-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Aawm26w2FvhBZYVtgKFl9vxXgJmynFzWHlLL/XR11ytB1EJacGEQvP+k7Z/nPsBk Bprl2Ft/VPR9qgURDt3woA== 0000950152-99-001687.txt : 19990309 0000950152-99-001687.hdr.sgml : 19990309 ACCESSION NUMBER: 0000950152-99-001687 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990421 FILED AS OF DATE: 19990308 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIEBOLD INC CENTRAL INDEX KEY: 0000028823 STANDARD INDUSTRIAL CLASSIFICATION: CALCULATING & ACCOUNTING MACHINES (NO ELECTRONIC COMPUTERS) [3578] IRS NUMBER: 340183970 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 001-04879 FILM NUMBER: 99558556 BUSINESS ADDRESS: STREET 1: P.O. BOX 3077 STREET 2: 5995 MAYFAIR RD CITY: CANTON STATE: OH ZIP: 44720-8077 BUSINESS PHONE: 3304904000 MAIL ADDRESS: STREET 1: PO BOX 3077 CITY: CANTON STATE: OH ZIP: 44720-8077 DEF 14A 1 DIEBOLD, INCORPORATED DEFINITIVE PROXY DEF 14A 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SCHEDULE 14A (RULE 14a) 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 sec.240.14a-11(c) or sec.240.14a-12
DIEBOLD, INCORPORATED (NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) Payment of Filing Fee (Check the appropriate box): [X] No fee required. [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. (1) Title of each class of securities to which transaction applies: ....... (2) Aggregate number of securities to which transaction applies: .......... (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): ............ (4) Proposed maximum aggregate value of transaction: ...................... (5) Total fee paid: ....................................................... [ ] 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: ............................................... (2) Form, Schedule or Registration Statement No.: ......................... (3) Filing Party: ......................................................... (4) Date Filed: ........................................................... - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 Diebold Logo 5995 MAYFAIR ROAD P. O. BOX 3077 - NORTH CANTON, OHIO 44720-8077 MARCH 8, 1999 DEAR SHAREHOLDER: The 1999 Annual Meeting of Shareholders of Diebold, Incorporated will be held at the Sheraton Inn, Belden Village, 4375 Metro Circle, NW, Canton, Ohio 44720 on Wednesday, April 21, 1999 at 10:00 a.m., Local Time. All holders of record of Diebold Common Shares as of February 26, 1999, are entitled to vote at the 1999 Annual Meeting. As described in the accompanying Notice and Proxy Statement, you will be asked to elect nine directors and to ratify the appointment of KPMG LLP as independent auditors for 1999. Not standing for re-election as a director is Mr. Daniel T. Carroll who reached the age of 72, the normal retirement age for directors. Mr. Carroll has served a total of almost nineteen years as a member of our Board of Directors. We are deeply grateful to him for his many contributions to the success of our Corporation. Diebold's Annual Report for the year ended December 31, 1998, is included herein. Your proxy card is enclosed. Please indicate your voting instructions and sign, date and mail this proxy card promptly in the return envelope. Sincerely, /s/ Robert W. Mahoney ROBERT W. MAHONEY Chairman of the Board, President and Chief Executive Officer 3 Diebold Logo 5995 MAYFAIR ROAD P.O. BOX 3077 - NORTH CANTON, OHIO 44720-8077 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS APRIL 21, 1999 The Annual Meeting of Shareholders of the Corporation will be held at the Sheraton Inn, Belden Village, 4375 Metro Circle, N.W., Canton, Ohio 44720, on April 21, 1999 at 10:00 a.m., Local Time, for the following purposes: 1. To elect Directors; 2. To vote upon ratification of the appointment by the Board of Directors of KPMG LLP as independent auditors for the year 1999; and 3. To consider such other matters as may properly come before the meeting or any adjournment thereof. The enclosed proxy card is solicited, and the persons named therein have been designated, by the Board of Directors of the Corporation. Holders of record of the Common Shares at the close of business on February 26, 1999 will be entitled to vote at the meeting. Your attention is directed to the attached proxy statement. By Order of the Board of Directors /s/ Charee Francis-Vogelsang CHAREE FRANCIS-VOGELSANG Vice President and Secretary March 8, 1999 (approximate mailing date) YOU ARE REQUESTED TO COOPERATE IN ASSURING A QUORUM BY FILLING IN, SIGNING AND DATING THE ENCLOSED PROXY AND PROMPTLY MAILING IT IN THE RETURN ENVELOPE 4 DIEBOLD, INCORPORATED 5995 MAYFAIR ROAD P.O. BOX 3077 - NORTH CANTON, OHIO 44720-8077 PROXY STATEMENT ANNUAL MEETING OF SHAREHOLDERS, APRIL 21, 1999 This proxy statement is furnished to shareholders of Diebold, Incorporated (the "Corporation") in connection with the solicitation by the Board of Directors of proxies which will be used at the 1999 annual meeting of shareholders on April 21, 1999, at 10:00 a.m., local time, or any adjournments thereof, for the purpose of considering and acting upon the matters referred to in the preceding notice of annual meeting and more fully discussed below. This proxy statement was first mailed to shareholders on or about March 8, 1999. Shares represented by a properly executed proxy will be voted as indicated on the proxy. Shareholders may revoke the authority granted by their proxies at any time before the exercise of the powers conferred thereby by notice in writing delivered to the Secretary of the Corporation; by submitting a subsequently dated proxy; or by attending the meeting, withdrawing the proxy and voting in person. On February 26, 1999, the record date for the meeting, the outstanding voting securities of the Corporation consisted of 68,949,664 Common Shares, $1.25 par value per share, all of one class. Each shareholder of record as of the close of business on February 26, 1999 will be entitled to one vote for each Common Share held on that date. If a shareholder gives written notice to the President, any Vice President or Secretary at least forty-eight hours prior to the time fixed for holding the meeting that the shareholder desires that the voting for the election of directors shall be cumulative, and if an announcement of the giving of such notice is made upon convening of the meeting by the Chairman or Secretary or by or on behalf of the shareholder giving such notice, each shareholder will have cumulative voting rights. In cumulative voting, each shareholder may cast a number of votes equal to the number of shares owned multiplied by the number of directors to be elected and the votes may be cast for one nominee only or distributed among the nominees. In the event that voting at the annual meeting is to be cumulative, unless contrary instructions are received on the enclosed proxy, it is presently intended that all votes represented by properly executed proxies will be divided evenly among the candidates nominated by the Board of Directors. However, if voting in such manner would not be effective to elect all such nominees, such votes will be cumulated at the discretion of the Board of Directors so as to maximize the number of such nominees elected. The results of shareholder voting at the annual meeting will be tabulated by the inspectors of elections appointed for the annual meeting. The Corporation intends to treat properly executed proxies that are marked "abstain" as present for purposes of determining whether a quorum has been achieved at the annual meeting but will not count any broker non-votes for such purpose. The director-nominees receiving the greatest number of votes will be elected. Votes withheld with respect to the election of directors will not be counted in determining the outcome of that vote. Abstentions with respect to the proposal to ratify the appointment of the independent auditors will have the same effect as votes against those proposals. The Corporation does not anticipate receiving any broker non-votes at the annual meeting in light of the nature of the matters to be acted upon at the annual meeting; however, any broker non-votes received in respect of the appointment of auditors will not affect the voting on such proposal. BENEFICIAL OWNERSHIP OF SHARES To the knowledge of the Corporation, no person beneficially owned more than 5 percent of the outstanding Common Shares as of December 31, 1998. 2 5 ELECTION OF DIRECTORS The Board of Directors recommends that nine nominees for director be elected at the annual meeting, each to hold office for a term of one year from the date of the annual meeting, and until the election and qualification of a successor. In the absence of contrary instruction, the Proxy Committee will vote the proxies for the election of the nine nominees, who are Louis V. Bockius III, Richard L. Crandall, Donald R. Gant, L. Lindsey Halstead, Phillip B. Lassiter, John N. Lauer, Robert W. Mahoney, William F. Massy and W. R. Timken, Jr. All nominees are presently members of the Board of Directors. As mentioned previously, Daniel T. Carroll reached the age of 72, the normal retirement age for directors, and is not seeking re-election this year. If for any reason any nominees are not available for election when the election occurs, the designated proxies, at their option, may vote for substitute nominees recommended by the Board of Directors. Alternatively, the Board of Directors may reduce the number of nominees. The Board of Directors has no reason to believe that any nominee will be unavailable for election when the election occurs. SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT The following table shows the beneficial ownership of Common Shares of the Corporation, including those shares which individuals have a right to acquire, e.g., through exercise of stock options under the Amended and Extended 1972 Stock Option Plan (the "1972 Plan") and the 1991 Equity and Performance Incentive Plan, as Amended and Restated (the "1991 Plan"), within the meaning of Rule 13d-3(d)(1) under the Securities Exchange Act of 1934, by each director-nominee, including the chief executive officer, the other four most highly compensated executive officers, the former president and chief operating officer ("named executive officers") and for such persons and the other executive officers as a group as of February 10, 1999. Ownership is also reported as of December 31, 1998 for shares in the 401(k) Savings Plan over which the individual has voting power, together with shares held in the Dividend Reinvestment Plan.
NAME, AGE, PRINCIPAL OCCUPATION COMMON OR EMPLOYMENT, SHARES PERCENT PRESENT AND DURING DIRECTOR BENEFICIALLY DEFERRED OF OTHER LAST FIVE YEARS SINCE OWNED(1) SHARES(1) CLASS DIRECTORSHIPS -------------------- -------- ------------ ----------- ------- ------------- DIRECTOR-NOMINEES: Louis V. Bockius III -- 63 1978 238,925(2)(3) -- 0.35 UNB Corp., United National Bank Chairman, Bocko Incorporated, North & Trust Co. Canton, Ohio (Plastic Injection Molding) Richard L. Crandall -- 55 1996 9,092 -- 0.01 Comshare, Inc., Computer Task Managing Director, Arbor Partners, Group, Inc., Giga Information LLC, Ann Arbor, Michigan (Venture Group Capital Assistance Firm) Prior -- Chairman of the Board, President and Chief Executive Officer, Comshare, Inc., Ann Arbor, Michigan (Software Producer) Donald R. Gant -- 70 1977 50,222(2)(4) -- 0.07 ABC Rail Products Corporation, Limited Partner, The Goldman Sachs Stride Rite Corp. Group, L.P., New York, New York (Investment Banker) L. Lindsey Halstead -- 68 1993 20,562 -- 0.03 None Retired Chairman of the Board, Ford of Europe (Automotive Industry)
3 6
NAME, AGE, PRINCIPAL OCCUPATION COMMON OR EMPLOYMENT, SHARES PERCENT PRESENT AND DURING DIRECTOR BENEFICIALLY DEFERRED OF OTHER LAST FIVE YEARS SINCE OWNED(1) SHARES(1) CLASS DIRECTORSHIPS -------------------- -------- ------------ ----------- ------- ------------- Phillip B. Lassiter -- 55 1995 11,670 -- 0.02 Ambac Financial Group, Inc., Chairman of the Board, President HCIA Inc. and Chief Executive Officer, Ambac Financial Group, Inc., New York, New York (Financial Guarantee Insurance Holding Company) John N. Lauer -- 60 1992 18,838 -- 0.03 BorsodChem, R.T., Menasha Chairman of the Board, President Corporation, Oglebay Norton Co. and Chief Executive Officer, Oglebay Norton Co. Cleveland, Ohio Prior -- President and Chief Executive Officer, Oglebay Norton Co. (Industrial Minerals & Great Lakes Shipping, Terminal Management and Mining) Cleveland, Ohio; Private Investor Robert W. Mahoney -- 62 1983 307,580(2)(6) 40,399 0.45 The Sherwin-Williams Company, Chairman of the Board, President The Timken Company and Chief Executive Officer, Diebold, Incorporated, Canton, Ohio William F. Massy -- 64 1984 25,213 -- 0.04 None President, The Jackson Hole Higher Education Group, Inc. and Professor of Education and Business Administration, Emeritus, Stanford University, Stanford, California Prior -- Director, Stanford Institute for Higher Education Research and Professor of Education and Business Administration, Stanford University, Stanford, California (Education) W. R. Timken, Jr. -- 60 1986 158,570(2)(5) -- 0.23 Aeroquip-Vickers, Inc., The Chairman, President and Chief Timken Company Executive Officer, The Timken Company, Canton, Ohio Prior -- Chairman of the Board, The Timken Company, Canton, Ohio, (Manufacturer of Tapered Roller Bearings and Specialty Alloy Steel)
4 7
NAME, AGE, PRINCIPAL OCCUPATION COMMON OR EMPLOYMENT, SHARES PERCENT PRESENT AND DURING DIRECTOR BENEFICIALLY DEFERRED OF OTHER LAST FIVE YEARS SINCE OWNED(1) SHARES(1) CLASS DIRECTORSHIPS -------------------- -------- ------------ ----------- ------- ------------- OTHER NAMED EXECUTIVE OFFICERS: Gerald F. Morris -- 78,072(6) 12,893 0.11 -- Alben W. Warf -- 74,676(6) -- 0.11 -- David Bucci -- 35,165(6) -- 0.05 -- Bartholomew J. Frazzitta -- 17,792(6) -- 0.03 -- Gregg A. Searle -- 30,396(6) -- 0.04 -- All Directors and Executive Officers -- 1,341,852(2)(3) 53,292 1.95 -- (26) as a Group (4)(5) (6)
- --------------- (1) Messrs. Mahoney, Morris, Warf and Bucci have stock options issued under the 1991 Plan for 178,123, 56,250, 33,750 and 21,317 shares respectively that are exercisable within 60 days following February 10, 1999. For all directors and executive officers as a group, the number of stock options issued under the 1972 Plan that are exercisable within 60 days following February 10, 1999 is 6,585. Under the 1991 Plan, Messrs. Bockius, Crandall, Gant, Halstead, Lassiter, Lauer, Massy and Timken each have stock options to acquire 5,624, 3,092, 4,359, 4,359, 9,420, 3,094, 9,420 and 2,812 shares, respectively, within 60 days following February 10, 1999. For all directors and executive officers as a group, the number of shares that are exercisable within 60 days following February 10, 1999 under the 1991 Plan is 420,064. The shares subject to the stock options described in this footnote are included in the above table. The deferred shares for Messrs. Mahoney and Morris are not included in the shares reported in the beneficial ownership and percent columns in the above table. (2) Includes shares registered as custodian or trustee for minors, shares held in trust or shares otherwise beneficially owned. (3) Includes 27,872 shares (0.04%) in which Mr. Bockius has sole voting power and shared investment power. Mr. Bockius disclaims any beneficial ownership of these shares. (4) Includes 1,188 shares in which Mr. Gant disclaims any beneficial ownership. (5) Includes 113,865 shares (0.17%) in which Mr. Timken has shared voting power and shared investment power. Mr. Timken disclaims any beneficial ownership of these shares. (6) Includes shares held in his or her name under the 401(k) Savings Plan over which he or she has voting power, and/or shares held in the Dividend Reinvestment Plan. 5 8 DIRECTOR COMMITTEES AND COMPENSATION The members of the Audit Committee are W. R. Timken, Jr., Chair, Louis V. Bockius III, Daniel T. Carroll, Richard L. Crandall and L. Lindsey Halstead. The committee met three times during 1998 in formal session and had various informal communications between themselves and management as well as the independent auditors at various times during the year. The functions performed by the committee include recommending to the Board of Directors the independent auditors for the upcoming year and meeting regularly and separately with both the independent auditors and the Corporation's internal auditors to (a) discuss their respective audit plans prior to the commencement of the audit, (b) discuss progress and findings on an interim basis, (c) review audit findings of the independent auditors after completion of examination and final discussions with internal auditors on results of their reviews, and (d) inquire as to the legality and propriety of the operations of the Corporation, including the steps taken to comply with the Corporation's business conduct policies. The members of the Board Membership Committee are Donald R. Gant, Chair, L. Lindsey Halstead, Robert W. Mahoney and W. R. Timken, Jr. The committee met two times during 1998. The committee's functions include reviewing the qualifications of potential director candidates and making recommendations to the Board of Directors to fill vacancies or to expand the size of the Board, when appropriate. The committee also makes recommendations as to the composition of the various committees of the Board and as to the compensation paid to the directors for their services on the Board and on the committees. The committee will consider nominees recommended by shareholders upon written submission of pertinent data to the attention of the Corporate Secretary. Such data should include complete information as to the identity and qualifications of the proposed nominee, including name, address, present and prior business and/or professional affiliations, education and experience, particular field or fields of expertise, an indication of the nominee's consent, and reasons why, in the opinion of the recommending shareholder, the proposed nominee is qualified and suited to be a director of the Corporation as well as what particular contributions to the success of the Corporation such person could be expected to make. The members of the Compensation and Organization Committee are William F. Massy, Chair, Donald R. Gant, Phillip B. Lassiter and John N. Lauer. The committee met six times during 1998. The committee's functions are described below under "Compensation and Organization Committee Report on Executive Compensation." The members of the Executive Committee are John N. Lauer, Chair, Louis V. Bockius III and Robert W. Mahoney. The committee did not hold any formal meetings in 1998. The functions of the committee were carried out by telephone or written correspondence. The committee's functions include reviewing the management and operation of the business of the Corporation between meetings of the Board of Directors. The members of the Investment Committee are Daniel T. Carroll, Chair, Richard L. Crandall, Phillip B. Lassiter and William F. Massy. The committee met three times in 1998. The committee's functions include establishing the investment policy including asset allocation for the Corporation's cash, short-term securities and retirement plan assets, overseeing the management of those assets, ratifying fund managers recommended by management and reviewing at least annually the investment performance of the Corporation's retirement plans and 401(k) Savings Plans to assure adequate and competitive returns. In 1998 the Board of Directors held six meetings. All directors attended more than 75% of the aggregate of all meetings of the Board and the Board committees on which they served during the year. Non-employee directors are compensated for their services as directors at the rate of $25,000 per year. Non-employee directors who are members of the Audit Committee, Board Membership Committee, Compensation and Organization Committee, Executive Committee and Investment Committee are compensated for their services at the rate of $3,000 per year per committee. In addition, each chair of a committee receives $1,000 per year, and each member of a committee who attends a meeting of a committee receives a fee of $1,000. A director may elect to defer receipt of all or a portion of his or her compensation pursuant to the 1985 Deferred Compensation Plan for Directors. Each non-employee director may also receive an award of option rights or restricted shares under the 1991 Plan. In 1998 each non-employee director was awarded a stock option to purchase 2,500 Common Shares at an exercise price representing 100% of the market price of the Common 6 9 Shares as of the day prior to the date of grant. During 1998 all directors' options became entitled to reload rights as described in footnote 2 of the table entitled Option Grants in Last Fiscal Year. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The members of the Compensation and Organization Committee are William F. Massy, Chair, Donald R. Gant, Phillip B. Lassiter and John N. Lauer. Mr. Gant formerly served as a director and officer for two of the Corporation's subsidiaries, but did not receive any additional compensation for serving in these capacities. Although Goldman, Sachs & Co., performed no investment advisory services for the Corporation or its subsidiaries in 1998, in the ordinary course of business, Goldman, Sachs and Co. may be called upon in the future to provide investment advisory or other services for the Corporation. Donald R. Gant is a limited partner of The Goldman Sachs Group L.P. of which Goldman, Sachs & Co. is its primary affiliate. EXECUTIVE COMPENSATION The following table provides information relating to the annual and long-term compensation for the years ended 1998, 1997, and 1996 for the named executive officers of the Corporation. The amounts shown include compensation for services in all capacities that were provided to the Corporation including any amounts which may have been deferred. SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION -------------------------------------- ANNUAL COMPENSATION AWARDS PAYOUTS(3) ----------------------------------------- ------------------------ ---------- OTHER ALL ANNUAL RESTRICTED SECURITIES OTHER NAME AND COMPEN- STOCK UNDERLYING LTIP COMPEN- PRINCIPAL POSITION YEAR SALARY BONUS SATION(1) AWARDS(2) OPTIONS PAYOUTS SATION(1) ------------------ ---- -------- -------- --------- ---------- ---------- ---------- --------- Robert W. Mahoney 1998 $550,000 $ -0- $21,073 $ -0- 56,250 $1,112,303 $65,570 Chairman of the Board, 1997 525,000 538,450 21,166 -0- 56,250 1,556,842 23,930 President and Chief 1996 469,583 498,750 21,261 -0- 168,750 1,214,649 12,191 Executive Officer Gerald F. Morris 1998 295,000 -0- 16,257 -0- 22,500 768,052 34,969 Executive Vice 1997 287,500 220,660 16,613 -0- 22,500 1,075,009 25,224 President and Chief 1996 272,500 205,800 16,201 -0- 22,500 838,709 18,141 Financial Officer Alben W. Warf 1998 265,000 -0- 16,204 -0- 13,500 498,817 12,838 Senior Vice President, 1997 246,000 194,510 14,316 -0- 13,500 698,172 8,963 Electronic Systems 1996 230,000 175,398 12,966 -0- 13,500 544,744 7,691 Development and Manufacturing David Bucci 1998 190,000 -0- 8,117 183,561 9,000 -0- 7,513 Group Vice President 1997 178,125 95,408 6,452 -0- 2,250 -0- 6,214 North American Sales 1996 118,299 40,412 4,957 -0- 2,250 -0- 5,720 and Service Bartholomew J. Frazzitta 1998 184,000 -0- 14,136 -0- -0- 353,109 8,719 Vice President and 1997 172,167 71,981 6,723 -0- -0- 556,078 8,105 General Manager, 1996 162,167 78,715 17,882 -0- -0- 433,864 5,458 Physical Security Division Gregg A. Searle(4) 1998 312,500 -0- 27,523 -0- 30,000 -0- 8,729 Formerly President and 1997 335,000 371,981 17,137 -0- 30,000 1,075,009 8,318 Chief Operating Officer 1996 281,667 259,960 15,373 -0- 82,500 838,709 7,073
- --------------- (1) The amounts reported for 1998 for Other Annual Compensation consist of amounts reimbursed to the named executive officers for tax liability on the following items: use of a Corporation automobile or cash in lieu thereof; supplemental executive life insurance and financial planning services. The Other Annual Compensation column also includes preferential interest earned and paid to Messrs. Mahoney, Morris, Warf and Searle on deferred compensation. The All Other Compensation column presents amounts representing the dollar value of insurance premiums paid by the Corporation for the benefit of the executive and amounts contributed 7 10 for 1998 under the Corporation's 401(k) Savings Plan respectively as follows: Mr. Mahoney ($3,458, $7,840); Mr. Morris ($1,208, $7,840); Mr. Warf ($1,388, $7,840); Mr. Bucci ($-0-, $7,513); Mr. Frazzitta ($879, $7,840) and Mr. Searle ($889, $7,840). The All Other Compensation column also includes an amount of $54,272, $25,921 and $3,609 for preferential interest earned but not paid in 1998 by Mr. Mahoney, Mr. Morris and Mr. Warf respectively on deferred compensation. (2) Dividends are paid on restricted shares at the same rate as paid to all shareholders. As of December 31, 1998 Mr. Bucci held a total of 3,713 restricted shares with a value as of that date of $132,508. (3) The payouts reported for 1998 were based upon a management objective of cumulative earnings for the performance period of January 1, 1996 through December 31, 1998. The performance objective was met at the maximum amount, and the payout was in the form of cash and/or stock. Pursuant to the terms of the plan, the management objective was adjusted to exclude the realignment charge taken by the Corporation in 1998. (4) Mr. Searle resigned from the Corporation effective September 30, 1998. EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL AGREEMENTS The Corporation has entered into agreements with each of the named executive officers, and certain other executives, providing that in the event of any change in control of the Corporation through the acquisition of 20 percent or more of the outstanding voting securities of the Corporation, certain changes in the composition of the Corporation's Board of Directors, or by merger or consolidation of the Corporation into, or sale of substantially all of its assets to, another corporation, such persons would continue their employment with the Corporation in their present positions for a term of three years following such change in control. During such term of employment, each of the named executive officers would be entitled to receive base compensation and to continue to participate in incentive and employee benefit plans at levels no less favorable to him or her than prior to commencement of the term. In the event of the termination of such person's employment under certain circumstances after a change in control of the Corporation, such person would be entitled to receive a payment in the amount of approximately twice such person's prior base salary and to continue to participate in certain employee benefit plans for up to two years. None of the agreements will become operative until a change in control of the Corporation has occurred, prior to which time the Corporation and such persons each reserve the right at any time, with or without cause, to terminate his or her employment relationship. The Corporation has established trusts to secure, among other things, the payment of amounts that may become payable pursuant to these agreements and to reimburse such persons for expenses incurred in attempting to enforce the Corporation's obligations pursuant to these agreements and certain other arrangements. These trusts will be funded only in connection with or in anticipation of a change in control of the Corporation. 8 11 OPTION GRANTS IN LAST FISCAL YEAR The following table provides information relating to stock option grants for the year 1998 for the named executive officers of the Corporation. No stock appreciation rights were granted to the named executive officers or other optionees during 1998.
INDIVIDUAL GRANTS ---------------------------------------- NUMBER OF GRANT DATE VALUE(1) SECURITIES % OF ----------------------- UNDERLYING TOTAL OPTIONS EXERCISE GRANT OPTIONS GRANTED TO OR BASE DATE GRANTED(2) EMPLOYEES IN PRICE EXPIRATION PRESENT NAME (#) FISCAL YEAR ($/SH)(3) DATE VALUE ($) ---- ---------- ------------- --------- ---------- --------- Robert W. Mahoney.................... 56,250 20.7 47.53 1/28/08 629,438 Gerald F. Morris..................... 22,500 8.3 47.53 1/28/08 251,775 Alben W. Warf........................ 13,500 5.0 47.53 1/28/08 151,065 David Bucci.......................... 9,000 3.3 47.53 1/28/08 100,710 Bartholomew J. Frazzitta............. 0 0 0 0 0 Gregg A. Searle(4)................... 30,000 11.1 47.53 1/28/08 335,700
- --------------- (1) The Securities and Exchange Commission authorizes the use of variations of the Black-Scholes option-pricing model for valuing executive stock options in its rules on executive compensation disclosure. The Corporation utilizes the Black-Scholes model to estimate the grant date present value of stock option grants. The following assumptions were used in calculating the Black-Scholes present value of the 1998 stock option grants: (a) an expected option term of four years for options expiring on January 28, 2008 for the options granted to Messrs. Mahoney, Morris, Warf, Bucci and Searle ; (b) an interest rate of 4.7%, which is the interest rate for a zero-coupon U.S. government issue; (c) volatility of 0.25 calculated using the quarter ending stock price for the equivalent period to the expected option term prior to grant date; and (d) dividend yield of 1.5%, the average dividends paid annually. There is no assurance that the value actually realized by an executive will be at or near the estimated Black-Scholes value. The actual value, if any, an executive may realize will depend on the excess of the stock price over the exercise price on the date the option is exercised. The Corporation does not advocate or necessarily agree that the Black-Scholes model can properly determine the value of an option. (2) All option grants were new and not granted in connection with an option repricing transaction. The term of the options is ten years, and vesting occurs at the rate of 25% annually beginning one year from the date of grant or immediately in the event of a change in control. These options have a reload feature, under which an optionee can elect to pay the exercise price using previously owned shares and receive a new option at the then current market price for a number of shares equal to those surrendered. The reload feature is only available, however, if the optionee agrees to defer receipt of the balance of the option shares for at least two years. This feature was also made available to all outstanding stock options held by these individuals. (3) The exercise or base price per share represents the fair market value of the Corporation's Common Shares as of the day prior to the date of grant. (4) Mr. Searle forfeited all rights to his option as well as previously granted unvested options when he resigned. 9 12 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES The following table provides information relating to stock option exercises for the year 1998 and exercisable and unexercisable stock options at December 31, 1998 for the named executive officers of the Corporation. No stock appreciation rights were awarded to such individuals during the last fiscal year, and no stock appreciation rights were exercised or remained unexercised during the last fiscal year.
NUMBER OF SECURITIES VALUE OF UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY OPTIONS OPTIONS AT FY-END AT FY-END (#) ($) SHARES ------------- ------------- ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/ NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE ---- ----------- ----------- ------------- ------------- Robert W. Mahoney........................ 0 0 121,873* 1,095,097* 215,627** 562,422** Gerald F. Morris......................... 0 0 33,750* 438,047* 56,250** 224,961** Alben W. Warf............................ 0 0 20,250* 262,828* 33,750** 134,976** David Bucci.............................. 0 0 19,067* 424,092* 13,725** 43,778** Bartholomew J. Frazzitta................. 0 0 0 0 Gregg A. Searle.......................... 28,125 409,081 0 0
- --------------- * exercisable ** unexercisable LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR The following table provides information relating to the long-term incentive awards that were made in the year 1998 under the 1991 Plan for the named executive officers.
ESTIMATED FUTURE PAYOUTS UNDER PERFORMANCE NON-STOCK PRICE-BASED PLANS NUMBER OF OR OTHER PERIOD NUMBER OF SHARES SHARES, UNITS UNTIL MATURATION ------------------------------ NAME OR OTHER RIGHTS OR PAYOUT THRESHOLD TARGET MAXIMUM ---- --------------- ---------------- --------- ------ ------- Robert W. Mahoney............. 15,000 1/1/98-12/31/00 7,500 15,000 22,500 Gerald F. Morris.............. 9,788 1/1/98-12/31/00 4,894 9,788 14,682 Alben W. Warf................. 6,357 1/1/98-12/31/00 3,179 6,357 9,536 David Bucci................... 4,950 1/1/98-12/31/00 2,475 4,950 7,425 Bartholomew J. Frazzitta...... 4,500 1/1/98-12/31/00 2,250 4,500 6,750 Gregg A. Searle(1)............ 12,000 1/1/98-12/31/00 6,000 12,000 18,000
The table above presents information about performance shares awarded during the year pursuant to the 1991 Plan. Each performance share that is earned out entitles the holder to the then current value of one Common Share. Payouts of awards are tied to achievement of management objectives based upon specified cumulative levels of earnings for each performance period. The target amount will be earned for a performance period if the Corporation achieves 100% of the targeted earnings rate. No amount is payable unless the threshold amount, which is fixed at 90% of targeted earnings, is exceeded. The maximum award amount will be earned if the Corporation achieves 110% of the targeted earnings rate. Payouts may be made in the form of Common Shares, cash or a combination of Common Shares and cash as recommended by the Compensation and Organization Committee and approved by the Board of Directors. - --------------- (1) Mr. Searle forfeited all rights to his award when he resigned. 10 13 PENSION PLAN TABLE The named executive officers and the other executive officers are eligible to participate in a qualified non-contributory defined benefit retirement plan ("Retirement Plan"). In addition, the named executive officers, and the other executive officers participate in an unfunded non-qualified supplemental retirement plan ("Supplemental Plan"). The following table sets forth the estimated annual benefits for both the Retirement Plan and the Supplemental Plan upon retirement at age 62 to the executive officers who elect to retire and receive an annuity. The benefit amounts shown in this table are in addition to any benefits to which the participant might be entitled under the Social Security Act, and assume that the Supplemental Plan and the Social Security Act continue unchanged and that one-half of each participant's anticipated Social Security benefit is $7,074 per year at age 62.
ANNUAL BENEFIT PAYABLE AT AGE 62 -------------------------------------- AVERAGE 15 OR COMPENSATION 5 YEARS 10 YEARS MORE YEARS AT AGE 62 OF SERVICE OF SERVICE OF SERVICE ------------ ---------- ---------- ---------- $ 300,000................................. $ 57,926 $122,926 $ 187,926 500,000................................. 101,259 209,593 317,926 700,000................................. 144,593 296,259 447,926 900,000................................. 187,926 382,926 577,926 1,100,000................................. 231,259 469,593 707,926 1,300,000................................. 274,593 556,259 837,926 1,500,000................................. 319,926 642,926 967,926 1,600,000................................. 339,593 686,259 1,032,926 1,700,000................................. 361,259 729,593 1,097,926
Benefit levels under the Retirement Plan are based on years of service (subject to a maximum of 30 years), final average compensation (which is a 5-year average of the Salary and Bonus as reflected in the Summary Compensation Table but limited to $160,000 in 1998 and 1997 and $150,000 in 1994 through 1996), and the participant's individual Covered Compensation as defined under the Internal Revenue Code. The Supplemental Plan provides a supplemental monthly retirement benefit so that a participant's total retirement benefit from the Retirement Plan and the Supplemental Plan, plus one-half of the participant's anticipated Social Security benefit, equals 65% (prorated for less than 15 years of service) of the participant's final average compensation received from the Corporation during the highest five consecutive years of the last ten calendar years of employment. Compensation is defined for this purpose as Salary plus Bonus accrued for each such calendar year. The Supplemental Plan benefits are payable at age 62 on a joint and survivor basis, if married, and a single life basis, if single at retirement. A participant may also elect, subject to the approval of the Compensation and Organization Committee of the Board, to receive benefits in the form of a lump sum payment at retirement. In no case will less than 5 years of benefit be paid to the participant, his or her spouse and/or beneficiary, as applicable. Benefits are also available to participants electing early retirement at age 60 (on a reduced basis), who die or become disabled while employed, or whose employment is involuntarily terminated after completing 15 years of service. Reduced benefits (computed at a 55% of final average compensation, rather than 65%) are also available to a participant who voluntarily terminates employment after completing 15 years service. Accrued benefits under the Supplemental Plan are fully vested in the event of a change in control of the Corporation. As of December 31, 1998, the number of years of service for the named executive officers is as follows: Mr. Mahoney, 16.5 years; Mr. Morris, 8.1 years; Mr. Warf, 17.3 years; Mr. Bucci, 21.3 years; Mr. Frazzitta, 26.2 years and Mr. Searle, 9.1 years. 11 14 COMPENSATION AND ORGANIZATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION The Compensation and Organization Committee (the "Committee") is composed entirely of non-employee directors. The Committee's principal functions are to establish base salary levels, to determine and measure achievement of corporate and individual goals for the named executive officers and other executive officers under the Annual Incentive Plan, and to select the participants, measure achievement of objectives and determine awards under the 1991 Equity and Performance Incentive Plan, as Amended and Restated (the "1991 Plan"). In addition, the Committee reviews any proposed changes to any benefit plans of the Corporation such as retirement plans, deferred compensation plans and 401(k) Savings Plans. The Committee's recommendations are subject to the approval of the Board of Directors. The Committee believes that the compensation for the named executive officers and the other executive officers should tie individual compensation to the performance of the Corporation. From time to time, the Committee reviews studies prepared by independent compensation consultants and meets with them to review such studies when necessary. In 1996, the Committee reviewed and evaluated the executive compensation program with an outside consultant. Particular emphasis was placed on the long-term incentive elements of the program. This evaluation included a review of compensation policies of companies similar to the Corporation in size and industry and included those companies with which the Corporation competes for talented executives. Due to the unique character of the Corporation's business, the companies selected for this purpose would not necessarily include any of those companies reflected in the Corporation's performance graph. The survey data used for review of compensation policies are based upon companies that are similar in size and lines of business to the Corporation. The studies reviewed by the Committee surveyed many companies but did not identify any by name. Some or all of the companies in the peer group used in the performance graph may have been included in the compensation studies used by the Corporation, based on the reported lines of business and market capitalization reflected in the surveys. The Committee used this information, as well as the results from the evaluation of the executive compensation program, as a basis for review and recommendation for compensation approved for the executive officers in 1998. The Committee believes its present compensation programs are competitive with those offered by companies similar to the Corporation. Also, the Committee believes that the base salary should be set at or below median, and that total compensation should be at or above the median when the Corporation meets or exceeds its expectations and below when it does not. Further, a significant proportion of total compensation should be variable and dependent on the overall performance of the Corporation, and this objective can be achieved through appropriate design of long-term incentive compensation. The Corporation has three basic elements in the compensation for its executive officers. These elements are (a) base salary compensation, (b) annual incentive compensation and (c) long-term incentive compensation. These elements of compensation recognize both individual and corporate performance. Annual incentive compensation provides incentive compensation which optimizes rewards for performance over a shorter period of performance, while long-term incentive compensation optimizes rewards for performance over a longer term based upon achievement of cumulative earnings, usually over a three-year period. In addition, stock option grants result in a reward when the market value appreciates in relation to the option price. BASE SALARY COMPENSATION The base salary for all executive officers is reviewed annually, and the Committee's review process continues throughout the year. This review includes an analysis of past and expected future performance of the executive officers, as well as the responsibilities and qualifications of the executive officers individually and the performance of the Corporation in comparison with companies similar to the Corporation. The base salaries established for 1998 were consistent with the Committee's compensation policy, noted above, of generally setting base salary at or below median. At its meeting in August, due to business conditions, the Committee decided to impose a general deferral of increases in the salaries of the executive officers for twelve months from the anniversary date of normal review. 12 15 ANNUAL INCENTIVE COMPENSATION The Annual Incentive Plan ("Incentive Plan") recognizes the performance of the named executive officers, other executive officers and key managers who contribute to the Corporation's success. These participants have the greatest impact on the profitability of the Corporation. In general, the participants with the most significant responsibility have the greatest proportion of their cash compensation tied to the Incentive Plan. The performance criteria, which are described in more detail below, reflect a combination of corporate operating profit, net of minority interest, and specific individual goals and objectives. At the beginning of each year, the Committee establishes annual performance goals for the Corporation which are based on operating profit, net of minority interest. The performance goals include threshold and maximum amounts for achievement. The Committee established the threshold level for 1998 at a level that required the Corporation to exceed by five percent the operating profit achieved in 1997 before any payout could occur and with the maximum amount at 22 percent over 1997. At the same time, the Committee reviewed, amended and approved individual personal performance goals and objectives for the named executive officers. The Incentive Plan is generally weighted 50% on the Corporation achieving its operating profit goal, and 50% on the achievement of the individual goals and objectives. No Incentive Plan compensation is paid if the Corporation does not achieve at least the threshold amount of its operating profit goal even though an individual may have achieved his or her personal goals and objectives. At the end of each year, the Committee reviews the performance of the Corporation and achievement of the personal goals and objectives for the named executive officers and other executive officers. The Committee then reviews its findings and recommendations with the Board of Directors. In 1998, the Corporation did not achieve the threshold of its performance goals. As a result the executive officers did not receive any Incentive Plan compensation. LONG-TERM INCENTIVE COMPENSATION The 1991 Plan affords flexibility in the types of awards that can be made for a long-term period. In particular, certain awards tie the individual's performance to the performance of the Corporation. In 1998 the Committee recommended performance share grants for the named executive officers, and the other executive officers for the three-year performance period of January 1, 1998 through December 31, 2000. Prior to recommending the grants, the Committee reviewed the performance, together with the responsibilities, of the executive officers. The performance share grants were generally determined by the level of responsibilities and the performance of the executive officers. These executive officers have the greatest impact on the profitability of the Corporation. The management objective for this performance period will be measured for the entire performance period on a cumulative basis. There will be no earnout unless the earnings goal is achieved for the three-year performance period. Payout of any awards will be based upon achievement of a threshold amount of 90% of the management objective and the maximum payout will be earned if 110% of the management objective is achieved. The Committee believes these awards motivate individual performance and increase shareholder value because achievement of corporate financial goals on a cumulative basis over an extended period must be met before any earnout occurs. For the three-year cumulative performance period of January 1, 1996 through December 31, 1998, the Committee recommended and the Board of Directors approved a very challenging objective for this performance period. The objective was adjusted as permitted by the plan covering such awards to exclude the realignment charge taken by the Corporation in 1998. In evaluating the performance of all participants, the Committee and the Board of Directors determined that considering all factors it was in the best interests of the Corporation to exclude the realignment charge. The Committee also took into consideration that no awards for the year were payable under the Annual Incentive Plan and the realignment charge, if applied, would distort the favorable impact of the participants' contributions to corporate performance in the three-year award cycle. After giving effect to the exclusion, performance of the objective was at the maximum. The payout was in the form of cash and/or stock. Performance share grants have generally been issued as the principal form of equity incentive for the Corporation's executive officers during the last eight years. A restricted share award was made in 1998 to one of the named executive officers and to another executive officer. These executive officers were not previously awarded performance share grants, but were included in such grants when such executive officers were promoted 13 16 to that level. These awards in 1998 were made on the basis of their 1997 performance against their goals and objectives. The restricted share awards were intended to provide an equivalent compensation program for these executive officers until they achieved their earnout of performance shares under the relevant performance period. All rights to the restricted share awards are forfeited if the executive officer terminates employment voluntarily or in the event of termination for cause before the end of a three-year period. In addition, during 1998 the Committee recommended, and the Board of Directors approved, stock option grants to the named executive officers. Stock options were also granted to certain other executive officers in 1998. The option awards reflect conclusions presented in an earlier report by the outside compensation consultant, which indicated that the combination of annual incentive compensation and performance share awards were well below median at the level of the top five executives. The report also concluded that reliance on performance shares as the sole long-term incentive did not provide sufficient upside leverage to recognize excellent performance. Further, the compensation consultant informed the Committee that any increase in long-term incentive compensation should be tied to the stock price. The number of shares granted to the named executive officers was based upon the recommendations of the compensation consultant. In making its recommendations, the consultant considered target total compensation for the peer companies of the Corporation as well as the value of option grants as determined by means of the Black-Scholes option valuation method. The peer companies selected for this purpose would not necessarily include any of those companies reflected in the Corporation's performance graph. This is due to the unique character of the Corporation's business. Some or all of the companies in the peer group used in the performance graph may have been included in the compensation studies provided by the consultant based on the reported lines of business and market capitalization. The Committee believes that stock options provide an essential competitive component in the executive compensation program. Also, the Committee believes that stock options align the interests of the named executive officers and other executive officers with those of the Corporation's shareholders since no benefit inures to the executive officers unless stock price appreciation occurs over a period of years. Information on the stock options granted to the named executive officers is included in the table entitled Option Grants in Last Fiscal Year. STOCK OWNERSHIP GUIDELINES Based upon information provided by the executive compensation consultant, stock ownership guidelines were established at the end of 1996 for the named executive officers and other executive officers. The Committee and the Board of Directors believe that it is important for each executive officer to have a substantial investment in the Corporation as such investment links an executive officer's interests with other shareholders. These guidelines set forth a specific target level of ownership based upon base salary. The target levels are 4 times for group vice presidents and vice presidents, 6 times for executive vice presidents and senior vice presidents, 8 times for the president and chief operating officer and 10 times for the chairman of the board and chief executive officer. The guidelines recommend that the executive officers reach their respective level within three to five years. Periodic adjustments may be considered, and discretion may be used in certain instances. It is expected that the target levels will be achieved from stock that is obtained by the executive officers through the various elements of the executive compensation program. The Committee reviews progress toward the target levels of ownership on an annual basis to determine whether all of the executive officers are at the requisite level of making progress toward such target levels. CHIEF EXECUTIVE OFFICER COMPENSATION The chief executive officer, a named executive officer, participates in the three elements of compensation previously discussed for the other executive officers. In setting the base salary compensation for the chief executive officer for 1998, the Committee considered a number of factors. These included an evaluation of his experience and performance in relation to the performance of the Corporation. As stated previously, the Committee believes that individual compensation should be tied to the performance of the Corporation so that a higher portion of total compensation is attributable to incentive compensation. Also, the chief executive officer has been responsible for the functions of the position of president since the president resigned as of September 30, 1998. 14 17 In addition to the Corporation's performance goal based on operating profit, the chief executive officer's individual performance relating to annual incentive compensation is measured by achievement of specific personal goals and objectives. In 1998 the Corporation did not achieve the threshold of its performance goals. As a result, the chief executive officer did not receive any Incentive Plan compensation. With respect to long-term incentive compensation, the chief executive officer was granted a performance share grant in 1998 covering the performance period of January 1, 1998 through December 31, 2000. As stated previously, any earnout of shares will be based upon achievement of a threshold amount of 90% of the management objective and the maximum payout will be earned if 110% of the management objective is achieved. The estimated payout for the chief executive officer is 7,500 shares at threshold, 15,000 shares at target and 22,500 shares at maximum. For the performance period of January 1, 1996 through December 31, 1998, the chief executive officer earned 31,894 shares, which was the maximum amount. The payout was in the form of cash. In addition, in 1998 the chief executive officer was granted a stock option for 56,250 shares at $47.53 per share, which represented the fair market value as of the day prior to the date of grant. Additional information on his stock option is included in the table entitled Option Grants in Last Fiscal Year. The Committee believes the chief executive officer's compensation is commensurate with his experience, his performance and the performance of the Corporation. COMPLIANCE WITH FEDERAL TAX LEGISLATION Federal tax legislation enacted in 1993 generally precludes the Corporation and other public companies from taking a tax deduction for compensation in excess of $1 million which is not performance-based and is paid, or otherwise taxable, to the named executive officers. Certain awards were made prior to February 18, 1993 and are not covered by the legislation. The compensation under the Corporation's existing programs was affected by the limitation during 1998. However, the Committee established a policy in 1995 that any amounts affected by the limitation would be automatically deferred until the limitation no longer applies. Therefore, such amounts for 1998 were automatically deferred. At the annual meeting of shareholders in April 1997, an amendment and restatement of the 1991 Plan was approved to ensure that certain awards qualify as performance-based compensation that is exempt from the legislation. The foregoing report on 1998 executive compensation was submitted by the Compensation and Organization Committee of the Corporation's Board of Directors and shall not be deemed to be "soliciting material" or to be "filed" with the Securities and Exchange Commission (the "Commission") or subject to Regulation 14A promulgated by the Commission or Section 18 of the Securities Exchange Act of 1934. The names of the directors who serve on the Compensation and Organization Committee are set forth below: William F. Massy, Chair Donald R. Gant Phillip B. Lassiter John N. Lauer 15 18 PERFORMANCE GRAPH Set forth below is a line graph comparing the yearly percentage change in the cumulative shareholder return, which includes the reinvestment of cash dividends, of the Corporation's Common Shares with the cumulative total return of the S&P Composite-500 Stock Index and a custom composite index of five stocks. This index consists of Hubbell Inc. and Thomas & Betts Corp. (electrical products companies) and Harris Corp., SCI Systems Inc. and Varian Associates (diversified electronic products companies). These companies were selected based on similarity to the Corporation's line of business and similar market capitalization. The comparison covers the five-year period starting December 31, 1993 and ended December 31, 1998. The comparisons in this graph are required by rules promulgated by the Commission and are not intended to forecast future performance of the Corporation's Common Shares. Cumulative Total Return Chart
DEC-93 DEC-94 DEC-95 DEC-96 DEC-97 DEC-98 Diebold $100 $105 $144 $249 $304 $218 S&P 500(R) $100 $101 $139 $171 $229 $294 Custom Composite Index (5 Stocks) $100 $106 $141 $180 $228 $211
16 19 RATIFICATION OF APPOINTMENT OF AUDITORS BY THE BOARD OF DIRECTORS KPMG LLP acted as the Corporation's independent auditors during the past fiscal year, and has so acted since 1965. On the recommendation of the Audit Committee and the Board of Directors, and subject to ratification by the shareholders, the Board of Directors appointed KPMG LLP to examine the accounts and other records of the Corporation for the fiscal year ending December 31, 1999. The Board of Directors will present to the annual meeting a proposal that such appointment be ratified. Should the shareholders fail to ratify the appointment, the Board of Directors will reconsider its selection. KPMG LLP has no financial interest, direct or indirect, in the Corporation or any subsidiary. A representative of KPMG LLP is expected to be present at the annual meeting to make a statement if he or she desires to do so and to respond to appropriate questions. THE BOARD RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF AUDITORS. EXPENSES OF SOLICITATION The cost of soliciting the proxies will be paid by the Corporation. In addition to solicitation by mail, some of the Corporation's directors, officers and employee associates, without extra compensation may conduct additional solicitations by telephone, facsimile and personal interviews. The Corporation will also enlist, at its own cost, the assistance of banks, bankers and brokerage houses in additional solicitations of proxies and proxy authorizations, particularly from those of their clients or customers whose shares are not registered in the clients' or customers' own names. Brokers, bankers, etc., will be reimbursed for out-of-pocket and reasonable clerical expenses incurred in obtaining instructions from beneficial owners of the Common Shares. It is estimated that the expense of such special solicitation will be nominal. In addition, Georgeson & Co., Inc., New York, New York, has been retained to assist in the solicitation of proxies for an estimated fee of $7,000. PROPOSALS OF SHAREHOLDERS The Corporation must receive by November 8, 1999 any proposal of a shareholder intended to be presented at the 2000 annual meeting of shareholders of the Corporation (the "2000 Meeting") and to be included in the Corporation's proxy, notice of meeting and proxy statement related to the 2000 Meeting pursuant to Rule 14a-8 under the Securities Exchange Act of 1934 (the "Exchange Act"). Such proposals should be submitted to the Secretary of the Corporation by certified mail, return receipt requested. Proposals of shareholders submitted outside the processes of Rule 14a-8 under the Exchange Act in connection with the 2000 Meeting ("non-Rule 14a-8 Proposals") must be received by the Corporation by January 24, 2000 or such proposals will be considered untimely under Rule 14a-4(c) of the Exchange Act. The Corporation's proxy related to the 2000 Meeting will give discretionary authority to the proxy holders to vote with respect to all Non-Rule 14a-8 Proposals received by the Corporation after January 24, 2000. 17 20 OTHER MATTERS The Corporation is not aware of any matters to be presented at the annual meeting other than the matters set forth herein. Should any other matters be presented for a vote of the shareholders, the proxy in the enclosed form confers discretionary voting authority upon the persons voting such proxy. In accordance with the provisions of the General Corporation Law of the State of Ohio, the Board of Directors has appointed inspectors of elections to act at the annual meeting. By Order of the Board of Directors /s/ Charee Francis-Vogelsang Charee Francis-Vogelsang Vice President and Secretary Canton, Ohio March 8, 1999 THE ANNUAL REPORT OF DIEBOLD, INCORPORATED FOR THE YEAR ENDED DECEMBER 31, 1998, WAS MAILED TO ALL SHAREHOLDERS ON OR ABOUT MARCH 8, 1999. 18 21 [Map] From Interstate 77 North: Exit 109 (Everhard Road) turn right and take first immediate right (service road) or turn right (Everhard Road) and go to the first light (Dressler Road), turn right and follow 1/4 mile to Metro Circle and turn right. From Interstate 77 South: exit 109A (Belden Village Avenue) go to the third light (Dressler Road) turn right and follow 1/2 mile to Metro Circle and turn right. - -------------------------------------------------------------------------------- DIEBOLD, INCORPORATED 5995 Mayfair Road P.O. Box 3077, North Canton, Ohio 44720-8077 This Proxy is Solicited on Behalf of the Board of Directors The undersigned hereby appoints Robert W. Mahoney and Gerald F. Morris, and each of them, as Proxies, with full power of substitution to represent and to vote all the Common Shares of Diebold, Incorporated held of record by the undersigned on February 26, 1999, at the annual meeting of shareholders which will be held on April 21, 1999 or at any adjournment thereof, as indicated on the reverse side. You are encouraged to specify your choices by marking the appropriate boxes, SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance with the Board of Directors recommendations. The Proxies cannot vote your shares unless you sign and return this Card. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting. (Continued, and to be dated and signed on reverse side.) DIEBOLD, INCORPORATED P.O. BOX 11105 NEW YORK, N.Y. 10203-0105 22 Detach Proxy Card Here - -------------------------------------------------------------------------------- [ ] 1. Election of Directors FOR all nominees [ ] WITHHOLD AUTHORITY to vote [ ] *EXCEPTIONS [ ] listed below for all nominees listed below. Nominees: L.V. Bockius III, R.L. Crandall, D.R. Gant, L.L. Halstead, P.B. Lassiter, J.N. Lauer, R.W. Mahoney, W.F. Massy, and W.R. Timken, Jr. (INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark the "Exceptions" box and write that nominee's name in the space provided below). *Exceptions ____________________________________________________________________
2. To Ratify the Appointment of KPMG LLP as Independent Auditors for the year 1999. FOR [ ] AGAINST [ ] ABSTAIN [ ]
Change of Address and or Comments Mark Here [ ] NOTE: Please sign exactly as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. . Dated:__________________, 1999 ______________________________ Signature ______________________________ Signature Votes MUST be indicated (x) in Black or Blue ink. Please Sign, Date and Return the Proxy Promptly Using the Enclosed Envelope. 23 [Map] From Interstate 77 North: Exit 109 (Everhard Road) turn right and take first immediate right (service road) or turn right (Everhard Road) and go to the first light (Dressler Road), turn right and follow 1/4 mile to Metro Circle and turn right. From Interstate 77 South: exit 109A (Belden Village Avenue) go to the third light (Dressler Road) turn right and follow 1/2 mile to Metro Circle and turn right. - -------------------------------------------------------------------------------- CONFIDENTIAL VOTING INSTRUCTIONS To Vanguard Fiduciary Trust Company, Trustee for the Diebold, Incorporated 401(k) Savings Plan ("SP") The undersigned, as a participant in the SP, hereby directs the Trustee to vote in person or by proxy, with the powers the undersigned would possess if personally present, to vote all Common Shares of the undersigned in Diebold, Incorporated (and to exercise all other shareholder rights and powers) at the annual meeting of its shareholders to be held on April 21, 1999 and at any adjournments thereof, upon all matters that may properly come before the meeting, including the matters identified on the reverse side of this consent card and described in the proxy statement furnished herewith, subject to any directions indicated on the reverse side of this consent card. PLEASE MARK, SIGN AND DATE THE REVERSE SIDE AND RETURN THIS CONSENT CARD PROMPTLY IN THE ENCLOSED ENVELOPE. DIEBOLD, INCORPORATED P.O. BOX 11105 NEW YORK, N.Y. 10203-0105 24 Detach Instruction Card Here - -------------------------------------------------------------------------------- [ ] 1. Election of Directors FOR all nominees [ ] WITHHOLD AUTHORITY to vote [ ] *EXCEPTIONS [ ] listed below for all nominees listed below. Nominees: L.V. Bockius III, R.L. Crandall, D.R. Gant, L.L. Halstead, P.B. Lassiter, J.N. Lauer, R.W. Mahoney, W.F. Massy, and W.R. Timken, Jr. (INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark the "Exceptions" box and write that nominee's name in the space provided below). *Exceptions_____________________________________________________________________
2. To Ratify the Appointment of KPMG LLP as Independent Auditors for the year 1999. FOR [ ] AGAINST [ ] ABSTAIN [ ]
NOTE: Please sign exactly as name appears hereon. . Dated:__________________, 1999 ______________________________ Signature ______________________________ Signature Votes MUST be indicated (x) in Black or Blue ink. Please Sign, Date and Return the Instruction Card Promptly Using the Enclosed Envelope. -----END PRIVACY-ENHANCED MESSAGE-----