A. O. Smith17,360
Automotive Products Company, 1992 132,071 175,000 72,955 31,000 45,849
Automotive Productsa division of the Company
1991Michael W. Watt 1994 200,000 165,000 12,143 10,200 85,234
President of A. O. Smith 1993 N/A N/A N/A N/A N/A
Water Products Company, 1992 N/A N/A N/A N/A N/A
a division of the Company
W. David Romoser 1994 191,667 150,000 14,460 10,200 22,206
Vice President, Secretary and 1993 N/A N/A N/A N/A N/A
General Counsel 1992 N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------
(1) Includes amounts earned during 19931994 even if deferred.
(2) Disclosure of information for years prior to 1992 is not required.
(3) ReflectsIncludes amounts of tax reimbursements.reimbursements for the following: Company car,
country club, financial counseling and executive term life insurance
premiums and reimbursement of executive payments for term life insurance
premiums.
(3) See footnote (1) in Option Grants Table.
(4) All Other Compensation includes the amount ofamounts of: (a) Company contributions
under the Profit Sharing Retirement Plan (a 401(k) plan) and contributions
under the Supplemental Benefit Plan for the 401(k) plan. Premiumsplan and (b) the value
of the non-term portion of the premiums paid on
policies underby the A. O. SmithCompany (arrived at by
treating the payment as an interest-free loan to the earliest possible date
the payment can be refunded and calculating its present value) for the
benefit of the named Executive Officers pursuant to the Executive Life
Insurance Plan, a split-dollar insurance plan. (Note: the amounts in the
Summary Compensation Table were adjusted to include amounts for (b) during
prior year). The amounts paid in 1994 are notas follows: Mr. O'Toole -- (a)
$41,405 and (b) $72,357 ; Mr. Bomberger -- (a) $23,477 and (b) $30,122 ;
Mr. Licavoli -- (a) $18,894 and (b) $8,446 ; Mr. Watt -- (a) $16,080 and
(b) $8,740 ; and Mr. Romoser -- (a) $15,410 and (b) $6,796. Also included
and do not benefitis an amount of $60,414 paid to Mr. Watt in connection with the
named Executive Officers becausecommencement of his employment with the Company has the right to the cash surrender valueand reimbursement of
the policies.
(5) See footnote (1) in Option Grants Table.moving, traveling and temporary housing expenses.
8
11
STOCK OPTION GRANTS
The table below reflects the stock option grants made under the 1990
Long-Term Executive Incentive Compensation Plan to the five named Executive
Officers during 1993.
- --------------------------------------------------------------------------------
OPTION GRANTS TABLE
- --------------------------------------------------------------------------------
Option Grants in 19931994.
- ----------------------------------------------------------------------------------------------------------------
OPTION GRANTS TABLE
- ----------------------------------------------------------------------------------------------------------------
Option Grants in 1994
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(2)
- --------------------------------------------------------------------------- ----------------------------------------------------------------
% OF
TOTAL
OPTIONS
OPTIONS GRANTED EXERCISE
GRANTED(1) TO ALL PRICE EXPIRATION 0% 5% 10%
NAME (#) EMPLOYEES ($/SH) DATE ($) ($) ($)
- ----------------------------- ------------- ---------- --------- -------- ---------- --- ----------- ----------------------- ------------
Robert J. O'Toole
Chairman, President and
Chief Executive Officer 52,800 28.00% $27.5057,800 32.58% $25.81 10/12/0311/04 $0 $ 914,760939,845 $ 2,308,6802,371,990
Glen R. Bomberger 16,300 8.65% 27.5017,800 10.03% 25.81 10/12/0311/04 0 282,398 712,718
Rodney A. LeMense 16,300 8.65% 27.50 10/12/03 0 282,398 712,718
Donald L. Dunaway 16,300 8.65% 27.50 10/12/03 0 282,398 712,718289,433 730,475
Samuel Licavoli 13,500 7.17% 27.5014,700 8.29% 25.81 10/12/0311/04 0 233,888 590,288
--------- --------- --- ----------- -----------239,026 603,257
Michael W. Watt 10,200 5.75% 25.81 10/11/04 0 165,855 418,587
W. David Romoser 10,200 5.75% 25.81 10/11/04 0 165,855 418,587
------- ----- -- ------------ ------------
Totals 115,200 61.15%110,700 62.40% N/A N/A $0 $ 1,995,8401,800,014 $ 5,037,120
--------- --------- --- ----------- -----------
--------- --------- --- ----------- -----------4,542,896
======= ===== == ============ ============
All Stockholders (20,686,866(20,905,621
shares of Class A Common
Stock and Common Stock) N/A N/A N/A N/A 0 $358,399,953 $904,506,980$339,931,669 $857,922,784
Named Executive Officers' %
of Total Stockholders
Equity N/A .56%.53% N/A N/A 0 .56% .56%
.53% .53%
- --------------------------------------------------------------------------------
(1) The 1993All options were granted by the Board of Directors subject to and
contingent upon stockholder approval at the 1994 annual meeting of the
proposed amendment to increase the authorized shares forunder the 1990 Long-Term Executive Incentive
Compensation Plan. All options granted were options to
acquire Common Stock. The options were granted on 10/12/9311/94 as options to
acquire Common Stock and are first exercisable on 10/11/94.10/95. An additional
option to acquire Common Stock was granted on 12/13/94 and is first
exercisable on 12/12/95. All options were granted at market value on the
date of grant.grant and have a 10 year term.
(2) The dollar values in these columns represent assumed ratesASSUMED RATES of appreciation
only, over the 10-year option term, at the 5% and 10% rates of appreciation
set by the Securities and Exchange Commission rules as well as a 0%
increase in value. These amounts are not intended to predict or represent
possible future appreciation of the Company's Common Stock value. Actual
gains, if any, on stock option exercises and Common Stock holdings depend
on future performance of the Company's Common Stock and overall stock
market conditions.
9
12
OPTION EXERCISES AND YEAR-END VALUES
The table includes information related to options exercised by the five
named Executive Officers during fiscal year 19931994 and the number and value of
options held at the end of the fiscal year.
- --------------------------------------------------------------------------------
OPTION EXERCISES AND YEAR-END VALUE TABLE
- --------------------------------------------------------------------------------
Aggregated Option Exercises in Fiscal Year 1993,1994, and December 31, 19931994 Option
Values
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 19931994 (#) DECEMBER 31, 19931994 ($)(1)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------------------------- --------------- ------------ ----------- ------------- ----------- -------------
Robert J. O'Toole
Chairman, President
and Chief Executive
Officer 48,000 $1,413,611 396,600 57,800 $ 5,401,264 $ 0
Glen R. Bomberger 27,000 $ 768,196 128,100 17,800 $ 1,783,413 $ 0
Samuel Licavoli 0 $ 0 391,800 52,800 $10,649,05013,500 14,700 $ 435,600
Glen R. Bomberger 0 $ 0
138,800 16,300Michael W. Watt 0 $ 3,790,412 $ 134,475
Rodney A. LeMense(2) 76,900 $1,857,757 0 16,3009,300 10,200 $ 0 $ 134,475
Donald L. Dunaway 16,7000
W. David Romoser 10,600 $ 363,720 105,400 16,300163,643 9,300 10,200 $ 2,830,162 $ 134,475
Samuel Licavoli 31,000 $ 525,412 0 13,500 0 $ 111,3750
- --------------------------------------------------------------------------------
(1) Based on the difference between the option exercise price and the closing
price on the AmericanNew York Stock Exchange of $35.75$24.50 for the Common Stock on
December 31, 1993.
(2) Mr. LeMense is retiring on March 31, 1994.
- --------------------------------------------------------------------------------
PENSION PLAN TABLE(1)
- --------------------------------------------------------------------------------
YEARS OF SERVICE(3)
---------------------------------------------------------
REMUNERATION(2) 10 20 25 30 35
- --------------- ------- ------- ------- -------- --------
$150,000 $21,008 $42,016 $52,520 $ 125,000 $18,864 $37,728 $47,16063,024 $ 56,593 $ 66,025
150,000 22,864 45,728 57,160 68,593 80,025
175,000 26,864 53,728 67,160 80,593 94,025
200,000 30,864 61,728 77,160 92,593 108,025
225,000 34,864 69,728 87,160 104,593 115,641*
250,00073,528
175,000** 23,693 47,488 59,385 71,282 83,179
200,000** 26,899 54,255 67,933 81,610 95,288
225,000** 30,104 61,021 76,480 91,939 107,397
250,000** 33,178 67,512 84,678 101,845 118,800*
275,000** 34,913 71,173 89,303 107,433 118,800*
300,000
and Above** 36,599 73,197 91,496 109,796 115,641*35,217 71,816 90,115 108,414 118,800*
- --------------------------------------------------------------------------------
* Maximum annual benefit payment in 19931994 is $115,641.$118,800.
** Maximum allowable salary that can be used in benefit calculation for 19931994 is
$235,840.$150,000.
(1) The Pension Plan Table shows estimated annual benefits payable to an
executive officer upon retirement under the A. O. Smith Retirement Plan,
assuming retirement at year-endDecember 31, 1994, at age 65 and based upon specifiedthe
final compensation and years of service set forth in the Table.Table and based on
compensation increases of 4% each year. Benefit amounts were computed on a
straight-life annuity basis and are not subject to any deduction for Social
Security amounts.
10
13
(2) The compensation covered by the Plan is based on the average of the highest
5 years of annual compensation out of the last 10 years prior to retirement.
The amount included in the calculation of compensation, as reflected in the
Summary Compensation Table, is Salary. Compensation covered by the Plan does
not include Bonus, Other Annual Compensation, Long Term Compensation or All
Other Compensation amounts.
(2)(3) Messrs. O'Toole, Bomberger, LeMense, DunawayLicavoli, Watt and LicavoliRomoser had 30, 33,31, 34, 302, 1 and
12 years of service, respectively, at year-end.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with the Company's Executive Life Insurance Plan, some of the
life insurance policies were purchased from Northwestern Mutual Life Insurance
Company. Mr. Schuenke, a director of the Company, was the chief executive
officer until September 30, 1993 and chairman of
Northwestern Mutual until January 31, 1994 of
Northwestern Mutual.1994. The total amount paid by the Company
in 19931994 with respect to the policies was $648,482.$465,370.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The directors who served as members of the Personnel and Compensation
Committee Members during fiscal year 19931994 are: Tom H. Barrett, Russell G. Cleary Lloyd B. Smith,and
Arthur O. Smith and Thomas I. Dolan. Mr. Dolan, who
became a committee member on April 9, 1992, was Chairman of the Board of
Directors of the Company until March 31, 1992, and formerly was chief executive
officer and president until March 1989. Mr. Dolan resigned from the Personnel
and Compensation Committee on December 14, 1993. Mr. Lloyd B. Smith was formerly
chief executive officer, chairman and president of the Company until his
retirement as chairman in 1984. Mr. L. B. Smith retired from the Personnel and
Compensation Committee and the Board of Directors of the Company on April 7,
1993.Smith.
Mr. Arthur O. Smith is an executive officer and a director of SICO. Mr.
Lloyd B. Smith retired as director and executive officer of SICO in May 1993.
During
1993,1994, the Company provided SICO consulting services, office space, directors',
officers' and group insurance coverage and other miscellaneous services. The
Company was reimbursed by SICO in the amount of $163,967$119,080 for the Company's costs
relating to such services. Mr. Arthur O. Smith is a director of the Company and
served on the Personnel and Compensation Committee of the Company in 1993. Mr. Lloyd B. Smith served as a director of the Company and
member of the Personnel and Compensation Committee until his retirement in April
1993.1994. Mr.
Glen R. Bomberger, an executive officer and a director of the Company, is also a
director and vice president-financepresident -- finance of SICO and served as a member of the
compensation committee of SICO. Mr. Bruce M. Smith, an executive officer and
director of SICO, is a nominee for election as a director of the Company.
BOARD PERSONNEL AND COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Personnel and Compensation Committee (the "Committee") of the Board of
Directors is responsible for establishing an executive compensation program and
for administering the executive compensation policies and plans of the Company.
The Committee also determines the amount of compensation which the Company's
chief executive officer and other executive officers receive annually.
11
14
The Committee consists of fourthree members, each of whom is an outside
director of the Company. This report was prepared by the Committee to provide
the Company's stockholders with a summary of its executive compensation policies
and practices.
The Committee has two primary objectives relating to the Company's
executive compensation program. The first is to recruit and retain high quality
executive leadership which is committed to achieving the current and long term
successful and profitable operations of the Company's businesses. The other is
to maintain an incentive compensation program which links executive pay to the
Company's return on investment.
In order to achieve these objectives, the Committee provides an executive
compensation program at a level competitive with other comparably sized manufacturing
companies. The Committee believes that return
11
14
on investment provides the best measure of performance because it closely
correlates the benefits to the stockholders with the financial incentives for
the executives. The Committee has established ranges for financial incentives
based upon return on investment, with smaller incentive payments for a modest
return on investment and larger incentive payments for greater returns.
The Company's executive compensation program consists of three components:
base salary, short term incentive (bonus) compensation and long term incentive
(stock options) compensation. In settingdetermining the executive compensation
practices,
for the Company, the Committee compares the Company's executive compensation program
with other companies' compensation programs for executives with similar
management responsibilities. The companies surveyed include manufacturing
businesses of similar size and the companies reflected in the Dow Auto Index,
one of the comparables used in the Company's Performance Graph. The Committee
annually reviews executive compensation data bases and also from time to time
uses independent compensation consultants and executive
compensation data bases for purposes of evaluating and
reviewing the Company's executive compensation program.
The Committee has designated certain executives, including the chief
executive officer ("CEO"), for compensation under the executive compensation
program in accordance with the performance criteria and standards described
below.
BASE SALARY
The Committee establishes competitive salary ranges for the executive
officers, generally above the median level of the salary ranges in the survey
referred to above. In addition, the Committee reviews each executive's
performance and accomplishments during the prior year as well as experience and
service with the Company in determining the annual base salary level for the
executive within the applicable salary range. In 1994, this methodology was
followed in establishing base salaries for the executive officers.
SHORT TERM INCENTIVE COMPENSATION
Short term incentive compensation is provided under the Executive Incentive
Compensation Plan ("EICP"). The EICP, consistent with the Company's philosophy
of linking compensation to the Company's return on investment, provides an
opportunity for executives to earn a cash bonus, the amount of which is based
upon the Company's and/or the operating unit's return on investment. Each year
the Committee sets minimum and maximum financial objectives for each of the
business units and the corporation. Achievement of these financial objectives by
the business or corporate units determines the amount of the Incentive
Compensation Fund available for the award of individual executive bonuses.
12
15
Incentive compensation, while predicated on the executive's unit meeting
its financial objective, is also based upon achievement of strategic objectives
established each year for the executive. OfIn determining the funds available, distributionamount of approximatelyincentive
compensation award to be paid to an individual executive, the Committee
considers the executive's scope of responsibility, contributions to profit
improvement and attainment of the individual's strategic objectives.
Approximately half of the incentive compensation award distributed to the
individual executive is based on the return on investment of the executive's
business unit and theis formula-based between maximum and minimum target
achievement. The other half of the award is based upon accomplishment of the
executive's strategic objectives, such as development of personnel, planning,
maintenance of product leadership, continuous improvement programs and product
and process research and development.
In determining the amount of incentive compensation to
be paid to an individual executive, the Committee considers the executive's
scope of responsibility, contributions to profit improvement and attainment of
the individual's strategic objectives. The Committee assigns relative weight
values to these factors.12
15
The maximum amount of incentive compensation payable to an executive during
any year is 200% of base salary. In order to be eligible for incentive
compensation, executives are required to enter into annual contracts (standard
incentive plan contracts required for all plan participants) which obligate them
to remain in the employment of the Company for the year.
During 1993,1994, the Company had a record return on investment and most of the
operating units achieved satisfactory levels of return on investment.
Accordingly, the Committee made incentive compensation awards to the
participating executives based on the factors described above.
LONG TERM INCENTIVE COMPENSATION
The Committee utilizes the shareholder approved 1990 Long-TermLong Term Executive
Incentive Compensation Plan ("LTEICP") as another key component in carrying out
the Company's philosophy of linking the executive compensation program to the
stockholders' interests. The LTEICP consists of stock options which are granted
annually to the executives at the current market price of the stock on the date
of the grant. The size of the option grant to the executive is established at a
level commensurate with the median level of grants for the executive's position
as reported in the aforementioned survey data and studies by independent
compensation consultants referred to above are utilized by the Committee in determining the
size of the option grants to the executives.consultants. Pursuant to the LTEICP, executives enter into stock option agreementsstandard
plan contracts each year which reflect the specific terms of the stock option
grants and terms of forfeiture should the executive leave the employment of the
Company.
CEO COMPENSATION
The Committee, in establishing the 19931994 compensation program for the Chief
Executive Officer, Robert J. O'Toole, employed the methodology, surveys and
study conducted by an independent consulting firm previously described in this
report. In setting Mr. O'Toole's base salary for 1993 was established by1994, the Committee after reviewingreviewed
his accomplishments during the prior year, experience, and
service with the Company
and determined to position it above the median level of salaries of chief
executive officers of similar sized manufacturing companies. Mr. O'Toole's bonus
compensation for 19931994 was directly related to the Company's record return on
investment earned by the Company.Company and reflected Committee set minimum and maximum
objectives. The maximum amount of bonus compensation payable to Mr. O'Toole is
200% of base salary. The Committee made stock option grants to Mr. O'Toole under
the LTEICP consistent with the methodology utilized in making grants to the
other participating executives.
CONCLUDING REMARKS
The Committee reviewed executive compensation during 19931994 and concluded
that the stockholders' interests were well served by the executive compensation
program. The Committee will continue to monitor and evaluate its executive
compensation program on an ongoing basis and make any adjustments determined to be appropriate. The
proposed regulations issued by the Internal Revenue Service which implementhas to date only issued partial regulations
implementing the new deduction limitations for executive compensation are
being studied
13
16
and thecompensation. The
Committee intends, subject to review various alternatives for preservingthe limited guidance of the regulations, to
preserve the deductibility of executive compensation.
PERSONNEL & COMPENSATION COMMITTEE
Tom H. Barrett, Chairman
Russell G. Cleary, Member
Arthur O. Smith, Member
Thomas I. Dolan, Member Russell G. Cleary, Member13
16
PERFORMANCE GRAPH
The graph below shows a five year comparison of the cumulative shareholder
return on the Company's common stock with the cumulative total return of
companies on the S&P 500 Composite Index and the Dow Automotive Index (without
tire and rubber), both of which are published indexes.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
from DecemberFROM DECEMBER 31, 1988 to December1989 TO DECEMBER 31, 19931994
(ASSUMES $100 INVESTED WITH REINVESTMENT OF DIVIDENDS)
Dow Automotive
Measurement PeriodMEASUREMENT PERIOD DOW AUTO W/O
(FISCAL YEAR COVERED) A. O. SMITH S&P 500 Index (without
(Fiscal Year Covered) CORPORATION Composite Index Tire and Rubber)
- --------------------- ----------- --------------- ----------------TIRE & RUBBER
12/31/88 $100.00 $100.00 $100.00
12/31/89 88.72 131.64 98.77100.00 100.00 100.00
12/31/90 110.57 127.53 86.80124.64 96.80 87.88
12/31/91 135.47 166.43 106.59152.65 126.42 107.92
12/31/92 296.34 179.15 136.74333.89 136.16 138.44
12/31/93 570.53 197.20 178.94
Assumes $100 invested with reinvestment of dividends643.03 149.91 181.18
12/30/94 448.44 151.89 159.07
14
17
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors and Executive Officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and the New York and American Stock Exchange.Exchanges. Executive Officers, Directors and
greater than ten percent shareholders are required by SEC regulations to furnish
the Company with copies of all Section 16(a) Forms 3, 4 and 5 which they file.
Based solely on its review of the copies of such forms received by the
Company and written representations from certain reporting persons during fiscal
year 1993,1994, the Company believes that all filing requirements applicable to its
Executive Officers, Directors and greater than ten percent beneficial owners
were met.
AMENDMENTS14
17
BOARD OF DIRECTORS PROPOSAL TO AMEND RESTATED
CERTIFICATE OF INCORPORATION TO INCREASE
AUTHORIZED CLASS A COMMON STOCK AND RESTATEMENT OF THE 1990
LONG-TERM EXECUTIVE INCENTIVE COMPENSATION PLAN
GENERALCOMMON STOCK
The Board of Directors has proposed amendmentsan amendment to Article 4 of the
1990 Long-Term Executive Incentive
Compensation Plan (the "Plan") wouldCompany's Restated Certificate of Incorporation to increase the number of
authorized shares of Class A Common Stock from 7,000,000 to 14,000,000 shares
and authorized shares of Common Stock authorizedfrom 24,000,000 to 60,000,000 shares. As
of December 31, 1994, 6,035,541 shares of Class A Common Stock were issued (of
which 6,032,081 were outstanding and 3,460 shares were held in the Company's
treasury), leaving a balance of 964,459 unissued shares of Class A Common Stock.
As of December 31, 1994, 15,664,109 shares of Common Stock were issued (of which
14,873,540 were outstanding and 790,569 shares were held in the treasury) and
1,623,200 shares are reserved for issuance upon the exercise or grant of stock
options under the Plan by reserving an additional 1,000,000Company's stock option plan, and 6,035,541 shares add
a provision to limit the maximum numberare reserved
for issuance upon conversion of shares available for option grants to
any participant in any Plan year to 150,000 shares, and restate the Plan to
reflect these amendments and certain stock changes made during 1993 (the
"Proposed Amendments"). The Plan, effective January 1, 1990, was originally
approved by the stockholders at the 1990 annual meeting, after being approved
and adopted by the Board of Directors on October 10, 1989. The Plan superseded
and replaced, as of the effective date, the 1980 Long-Term Executive Incentive
Compensation Plan. The text of the Plan, as proposed to be amended and restated,
is set forth on Exhibit A hereto and the description of the Plan which appears
herein is qualified in its entirety by reference to such text.
On February 23, 1994, the per share closing price of both the Class A Common Stock and theinto Common Stock,
onleaving a balance of 677,150 unissued shares of Common Stock. No shares of
Preferred Stock are currently issued and outstanding.
Due to the American Stock Exchange was $36.50.
VOTE REQUIRED
The affirmative votelimited number of a majority of the votes of the shares of Class A Common Stock and Common
Stock outstandingavailable for issuance, the Board of Directors has declared it advisable
that the Restated Certificate of Incorporation be amended, subject to approval
by the stockholders, to increase the aggregate number of shares which the
Company has the authority to issue from 34,000,000 to 77,000,000 shares
(14,000,000 shares of Class A Common Stock, 60,000,000 shares of Common Stock,
and entitled to vote at3,000,000 shares of Preferred Stock). The Board recommends that the
meeting is
required for approvalstockholders approve the amendment of the Proposed Amendments. Refer to the General
Information Section on pages 1 and 2first paragraph of Article 4 of the
proxy statement forCompany's Restated Certificate of Incorporation so that, as amended, it shall
read as follows:
"The aggregate number of shares which the corporation has the
authority to issue shall be seventy-seven million (77,000,000) shares,
consisting of:
(a) fourteen million (14,000,000) shares designated as "Class A
Common Stock," with a more detailed
discussionpar value of the vote required. SICO, which on the Record Date had the right to
vote approximately 72.6%Five Dollars ($5) per share;
(b) sixty million (60,000,000) shares designated as "Common Stock,"
with a par value of the outstandingOne Dollar ($1) per share; and
(c) three million (3,000,000) shares designated as "Preferred
Stock," with a par value of One Dollar ($1) per share."
The additional shares of Class A Common Stock and Common Stock (see "Principal Shareholders" herein) has advisedfor which
authorization is sought would be part of existing classes and, if and when
issued, would have the Company that it will
vote all suchsame rights and privileges as the outstanding shares for approval of the Proposed Amendments. Accordingly,
approval of the Proposed Amendments is assured. The Board of Directors
recommends that stockholders vote FOR approval of the Proposed Amendments.
PURPOSE
The Plan, under which options may be granted until December 31, 1999, was
adopted to permit the Company to attract and retain executive personnel
possessing outstanding ability; to motivate executive
15
18
personnel by means of growth-related incentive to achieve long-range growth
goals; to provide incentive compensation opportunities competitive with other
major corporations; and to further the identity of interest of participants with
those of the Company's stockholders through opportunities for increased stock
ownership.
STOCK SUBJECT TO THE PLAN
The Plan currently reserves 1,000,000 shares of authorized
Class A Common Stock and Common Stock, respectively, would have. Holders of
Class A Common Stock and Common Stock would not have the preemptive right to
subscribe for and purchase any part of any new or treasury shares for issuanceadditional issue of stock or
securities convertible into stock.
Upon adoption of the proposed amendment, under the Plan. AsDelaware General
Corporation Law the Board of February 23, 1994, 25,400Directors would be authorized to issue additional
shares remained availableof Class A Common Stock, Common Stock and Preferred Stock at such time or
times, to such persons and for future grantssuch consideration as it may determine without
stockholder approval. The Board would have the authority, as it has now, to fix
the number of options.shares in each series of Preferred Stock, the designations
thereof, and the terms of each series including the dividend rights, redemption
and retirement provisions, liquidation preferences and other
15
18
rights and restrictions. In order to minimize dilution of the voting control
exercised by SICO, and to further increase the liquidity of the Common Stock,
the Company currently believes that it is more likely to issue additional Common
Stock and Preferred Stock than Class A Common Stock in the future. The Proposed Amendments reserve an additional 1,000,000increase
in the number of authorized shares of Class A Common Stock and Common Stock
would enable the Company, as the need may arise, to take timely advantage of
market conditions and the availability of favorable opportunities without the
delay and expense of holding a meeting of stockholders.
The purpose of increasing the number of authorized shares of Common Stock
and limit any future option grantsis to Common Stock. The proposed
increase reflects the needmake additional stock available for additional sharesissuance for options which may be
granted in 1994 and subsequent years and which were granted in 1993 subject to
stockholder approval. The Plan provides for adjustments to reflect future stock
dividends (other than in lieu of an ordinary cash dividend), split-ups,
recapitalizations, reorganizations, combinations of shares, mergers,
consolidations and the like.
AWARDS UNDER THE PLAN
Certain of the options under the Plan are designed to qualifysuch corporate purposes
as incentive
stock options under Section 422A of the Internal Revenue Code of 1986
("Incentive Stock Options") and the remainder of the options under the Plan are
non-statutory options, i.e., options that are not Incentive Stock Options. All
options already granted under the Plan are non-statutory options.
The Plan is administered by the Personnel and Compensation Committee of the Board of Directors consistingmay determine in its discretion, including, without
limitation, future public offerings, acquisitions, investment opportunities,
incentive compensation, stock splits, stock dividends or other distributions,
warrants or rights and other corporate purposes. The purpose of not less than three members of the Board who
are not, and for one year, have not been eligible to be participants in the Plan
(the "Committee"). The Committee has authority to interpret the provisions of
the Plan, determineincreasing the
number of authorized shares of Class A Common Stock is to provide sufficient
stock subjectfor future stock splits and stock dividends. The Company does not have any
present plans or intentions to each option and
prescribe when the options may be exercised and any limitations upon the
exercise of options or any restrictions upon transferability of shares acquired
pursuant to the exercise of options. The Plan gives the Committee authority to
allow payment of the option price of any option granted under the Plan with
previously acquiredissue shares of stock.
Options are granted to purchase Common Stock at fairor Class A Common
Stock. The Company may, however, issue additional shares of Common Stock in the
future if favorable opportunities arise and if market value onconditions and the
date of grant, as reasonably determined by the Committee. The Proposed
Amendments limit the maximum number of shares available for option grants to any
Plan participant in any Plan year to 150,000 shares. Options may be granted for
a period of not less than eleven months and twenty-nine days nor more than ten
years. The aggregate fair market value, determined as of the time of grant, of
stock with respect to which any Incentive Stock Option granted under the Plan or
any other planeconomic position of the Company is exercisable for the first time by a participant
during any calendar year may not exceed $100,000.
ELIGIBILITY
Key employees (including executive officers) of the Company, its
subsidiaries and affiliated corporations in which the Company has an equity
interest ("affiliated subsidiaries") are eligible to receive options under the
Plan. It is expected that participation in the future will be limited as it has
been in the past to present and future executives of the Company, its
subsidiaries and affiliated subsidiaries. Currently, the number of such
individuals is 16.
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EXERCISE OF OPTIONS
Options granted under the Plan are exercisable on such date(s) and during
such period andappropriate for such numberan issuance.
The issuance of any additional shares as shall be determined by the
Committee pursuant to the provisions of the agreement evidencing such option,
subject to the provisions of the Plan.
FEDERAL INCOME TAX CONSEQUENCES
In general, a participant will not recognize any regular federal taxable
income at the time of grantClass A Common Stock, Common Stock
or exercise of an IncentivePreferred Stock Option. If the
participant holds the stock acquired through exercise of an Incentive Stock
Option for at least one year from the date of exercise and at least two years
from the date of grant, upon sale the difference between the amount realized and
the option price of the stock will be taxed as long-term capital gain or loss
and the Company will not be entitled to any deduction with respect to the
exercise of the option. If these holding periods are not satisfied, at the time
of disposition the amount by which the fair market value of the stockmay, depending on the date of exercise exceeds the option price will be taxed as ordinary income to
the participant and will be deductible by the Company. Any additional gain will
be treated as a capital gain. The amount of ordinary income (and the Company's
deduction) is limited to the excess of the amount realized over the option
price.
The exercise of an Incentive Stock Option can resultcircumstances in a federal
alternative minimum tax liability. In calculating a participant's alternative
minimum tax, an Incentive Stock Option is treated as a non-statutory stock
option. A participant pays the federal alternative minimum tax when it exceeds
the regular federal tax liability for the same year.
The grant of non-statutory options will not result in any federal taxable
income to participants. Upon exercise, the amount by which the fair market value
of the stock acquired exceeds the option price will be taxed as ordinary income
to the participant and will be deductible by the Company. Upon sale of the
stock, the difference between the amount realized and fair market value used to
calculate gain at exercise will give rise to capital gain or loss.
In general, a participant will not recognize income or loss on shares of
Company stock used to acquire shares of stock covered by an option. However, if
the shares delivered in payment of the option price were previously acquired by
the participant through an Incentive Stock Option or under certain other types
of employee plans, and if the applicable holding period requirements for such shares are
not satisfied, income will be recognized as described above forissued, have the early dispositioneffect of Incentive Stock Options.
The foregoing discussion is not a complete discussiondiluting the equity of allexisting holders and the
federal
income tax aspectsearnings per share of the Plan. Someexisting shares of the provisions contained in the Internal
Revenue Code of 1986 have only been summarized, and additional qualifications
and refinements are contained in regulations issued by the Internal Revenue
Service.
FUTURE AMENDMENTScommon stock. The Board of Directors
without furtherdoes not plan to seek stockholder approval prior to any issuance of additional
shares unless required by law or the rules of the New York Stock Exchange,
American Stock Exchange or any other stock exchange on which stock of the
Company may be listed.
If the proposed amendment is adopted by the stockholders may
amend the Plan from time to time in such respects as the Board deems advisable,
except that, without prior approval of the stockholders, no amendment may
increase the maximum numberCompany, it
will become effective upon filing and recording a Certificate of shares which may be awarded or for which options
may be granted under the Plan; reduce the minimum option price which may be
established under the Plan; extend the termAmendment of
the Plan; change or add toRestated Certificate of Incorporation as required by the classesGeneral Corporation
Law of employees
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eligible to receive options; or withdraw the authority to administer the Plan
from the Committee. No amendment will, without the participant's consent, alter
or impair any of the rights or obligations under any option previously granted
to him under the Plan.
PLAN BENEFITS AS A RESULT OF AMENDMENT
A. O. Smith Corporation 1990 Long-Term Executive Incentive Compensation Plan
DOLLAR NUMBER OF
NAME AND POSITION VALUE ($) UNITS(1)
------------------------------------------ --------- ----------------
Robert J. O'Toole -- 52,800 shares
Chairman, President and of Common Stock
Chief Executive Officer
Glen R. Bomberger -- 16,300 shares
Executive Vice President and of Common Stock
Chief Financial Officer
Rodney A. LeMense -- 16,300 shares
Executive Vice President of Common Stock
Donald L. Dunaway -- 16,300 shares
Executive Vice President of Common Stock
Samuel Licavoli -- 13,500 shares
President of A. O. Smith of Common Stock
Automotive Products Company,
a division of the Company
Current Executive Officers -- 177,200 shares
as a Group (14 persons) of Common Stock
Non-Executive Officer -- 11,200 shares
Employees as a Group (2 persons)(2) of Common Stock
- ----------------
(1)Delaware.
The options were granted by the Board of Directors on October 12, 1993,
subjectrecommends a vote FOR the proposal to approval byamend the
stockholders at the April 13, 1994 Annual
Meeting. See footnote(1) in Option Grants Table.
(2) Non-employee DirectorsRestated Certificate of the Company are not eligible to participate in
the Plan. No associates of any Directors, Executive Officers or nominees
are eligible to participate in the PlanIncorporation, as set forth above, and no other person received oryour proxy will
receive 5% of such options.be so voted unless you specify otherwise.
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Company has appointed Ernst & Young LLP,
Certified Public Accountants, as the Company's independent auditors for 1994.1995.
The action of the Board of Directors was taken upon the recommendation of its
Audit Committee.
Although not required to be submitted to a vote of the stockholders, the
Board of Directors believes it appropriate to obtain stockholder ratification of
the Board's action in appointing Ernst & Young LLP as the Company's independent
auditors. Should such appointment not be ratified, the Board of Directors will
reconsider the matter. A representative of Ernst & Young LLP is expected to be
present at the annual meeting of stockholders and available to respond to
appropriate questions and he will have the opportunity to make a statement if he
desires to do so and is expected to be available to respond to
appropriate questions.
18so.
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STOCKHOLDER PROPOSALS
The Company has received proposalsa proposal from two stockholdersone stockholder who havehas informed
the Company of their intentionshis intention to present the proposed resolutionsresolution at the annual
stockholders meeting. Mr. John J. Gilbert, 1165 Park Avenue, New York, New York
10128-1210, has submitted a proposed resolution on cumulative voting inrotating the electionlocation of directors.the
annual shareholder meeting. Mr. Gilbert is the owner of 100 shares of Common
Stock and 200 shares of Class A Common Stock of the Company. The Adrian Dominican
Sisters, 1257 East Siena Heights Drive, Adrian, Michigan 49221, have submitted a
proposed resolution relatingCompany, and he serves as
co-trustee with respect to maquiladora operations. The Adrian Dominican
Sisters are the owners200 shares of 25,000 shares ofClass A Common Stock of the Company.
The proposed resolutionsresolution and the statementsstatement in support thereof areis presented
below as received from the stockholders.stockholder. The Board of Directors has recommended votesa
vote against boththe stockholder proposalsproposal for the reasons discussed in the Company's
responses.response.
STOCKHOLDER PROPOSAL
ON
CUMULATIVE VOTING INTO ROTATE THE ELECTIONLOCATION
OF DIRECTORSTHE ANNUAL MEETING OF STOCKHOLDERS
RESOLVED, that the stockholders of A. O. Smith Corporation, assembled in
annual meeting in person and by proxy, hereby request that the Board of
Directors to
take the necessary steps necessary to provide for cumulative voting inrotate the electionlocation of directors, which means each stockholder shall be entitled to as many votes as
shall equal the number of shares he or she owns multiplied by the number of
directors to be elected, and he or she may cast all of such votes for a single
candidate, or any two or more of them as he or she may see fit.
REASONS
Continued support along the lines we suggest were shown at the last annual meeting
when 11.7%, 408between Milwaukee, New York City and other areas where there are large
concentrations of stockholders.
REASONS
In 1989, * owners of 893,678138,610 shares were castvoted in favor of this similar
proposal. The vote against included * unmarked proxies. *((*Management was
requested to insert the correct figures, but does not knowhave available information
on the total number of owners or unmarked proxies.)
ThereWe believe management has been continued improvement inthe duty to attract as many stockholders relations, however,
Robert O'Toole, who conducted a niceand
directors to their annual meeting wasas possible and that such rotation would
accomplish better attendance.
In the only director present, as
well aspast, very few stockholders and directors attended our annual
meeting.
With the secretary, the representativelarge number of employee stockholders, rotation of the auditing firmannual
meeting would be beneficial, in our opinion.
Many companies hold their stockholder meetings at their plants and myself, at
the last annual meeting.
A. O. Smithhave
open houses for tours. The families enjoy doing this.
General Motors, one of our good customers, is a fine company. Nevertheless, cumulative voting is needed to
get directors onperfect example of doing
this the board to see that the stockholders meeting is held in
Milwaukee or rotated like some of its good customers do. General Motors is a
good example and A. O. Smith should follow their example.
Many other successful corporations have cumulative voting. For example,
Pennzoil having cumulative voting defeated Texaco in that famous case. Another
example, in spite of still having a stagger system of electing directors,
Ingersoll-Rand, which has cumulative voting, won two awards. In FORTUNE magazine
it was ranked second as "America's Most Admired Corporations" and the WALL
STREET TRANSCRIPT noted "on almost any criteria used to evaluate management,
Ingersoll-Rand excels."
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22
A law enacted in California provides that all state pension holding, as
well as state college funds, invested in shares must be voted in favor of
cumulative voting proposals, showing increasing recognition of the importance of
this democratic means of electing directors.right way.
If you agree, please mark your proxy for this resolution; otherwise it is
automatically cast against it, unless you have marked to abstain.
THE BOARD OF DIRECTORS AND MANAGEMENT DO NOT AGREE WITH THE ABOVE PROPOSAL AND
RECOMMEND A VOTE AGAINST IT FOR THE FOLLOWING REASONS:
A similar proposal on cumulative votingIt has been submitteda long-standing tradition of A. O. Smith Corporation to hold
its stockholders meetings in the stockholders atstate of its incorporation. Under the last two annual meetingsCompany's
By-Laws and in accordance with statutory provisions of Delaware, the state of
its incorporation, the Board of Directors is authorized to determine the date,
time and location of the stockholders. Both times the
stockholders disapproved the resolution by at least 86%annual meeting of the votes cast.
We continue to believe that this method of electing directors is not in the
best interests of the Company or its stockholders. The cumulative voting system
permits the holders of a small minority of shares or special interest groups to
elect one or more directors to represent their interests on the Board. A
director elected in this way might be primarily concerned about representing and
acting in the interests of these minority or special interest groups rather than
the interests of all stockholders. The potential for partisanship among
directors could interfere with the effective functioning of the Board.
The directors have a duty to manage the business and affairs of the Company
in the best interests of all stockholders. In our opinion,
cumulative votingselection of the
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location of the annual stockholders meeting should remain in the discretion of
the Board, and the adoption of a formal program requiring the rotation of the
meeting location would be unduly restrictive on the Board.
We also believe that an annual meeting is not be beneficialthe best forum for
communicating with our shareholders. Our focus has been to our directors in fulfilling their obligationscommunicate with
shareholders through the Company's quarterly and annual reports and other
periodic releases, including meetings with analysts. We make an effort to
provide timely information to all of our stockholders.
For all these reasons,shareholders, rather than providing
information at the Board of Directors and Management recommend a
vote AGAINST this stockholder proposal.
STOCKHOLDER PROPOSAL ON MAQUILADORA OPERATIONS
WHEREAS, International trade has a significant impact on the environment
and on people's ability to meet basic needs;
The socially-concerned proponents of this resolution have pursed
implementation of environmental standards and socially responsible conduct in
the maquiladora workplace for more than five years and firmly believe there is
need for strict, enforceable standards of conduct for corporations operating in
Canada, Mexico and the United States.
In past years, over twenty U.S. corporations have been urged to adopt
standards of conduct relative to their maquiladora operations in Mexico. These
standards address:
Responsible practices for handling hazardous wastes and protecting the
environment: Corporations must be guided by the principle that they will
follow regulations setting forth high standards of environmental protection
and secure the best possible protectionsannual meeting which only some of the environment.
Health and safety practices: Corporations must be guided by the
principles that they will follow regulations setting forth high standards
of occupational safety and health.
Fair employment practices and standard of living: Corporations must
respect workers' basic rights and human dignity.
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23
Community impact: Corporations must recognize social responsibilityshareholders are able
to communities in which they locate facilities and promote community economic
development and improvements in quality of life.
The United Nations Declaration of Human Rights states everyone has the
right to "just and favorable conditions of work," "protection against
unemployment," "equal pay for equal work," "just and favorable remuneration
ensuring...an existence worth of human dignity," "protection against
unemployment," and "join trade unions." (Article 23) "rest and leisure,
including reasonable limitation of working hours," (Article 24) "a standard of
living adequate for health and well being." (Article 25)
Debate in the U.S., Canada and Mexico about the North American Free Trade
Agreement (NAFTA) exposed major problems with the maquiladora industry. These
include severe environmental problems resulting from corporate irresponsibility,
major workplace hazards and wages at such low levels as to be inadequate to feed
an employee's family. U.S. officials responded by drafting side agreements on
labor and the environment. We urge official corporate policy to correct past
problems and chart a new course for the future.
THEREFORE, BE IT RESOLVED, the shareholders request the Board of Directors
to institute as official corporate policy that as our company continues to
expand its business in Mexico, it will evaluate the environmental and human
rights context in which we operate. The policy should include:
1. Prepare a publicly available plan explaining how we will improve work
conditions, health benefits, vocational training and salaries to
economically and socially responsible levels.
2. Disclose policies to prevent environmental harm, repair damaged
environment where corporate practices may have caused destruction and
prevent cross border dumping of toxic waste.
3. Publish plans and progress in supporting infrastructure needs and
community economic development.
4. Support the establishment of a council, with equal representation from
Canada, Mexico and the United States, to monitor progress in raising the
standards of labor, health and environmental to meet goals for sustainable
economic development.
THE BOARD OF DIRECTORS AND MANAGEMENT DO NOT AGREE WITH THE ABOVE PROPOSAL AND
RECOMMEND A VOTE AGAINST IT FOR THE FOLLOWING REASONS:
The Company is committed to the welfare of its employees and the safe
operation of its plant facilities on a worldwide basis. The Company strives to
be both a good employer and a good corporate citizen with respect to all of its
operations. We believe that the existing corporate philosophy and practices of
the Company adequately address all of the matters described in the proposal.
In the areas of health, safety and the environment, we treat our Mexican
operations in the same manner as our other plants by complying with all safety,
health and environmental regulations at national, regional and local levels. Our
employees receive training on proper handling of materials and are provided with
the same protective clothing and devices for any hazardous materials as their
U.S. coworkers. Wages and benefits for our employees in all countries are
established to attract and retain a competent, stable and dedicated workforce.
We provide our employees with excellent working conditions, including adequate
tools and training, to do their jobs and manufacture quality products for our
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24
customers. The Company also actively works in the local communities to improve
the standard of living of its employees and contributes to government-sponsored
housing programs.
Our Mexican operations compare favorably to any of our other facilities
worldwide, both in terms of work environment and employment conditions, as well
as the capability of producing world class products for our customers. We
believe that our Company has adequately addressed the employment, work
environment and social issues described in the stockholder proposal for all our
plant facilities and employees on a worldwide basis.
Our Company's practices relating to its employees and business operations
are designed and developed in full compliance with applicable laws and
regulatory requirements of all countries in which our employees and plant
facilities are located. We, therefore, believe that this proposal for the
development of additional plans and policies and other activities is simply
unnecessary.attend.
For all these reasons, the Board of Directors and Management recommend a
vote AGAINST this stockholder proposal.
OTHER BUSINESS
Management is not aware of any matters other than those stated above which
may be presented for action at the meeting, but should any matter requiring a
vote of the stockholders arise, it is intended that proxies solicited will be
voted in respect thereof in accordance with the discretion of the person or
persons voting the proxies.
DATE FOR STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 19951996 annual
meeting of stockholders must be received by the Company no later than November
3, 1994,1, 1995, to be included in the materials for the 19951996 meeting.
March 3, 19941, 1995
EVEN IF YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN THE
ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE. IF YOU ATTEND THE
MEETING YOU MAY REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON.
2218
25
EXHIBIT A21
[LOGO]
22
A. O. SMITH CORPORATION
1990 LONG-TERM EXECUTIVE INCENTIVE COMPENSATION PLAN
AMENDED AND RESTATED AS OF JANUARY 1, 1994
1. PURPOSE
The purpose of the A. O. Smith Corporation Long-Term Executive Incentive
Compensation Plan ("Plan") is to induce key employees to remain in the employ of
A. O. Smith Corporation ("Company") or Subsidiaries or Affiliates of the
Company, and to encourage such employees to secure or increase on reasonable
terms their stock ownership in the Company. The Board of Directors of the
Company believes the Plan will (1) attract and retain executive personnel
possessing outstanding ability; (2) motivate executive personnel, by means of
growth related incentive, to achieve long-range growth goals; (3) provide
incentive compensation opportunities which are competitive with those of other
major corporations; and (4) further the identity of interest of participants
with those of the corporation's stockholders through opportunities for increased
stock ownership.
2. EFFECTIVE DATE AND TERM OF THE PLAN
The Plan shall have a term of ten years from and after January 1, 1990, the
date adopted by the Board of Directors subject to approval by the stockholders
of the Company. The Plan supersedes and replaces, on the effective date, the A.
O. Smith Corporation 1980 Employees' Stock Option Plan. The Board of Directors,
without further approval of the stockholders may terminate the Plan at any time
but no termination shall, without the Participant's consent, alter or impair any
of the rights under any option theretofore granted to him under the Plan. The
Amended and Restated Plan shall be effective as of January 1, 1994, the
effective date adopted by the Board of Directors subject to approval by the
stockholders of the Company.
3. DEFINITIONS
(a) Affiliate: Means any corporation in which the Company has 50 percent
or less ownership.
(b) Awards: Means the awards granted by the Committee under the Plan.
(c) Board of Directors: Means the Board of Directors of the Company.
(d) Committee: Means the Committee referred to in Section 4 hereof.
(e) Common Stock: Means the Common Stock, par value $1 per share, of the
Company.
(f) Disability Date: Means the date on which a participant becomes
eligible for disability benefits from the A. O. Smith Retirement Plan or such
similar or successor plan.
(g) Disinterested Person: Means any director who at the time of acting is
not eligible, and has not at any time within one year prior thereto been
eligible, for selection as a participant in the Plan or as a person to whom
stock may be allocated or to whom stock options may be granted pursuant to any
other Plan of the Company entitling the Participants therein to acquire stock or
stock options of the Company.
A-1
26
(h) Employee: Means any full-time managerial, administrative or
professional employee (including any officer or director who is such an
employee) of the Company, or any of its Subsidiaries or Affiliates.
(i) Fair Market Value: Means the market value of the Common Stock as
reasonably determined by the Committee on the date the option is granted.
(j) Normal Retirement Date: Shall have the meaning set forth in the A. O.
Smith Retirement Plan.
(k) Operating Unit: Means any division of the Company, or any Subsidiary
or any Affiliate, which is designated by the Committee to constitute an
Operating Unit.
(l) Participant: Means an Employee who is selected by the Committee to
participate in the Plan.
(m) Subsidiary: Means any corporation in which the Company has more than
50 percent of the ownership.
(n) Plan Year: Means the twelve months ending December 31st.
4. ADMINISTRATION
The Plan shall be administered by a committee which shall consist of not
less than three (3) members of the Board of Directors of the Company, each of
whom is a Disinterested Person. The Committee shall be appointed from time to
time by the Board of Directors which may from time to time appoint members of
the Committee in substitution for members previously appointed and may fill
vacancies, however caused, in the Committee. A majority of its members shall
constitute a quorum. All determinations of the Committee shall be made by a
majority of its members. Any decision or determination reduced to writing and
signed by all of the members shall be fully as effective as if it had been made
by a majority vote at a meeting duly called and held. The Committee is expressly
authorized to hold Committee meetings by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other. The Committee shall have sole and complete
authority to adopt, alter and repeal such administrative rules, regulations and
practices governing the operation of the Plan as it shall from time to time deem
advisable and to interpret the terms and conditions of the Plan.
5. ELIGIBILITY
Employees who, in the opinion of the Committee, are key employees and have
demonstrated a capacity for contributing in a substantial measure to the
successful performance of the Company shall be eligible to be granted options to
purchase shares of Common Stock of the Company ("Shares") under the Option Plan.
The Committee shall, from time to time, choose from such eligible Employees
those to whom options shall be granted.
A Participant shall not be granted an option unless he enters into an
agreement with the Company that he will remain in the service of the Company, a
Subsidiary or an Affiliate for a period of at least twelve (12) months
(commencing on the first day of the month in which the option is granted) or
until his earlier retirement, at the pleasure of the Company, and at such
compensation as it shall reasonably determine from time to time. The agreement
shall provide that it does not confer upon the Employee any right to continue in
the employ of the Company or of any such Subsidiary or Affiliate, neither shall
A-2
27
it, except for said period of at least 12 months, restrict the right of the
Employee to terminate employment at any time.
6. AUTHORITY OF COMMITTEE
Subject to the provisions of the Plan, the Committee shall have complete
authority, in its discretion, to determine those Employees who shall be
Participants, the price at which options shall be granted, the term of the
option (except in no case shall an option term be less than eleven months and
twenty-nine days nor more than ten years) and the number and kind of Shares to
be subject to each option.
7. FORM OF OPTION
Options granted under the Plan shall be Incentive Stock Options,
non-qualified stock options, or some combination thereof.
8. OPTION PRICE AND MAXIMUM NUMBER OF OPTION SHARES
The option price will be determined by the Committee at the time the option
is granted and shall be 100 percent of the Fair Market Value of the Common Stock
at the date of the grant. The maximum number of Shares with respect to which
options may be granted during any Plan Year to any Participant shall be 150,000
Shares.
9. WITHHOLDING
The Company shall have the right to deduct and withhold from any cash
otherwise payable to a Participant, or require that a Participant make
arrangements satisfactory to the Company for payment of, such amounts as the
Company shall determine for the purpose of satisfying its liability to withhold
federal, state or local income or FICA taxes incurred by reason of the grant or
exercise of an option.
10. EXERCISE OF OPTIONS
Each option granted under the Option Plan will be exercisable on such date
or dates and during such period and for such number of Shares as shall be
determined pursuant to the provisions of the option agreement evidencing such
option. Subject to the provisions of the Plan, the Committee shall have complete
authority, in its discretion, to determine the extent, if any, and the
conditions under which an option may be exercised in the event of the death of
the Participant or in the event the Participant leaves the employ of the Company
or has his employment terminated by the Company. The purchase price of any
option may be paid (a) in cash or its equivalent; (b) with the consent of the
Committee, by tendering previously acquired Shares valued at their fair market
value as determined by the Committee; or (c) with the consent of the Committee,
by any combination of (a) and (b).
11. NON-TRANSFERABILITY
Options under the Plan are not transferable otherwise than by will or the
laws of descent or distribution, and may be exercised during the lifetime of a
Participant only by such Participant.
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28
12. AGREEMENTS
Options granted pursuant to the Plan shall be evidenced by stock option
agreements in such form as the Committee shall from time to time adopt.
13. ADJUSTMENT OF NUMBER OF SHARES
In the event a dividend shall be declared upon the Common Stock of the
Company payable in Shares (other than a stock dividend declared in lieu of an
ordinary cash dividend), the number of Shares then subject to any such option
and the number of Shares reserved for issuance pursuant to the Plan but not yet
covered by an option, shall be adjusted by adding to each Share the number of
Shares which would be distributable thereon if such Share had been outstanding
on the date fixed for determining the stockholders entitled to receive such
stock dividend. In the event the outstanding Shares of the Common Stock of the
Company shall be changed into or exchanged for a different number or kind of
Shares of stock or other securities of the Company or of another corporation,
whether through reorganization, recapitalization, stock split-up, combination of
Shares, merger or consolidation, then there shall be substituted for each Share
reserved for issuance pursuant to the Plan, but not yet covered by an option,
the number and kind of Shares of stock or other securities into which each
outstanding Share shall be so changed or for which each such Share shall be
exchanged. In the event there shall be any change, other than as specified above
in this paragraph in the number or kind of outstanding Shares or of any stock or
other security into which such Common Stock shall have been changed or for which
it shall have been exchanged, then if the Committee shall in its sole discretion
determine that such change equitably requires an adjustment in the number or
kind of Shares theretofore reserved for issuance pursuant to the Plan, but not
yet covered by an option, and of the Share then subject to an option or options,
such adjustment shall be made by the Committee and shall be effective and
binding for all purposes of the Plan and of each stock option agreement. The
option price in each stock option agreement for each Share or other securities
substituted or adjusted as provided for in this paragraph shall be determined by
dividing the option price in such agreement for each Share prior to such
substitution or adjustment by the number of Shares or the fraction of a share
substituted for such Share or to which such Share shall have been adjusted. No
adjustment or substitution provided for in this paragraph shall require the
Company in any stock option agreement to sell a fractional Share, and the total
substitution or adjustment with respect to each stock option agreement shall be
limited accordingly.
14. SHARES AVAILABLE
There shall be reserved, for the purpose of the Plan, a total of 2,000,000
Shares of Common Stock (or the number and kind of Shares of stock or other
securities which, in accordance with Section 13 hereof, shall be substituted for
said Shares or to which said Shares shall be adjusted). Such Shares may be, in
whole or in part, authorized and unissued Shares or issued Shares which shall
have been reacquired by the Company. In the event that (i) an option granted
under the option plan to any employee expires or is terminated unexercised as to
any Shares covered thereby, or (ii) Shares are forfeited for any reason under
the Plan, such Shares shall thereafter be available for the granting of options
under the Plan.
15. EXPENSES
The expenses of administering the Plan shall be borne by the Company.
A-4
29
16. NON-EXCLUSIVITY
Neither the adoption of the Plan by the Board of Directors nor the
submission of the Plan to the stockholders of the Company for approval shall be
construed as creating any limitations on the power of the Board of Directors to
adopt such other incentive arrangements as it may deem desirable, and such
arrangements may be either generally applicable or applicable only in specific
cases.
17. AMENDMENT
The Board of Directors, without further approval of the stockholders, may
from time to time amend the Plan in such respects as the Board may deem
advisable; provided, however, that no amendment shall become effective without
prior approval of the stockholders which would (a) increase the maximum number
of Shares which may be awarded, or for which options may be granted, in the
aggregate under the Plan; (b) reduce the minimum option price which may be
established under the Plan; (c) change or add to the classes of employees
eligible to receive options; or (d) withdraw the authority to administer the
Plan from the Committee. No amendment shall, without the Participant's consent,
alter or impair any of the rights or obligations under any option theretofore
granted to him under the Plan.
A-5
30
LOGO
31
A.O. SMITH CORPORATION
P.O.BOXP.O. Box 23973
Milwaukee, WI 53223-0973
PROXY - CLASS A COMMON STOCK
THIS PROXY IS SOLICITED ON
BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints ROBERT J. O'TOOLE, GLEN R. BOMBERGER and W.
DAVID ROMOSER, or any one of them, with full power of substitution, as proxy or
proxies of the undersigned to attend the annual meeting of stockholders of A. O.
Smith Corporation to be held on April 13, 1994,5, 1995, at 9:00 a.m., Eastern Time, at the
Hotel du Pont, 11th and Market Streets, Wilmington, Delaware, or at any
adjournment thereof, and there to vote all shares of Class A Common Stock which
the undersigned would be entitled to vote if personally present as specified
upon the following matters and in their discretion upon such other matters as
may properly come before the meeting.
1. ELECTION OF FOR all nominees listed below [ ]/ / WITHHOLD AUTHORITY [ ]/ /
DIRECTORS (except as marked to the contrary to vote for All Nominees
below) listed below
TOM H. BARRETT, GLEN R. BOMBERGER, THOMAS I. DOLAN, ROBERT J. O'TOOLE, DONALD J.
SCHUENKE, AND ARTHUR O. SMITH AND BRUCE M. SMITH
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
- -------------------------------------------------------------------------------_______________________________________________________________________________
2. PROPOSAL TO APPROVE AMENDMENTSAMENDMENT OF THE RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE THE 1990 LONG-TERM EXECUTIVE INCENTIVE
COMPENSATION PLAN:NUMBER OF AUTHORIZED SHARES OF THE CLASS A COMMON STOCK TO
14,000,000 SHARES AND THE COMMON STOCK TO 60,000,000 SHARES:
FOR [ ]/ / AGAINST [ ]/ / ABSTAIN [ ]/ /
3. PROPOSAL TO APPROVE THE RATIFICATION OF ERNST & YOUNG LLP AS THE INDEPENDENT
AUDITORS OF THE CORPORATION:
FOR [ ]/ / AGAINST [ ]/ / ABSTAIN [ ]/ /
4. STOCKHOLDER PROPOSAL RELATING TO CUMULATIVE VOTING INROTATE THE ELECTIONLOCATION OF DIRECTORS:THE ANNUAL MEETING OF
STOCKHOLDERS:
FOR [ ]/ / AGAINST [ ]/ / ABSTAIN [ ]
5. STOCKHOLDER PROPOSAL RELATING TO MAQUILADORA OPERATIONS:
FOR [ ] AGAINST [ ] ABSTAIN [ ]/ /
(continued, and to be signed and dated, on the other side) 23
PROXY NO. NO. OF SHARES
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
and accompanying Proxy Statement, ratifies all that said proxies or their
substitutes may lawfully do by virtue hereof, and revokes all former proxies.
Please sign exactly as your name appears below, date and return this proxy.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1, 2 AND 3 AND AGAINST PROPOSALS 4 AND 5.
Date__________________________________________, 1994
Signature___________________________________________
Signature___________________________________________PROPOSAL 4.
Date _________________________, 1995
Signature
--------------------------------------------
Signature
--------------------------------------------
When signing as attorney, executor, administrator,
trustee or guardian, please add your full title as
such. If shares are held by two or more persons,
all holders must sign the proxy.
If you also hold Common Stock, please fill out the green Common Stock
proxy.
No postage is required if this proxy is returned in the enclosed envelope and
mailed in the United States.
3224
A. O. SMITH CORPORATION
P.O. Box 23973
Milwaukee, WI 53223-0973
PROXY --- COMMON STOCK
THIS PROXY IS SOLICITED ON
BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints ROBERT J. O'TOOLE, GLEN R. BOMBERGER and W.
DAVID ROMOSER, or any one of them, with full power of substitution, as proxy or
proxies of the undersigned to attend the annual meeting of stockholders of A. O.
Smith Corporation to be held on April 13, 1994,5, 1995, at 9:00 a.m., Eastern Time, at the
Hotel du Pont, 11th and Market Streets, Wilmington, Delaware, or at any
adjournment thereof, and there to vote all shares of Common Stock which the
undersigned would be entitled to vote if personally present as specified upon
the following matters and in their discretion upon such other matters as may
properly come before the meeting.
1. ELECTION OF FOR all nominees listed below [ ]/ / WITHHOLD AUTHORITY [ ]/ /
DIRECTORS (except as marked to the contrary to vote for All contraryNominees
below) Nominees listed below
RussellRUSSELL G. Cleary, LeanderCLEARY, LEANDER W. Jennings, and Dr. Agnar PytteJENNINGS AND DR. AGNAR PYTTE
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
- --------------------------------------------------------------------------------_______________________________________________________________________________
2. PROPOSAL TO APPROVE AMENDMENTSAMENDMENT OF THE RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE THE 1990 LONG-TERM EXECUTIVE INCENTIVE
COMPENSATION PLAN:NUMBER OF AUTHORIZED SHARES OF THE CLASS A COMMON STOCK TO
14,000,000 SHARES AND THE COMMON STOCK TO 60,000,000 SHARES:
FOR [ ]/ / AGAINST [ ]/ / ABSTAIN [ ]/ /
3. PROPOSAL TO APPROVE THE RATIFICATION OF ERNST & YOUNG LLP AS THE
INDEPENDENT AUDITORS OF THE CORPORATION:
FOR [ ]/ / AGAINST [ ]/ / ABSTAIN [ ]/ /
4. STOCKHOLDER PROPOSAL RELATING TO CUMULATIVE VOTING INROTATE THE ELECTIONLOCATION OF DIRECTORS:THE ANNUAL MEETING OF
STOCKHOLDERS:
FOR [ ]/ / AGAINST [ ]/ / ABSTAIN [ ]
5. STOCKHOLDER PROPOSAL RELATING TO MAQUILADORA OPERATIONS:
FOR [ ] AGAINST [ ] ABSTAIN [ ]/ /
(continued, and to be signed and dated, on the other side) 25
PROXY NO. NO. OF SHARES
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
and accompanying Proxy Statement, ratifies all that said proxies or their
substitutes may lawfully do by virtue hereof, and revokes all former proxies.
Please sign exactly as your name appears below, date and return this proxy.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1, 2 AND 3 AND AGAINST PROPOSALS 4 AND 5.
Date_______________________________, 1994
Signature_______________________________
Signature_______________________________PROPOSAL 4.
Date __________________________, 1995
Signature
--------------------------------------------
Signature
--------------------------------------------
When signing as attorney, executor, administrator,
trustee or guardian, please add your full title as
such. If shares are held by two or more persons,
all holders must sign the proxy.
If you also hold Class A Common Stock, please fill out the white Class A
Common Stock proxy.
No postage is required if this proxy is returned in the enclosed envelope and
mailed in the United States.