DEF 14A 1 k67963def14a.txt DEFINITIVE PROXY STATEMENT SCHEDULE 14A PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. ) Filed by the registrant [X] Filed by a party other than the registrant [ ] Check the appropriate box: [ ] Preliminary proxy statement. [ ] Confidential, for use of the Commission only (as permitted by Rule 14a-6(e)(2)). [X] Definitive proxy statement. [ ] Definitive additional materials. [ ] Soliciting material pursuant to Section 240.14a-12 Tecumseh Products Company -------------------------------------------------------------------------------- (Name of Registrant as Specified in Its Charter) -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement if Other Than the Registrant) Payment of filing fee (check the appropriate box): [X] No fee required. [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. (1) Title of each class of securities to which transaction applies: -------------------------------------------------------------------------------- (2) Aggregate number of securities to which transaction applies: -------------------------------------------------------------------------------- (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): -------------------------------------------------------------------------------- (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: -------------------------------------------------------------------------------- [TECUMSEH PRODUCTS COMPANY LOGO] [TECUMSEH LOGO] March 15, 2002 Dear Shareholder: We cordially invite you to attend our 2002 annual meeting of shareholders next month in Tecumseh, Michigan. Only Class B shareholders will vote at the meeting. However, all shareholders are most welcome to attend. Starting today, we are sending the enclosed proxy statement to all our shareholders and a form of proxy to Class B shareholders only. If you are a Class B shareholder, your vote is very important. Even if you plan to attend in person, please complete and mail the enclosed proxy, or vote by telephone or on the Internet, at your earliest convenience. Thank you. Sincerely, /s/ KENNETH G. HERRICK Chairman of the Board of Directors /s/ TODD W. HERRICK President and Chief Executive Officer [TECUMSEH PRODUCTS COMPANY LETTERHEAD] [TECUMSEH PRODUCTS LOGO] NOTICE OF ANNUAL MEETING OF SHAREHOLDERS Date: Wednesday, April 24, 2002 Time: 9:00 a.m. Location: Tecumseh Country Club Tecumseh, Michigan From the center of Tecumseh, go north on the Tecumseh-Clinton Road about one mile to Burt Street. Turn right. Tecumseh Country Club is on the south side of Burt Street about one mile east of the Tecumseh-Clinton Road. The purposes of this year's annual meeting are: - To elect directors for the following year. - To consider any other matters properly presented at the meeting. All shareholders are most welcome to attend the meeting, but only those who held Class B shares at the close of business on March 1, 2002 will be entitled to vote. If you are a Class B shareholder, you will find enclosed a form of proxy solicited by our Board of Directors. Whether or not you plan to attend the meeting, please take the time to vote by completing and mailing the enclosed proxy or by voting by telephone or on the Internet. Even if you sign a proxy or vote by telephone or on the Internet, you may still attend the meeting and vote in person. You may revoke your proxy any time before the voting begins. YOUR VOTE IS VERY IMPORTANT. Thank you. TECUMSEH PRODUCTS COMPANY Daryl P. McDonald General Counsel and Secretary March 15, 2002 PROXY STATEMENT The Board of Directors of Tecumseh Products Company is soliciting proxies to vote Class B shares at our 2002 annual meeting of shareholders. This proxy statement contains information that may help you decide whether and how to vote. Please read this proxy statement carefully. Appendices A, B, and C contain important information about share ownership, executive compensation, and market performance. You can obtain more information about Tecumseh Products Company from our 2001 annual report to shareholders on Form 10-K and from the other public documents that we file with the SEC. VOTING We have two classes of common stock: Class B, which has full voting rights, and Class A, which generally has no voting rights. Nothing on the agenda for this year's annual meeting will require a vote by Class A shareholders so we are only soliciting proxies from Class B shareholders. At the close of business on March 1, 2002 (the record date for the meeting), 5,077,746 Class B shares were outstanding and entitled to vote, and 13,401,938 Class A shares were outstanding. To have a quorum, a majority of the outstanding Class B shares must be present at the meeting -- either in person or by proxy. Instead of signing and returning a proxy, if you hold your shares in your own name, you may vote by telephone or on the Internet by following the instructions attached to your proxy. If your shares are held through a broker, bank, or other nominee, you must contact the broker, bank, or other nominee to find out whether you will be able to vote by telephone or on the Internet. If you complete the enclosed proxy and return it before the meeting, or if you vote by telephone or on the Internet, the persons named will vote your shares as you specify. You may revoke a proxy any time before voting begins at the meeting. A later proxy by any means will cancel any earlier proxy. For example, if you vote by telephone and later vote differently on the Internet, the Internet vote will count, and the telephone vote will be canceled. If you wish to change your vote by mail, you should write our Secretary to request a new proxy. The last proxy we receive before the meeting will be the one we use. You also may change your vote by voting in person at the meeting. ELECTION OF DIRECTORS ELECTION PROCEDURE Our bylaws authorize the Board of Directors to determine the number of directors that will make up the full board. We currently have nine directors. The board has decided to keep the same number for the coming year and has nominated all nine incumbent directors for reelection. If you return a proxy or vote by telephone or on the Internet, your shares will be voted for all of the board's nominees or, if you specify otherwise, as you specify. If a nominee becomes unable to serve, which we do not expect to happen, your proxy will be voted for a substitute determined in the best judgment of the proxy holders. From the persons duly nominated, directors will be elected by plurality vote of the Class B shareholders present or represented at the meeting. This means that this year, regardless of the number of Class B shares not voted for a nominee, the nominees who receive the highest through ninth highest numbers of votes will be elected. NOMINEES FOR DIRECTOR Kenneth G. Herrick (director since 1951, age 80). Chairman of the Board of Directors of Tecumseh Products Company. Mr. Herrick is a member of the Boards of Trustees of Howe Military School and Herrick Foundation. Todd W. Herrick (director since 1973, age 59). President and Chief Executive Officer of Tecumseh Products Company. Mr. Herrick is a member of the Board of Directors of Comerica Bank and a member of the Boards of Trustees of Howe Military School and Herrick Foundation. He also is a member of the Advisory Boards to the School of Business of the University of Michigan and the School of Business of the University of Notre Dame. He serves on our Pension and Investment Committee. Mr. Herrick is the son of Kenneth G. Herrick. 1 David W. Kay (director since 2001, age 53). Vice President, Treasurer and Chief Financial Officer of Tecumseh Products Company since 2001; Corporate Controller of Tecumseh Products Company from 1999 to 2001; Corporate Controller of RTI International Metals, Inc. (manufacturing) from 1986 to 1999. Mr. Kay serves on our Pension and Investment Committee. J. Russell Fowler (director since 1967, age 83). Retired since 1994; Chairman Emeritus of Jacobson Stores, Inc. (mercantile business) from 1992 to 1994; Chairman of the Board of Directors and Chief Executive Officer of Jacobson Stores, Inc. from 1982 to 1992. Mr. Fowler is a member of the Boards of Directors of Butterfield Investment Company and Quanta, Inc. He serves on our Governance and Executive Compensation Committee, our Audit Committee, and Nominating Committee. John W. Gelder (director since 1989, age 68). Of counsel to the law firm of Miller, Canfield, Paddock and Stone, P.L.C. since 1999; senior member of Miller, Canfield, Paddock and Stone, P.L.C. until 1999. Mr. Gelder is a member of the Board of Trustees of Herrick Foundation. He serves on our Pension and Investment Committee and our Audit Committee. Miller, Canfield, Paddock and Stone, P.L.C. served as our principal outside legal counsel during 2001 and is continuing to do so this year. Stephen L. Hickman (director since 1991, age 59). Chairman of the Board of Directors and Chief Executive Officer of Brazeway, Inc. (manufacturer of aluminum extrusions and fabricator of aluminum products) since 2001; also President of Brazeway, Inc. until 2001. Mr. Hickman serves on our Governance and Executive Compensation Committee. Peter M. Banks (director since 1991, age 64). Partner in XR Ventures, L.L.C. (investments) since September 2000; Senior Executive of Veridian Corporation (research and development) from January 2000 to April 2000; President and Chief Executive Officer of ERIM International, Inc. (research and development) from 1997 to January 2000; President and Chief Executive Officer of Environmental Research Institute of Michigan (government research and development services) from 1995 to 1997; Professor and Dean of the College of Engineering of the University of Michigan from 1990 to 1994. Dr. Banks is a member of the Boards of Directors of X-Rite Corp., HandyLab, Inc., Chaos Technology, Inc., Urban Pixel, Inc., and Triformix, Inc. He serves on our Governance and Executive Compensation Committee, Pension and Investment Committee, and Nominating Committee. Jon E. Barfield (director since 1993, age 50). Chairman, President, and Chief Executive Officer of The Bartech Group, Inc. (contract employment and related staffing services) since 1997; Chairman and Chief Executive Officer of The Bartech Group, Inc. from 1995 to 1997; President of The Bartech Group, Inc. from 1981 to 1995. Mr. Barfield is a member of the Boards of Directors of National City Corporation, Granite Broadcasting Corporation, BMC Software, Inc., and Pantellos Group Limited Partnership, Inc. He also is a Trustee Emeritus of Princeton University, a member of the Boards of Trustees of Kettering University, Henry Ford Museum and Greenfield Village, and a director of Blue Cross and Blue Shield of Michigan, the Community Foundation for Southeastern Michigan, and Detroit Renaissance. He serves on our Pension and Investment Committee and our Audit Committee. Ralph W. Babb, Jr. (director since 1998, age 53). President and Chief Executive Officer of Comerica Incorporated and of its principal subsidiary, Comerica Bank, since January 2002; Vice Chairman and Chief Financial Officer of Comerica Incorporated and Comerica Bank from 1999 to January 2002; Executive Vice President and Chief Financial Officer of Comerica Incorporated and Comerica Bank from 1995 to 1999. Mr. Babb is a member of the Boards of Directors of Comerica, Incorporated, Comerica Bank, the Detroit Symphony Orchestra, Oakland University Foundation, Citizen's Research Council of Michigan, and St. Vincent & Sarah Fisher Center and a member of the Board of Trustees of William Beaumont Hospital -- Royal Oak. He serves on our Governance and Executive Compensation Committee, Audit Committee, and Nominating Committee. DIRECTOR COMPENSATION We do not pay employees any separate compensation for serving as directors. We pay all other directors a monthly retainer of $1,000, a $1,500 fee for each board meeting attended, and a $1,000 fee for each committee meeting attended. 2 We also reimburse those directors for travel expenses. DIRECTORS' MEETINGS AND STANDING COMMITTEES We held ten board meetings during 2001. The Audit Committee met three times during the year, the Governance and Executive Compensation Committee met four times, and the Nominating Committee did not meet. Each director attended at least 75% of the total of all board meetings and all meetings of board committees on which he served that were held during his period of service. NOMINATING COMMITTEE The function of the Nominating Committee is to make recommendations on nominations for the Board of Directors. The committee will consider shareholder suggestions for nominees for director (other than self-nominations). If you wish to make a suggestion, you should submit it in writing to Daryl P. McDonald, General Counsel & Secretary, Tecumseh Products Company, 100 E. Patterson Street, Tecumseh, Michigan 49286. The committee will consider suggestions received before December 31 at a meeting in the following year, before we mail the proxy materials for that year's annual meeting. AUDIT COMMITTEE The board has adopted a written charter specifying the powers and duties of the Audit Committee. A copy of the charter was included as Appendix D to the proxy statement for our 2001 annual meeting. All members of the Audit Committee are independent (as independence is defined in Rule 4200(a)(15) of the National Association of Securities Dealers, Inc.). AUDIT COMMITTEE REPORT We have reviewed the audited financial statements for the fiscal year ended December 31, 2001 and discussed them with management. We also have discussed with the independent accountants the matters required to be discussed by SAS 61 (Codification of Statements on Auditing Standards, AU sec. 380) and have considered whether their provision of non-audit services is compatible with maintaining their independence. In addition, we have received from the independent accountants the written disclosures and letter required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), and we have discussed their independence with them. While the composition of our committee meets NASD requirements, none of us is professionally engaged in the practice of, or is an expert in, auditing or accounting, including in respect of auditor independence. To meet our responsibilities to the board of directors, we inquire of and rely on, without independent verification, the information provided and representations made by management and the independent accountants relative to auditor independence, appropriateness of accounting and financial reporting principles, preparation and audit of the financial statements in accordance with accounting or auditing standards generally accepted in the United States, and compliance with applicable laws and regulations. Accordingly, our committee's oversight does not provide an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, our committee's considerations and discussions referred to above do not assure that the financial statements are complete and accurate, that the audit of the financial statements has been carried out in accordance with auditing standards generally accepted in the United States, that the financial statements are presented in accordance with accounting principles generally accepted in the United States, or that the independent accountants are in fact "independent." In reliance on the reviews and discussions referred to above, and subject to the limitations on the role and responsibilities of our committee referred to above and in our committee's charter, we recommended to the board of directors (and the board of directors approved) that the audited financial statements for the fiscal year ended December 31, 2001 be included in the annual report to shareholders on Form 10-K for that year. 3 Presented by the members of the Audit Committee of the Board of Directors J. Russell Fowler, Chairman John W. Gelder Jon E. Barfield Ralph W. Babb, Jr. GOVERNANCE AND EXECUTIVE COMPENSATION COMMITTEE The overall mission of the Governance and Executive Compensation Committee is to assist the board in conducting our business successfully so as to maximize long-term benefits to shareholders, including optimizing long-term financial success. Its functions include: - Actively developing and recommending to the board strategies for achieving those goals. - Monitoring and reporting to the board on the effectiveness of management policies and decisions. - Annually reporting to the board the committee's assessment of the board's performance in light of the objectives described above. - Annually reviewing with the board the appropriate skills and characteristics required of board members in the context of the then current composition and needs of the board, including issues of diversity, age, and skills. - Reviewing our policies for compensating outside directors and, if appropriate, making recommendations for changes. - Annually fixing the salaries of our Chief Executive Officer and other executive officers, considering, developing, reviewing, and making recommendations about programs for annual and long-term incentive compensation for those executives and for other key employees, and administering those programs, including our Management Incentive Plan. No director on this committee can be an employee of Tecumseh Products Company. VOLUNTARY EARLY RETIREMENT PROGRAM AND RELATED TRANSITION During 2001, we implemented a company-wide voluntary early retirement program intended to reduce the expense associated with our salaried workforce. Pursuant to that program, two of our executive officers, John H. Foss and James E. Martinco, retired effective as of October 1, and as part of the related management transition, the board appointed David W. Kay and Michael R. Forman as executive officers, also effective as of October 1. In connection with his retirement, Mr. Foss resigned from the board of directors, and Mr. Kay was appointed to the board as his replacement. During the latter part of 2000, the Governance and Executive Compensation Committee established 2001 salaries for the persons serving as executive officers at that time. Our CEO established the salaries paid to Mr. Kay and Mr. Forman for the portion of the year before they became executive officers, and he also established their salaries for the remainder of the year pursuant to authority conferred on him by the board of directors at the time they were appointed executive officers. The committee did not take any part in establishing 2001 salaries for Mr. Kay or Mr. Forman. The committee made all determinations relating to Management Incentive Plan awards for 2001. Executive officers who retired during the year were not eligible for consideration for those awards. GOVERNANCE AND EXECUTIVE COMPENSATION COMMITTEE REPORT Compensation Philosophy and Objectives We follow a "pay for performance" philosophy designed to accomplish three primary objectives: - Encouraging teamwork among members of management and excellence in the performance of individual responsibilities. - Aligning the interests of key managers with the interests of shareholders by offering an incentive compensation vehicle that is based on growth in return on equity and shareholder value. 4 - Attracting, rewarding, and retaining strong management. Our "pay for performance" strategy is intended to enhance shareholder value: - In the short term, by focusing management's attention on return on equity, cash return on assets, and other measures of current financial performance so as to challenge each business group to achieve and maintain positions of market leadership, to reduce costs where appropriate, and to continually seek to maintain and enhance Tecumseh Products Company's reputation for excellence in product quality and customer service. - In the longer term, by causing a substantial portion of each executive's potential compensation to be directly tied to market performance of the Class A shares. Management Incentive Plan Awards The principal tool for implementing our "pay for performance" philosophy is the Management Incentive Plan, which covers approximately 40 key executives, including all executive officers. (We also have a plan for awarding annual cash bonuses based on similar performance criteria, which covers lower level management employees.) The Management Incentive Plan is structured to provide both a short-term incentive tied to achievement of company-wide and business unit annual performance goals and a long-term incentive tied to the market performance of the Class A shares. We did not grant any plan awards for 2001. One third of each plan award granted for 2000 was payable in cash, and the remainder was denominated in phantom stock "units" considered for record keeping purposes as equivalents to Class A shares and valued accordingly. Half of the phantom stock units granted under each 2000 award (that is, one-third of the total award) vest after three full fiscal years, and the remaining units vest after five full fiscal years. All awards for years before 2000 were denominated entirely in phantom stock units vesting after five full fiscal years. Except in cases of earlier employment termination due to death, disability, or retirement, or in the event of a "change in control" (as defined in the plan), these phantom stock units are subject to forfeiture if the grantee does not remain with us until the units vest. As cash dividends are paid on Class A shares, additional phantom stock units (also subject to forfeiture), equal in value to the dividends paid, are credited to employee accounts under the plan. Thus, the potential payout on an award, although payable only in cash, is tied directly to the market value performance of Class A shares over three- and five-year periods. For purposes of computations under the plan, units are valued at the average of the closing prices for the Class A shares on the first trading day of the month over the eleven months preceding the valuation date rather than by the method required by the SEC for the Summary Compensation Table. The Management Incentive Plan affords us broad discretion to determine the amounts of awards granted, subject only to a limitation setting the maximum number of units awardable during a given year at 2% of the number of Class A shares outstanding at the end of the year. We also have broad discretion under the plan to establish criteria under which otherwise eligible employees may receive awards. In general, however, as was true for 2001, before or early in each year, we expect to establish objective company-wide and business group performance criteria and, after year-end, to use actual performance (measured against these criteria) as the principal basis for award decisions for that year. For 2001, the company-wide criteria established for the Corporate Office Group, which includes Todd W. Herrick, David W. Kay, and Michael R. Forman, related to return on equity, both in absolute terms and in relation to historical performance. The same company-wide return on equity criteria also applied to our business units, and additional group criteria relating to cash return on assets (both absolute and relative to prior performance) also were established for each business unit. Under the plan as implemented for 2001, depending on the extent to which actual return on equity for that year (and, for employees in a business unit, the extent to which the unit's actual cash return on assets for the year) fell within or exceeded our pre-approved ranges, each covered employee could have received an award of up to 80% of his 2001 salary. Tecumseh's 2001 performance was disappointing, both in terms of return on equity 5 and cash return on assets for business units. Applying the criteria we established at the beginning of the year to these measures of actual 2001 performance resulted in no plan awards. Nevertheless, we believe the plan is continuing to function as intended. Salaries In keeping with our "pay for performance" philosophy, we believe executive officers should receive salaries that are reasonable, but modest, in light of their experience, skills, and responsibilities, and that the opportunity to achieve significantly greater total compensation should be tied to Tecumseh Products Company's short- and long-term performance through the potential for awards under the Management Incentive Plan. While we believe that short-term performance generally should not be the controlling factor with respect to salaries, in view of Tecumseh's disappointing financial results in 2000, we decided to follow the CEO's recommendation and leave all executive officers' 2001 salaries at the same levels as in 2000. We made our salary determinations on the same basis for all executive officers. Concluding Observations We expect to continue our "pay for performance" strategy for the foreseeable future. We intend to continue to closely monitor the impact of compensation philosophy on financial performance and shareholder value and to consider additional ways in which current plans and policies might be improved. Section 162(m) of the Internal Revenue Code generally prohibits the deduction of certain compensation in excess of $1 million per year paid by a publicly-held corporation to any individual named in the corporation's summary compensation table for the year. The compensation paid to each of our executive officers was well below $1 million for 2001, and we expect the same will be true for the current year. Therefore, we have decided to defer consideration of any compensation policies related to Section 162(m) for the present. Presented by the members of the Governance and Executive Compensation Committee of the Board of Directors Ralph W. Babb, Jr., Chairman Peter M. Banks J. Russell Fowler Stephen L. Hickman BOARD OF DIRECTORS' REPORT ON SALARIES FOR NEW EXECUTIVE OFFICERS When we appointed new executive officers effective as of October 1 in connection with the retirements that were occurring under our voluntary early retirement program, we assigned our CEO primary responsibility for managing the transition. We decided it would not be worthwhile to convene the Governance and Compensation Committee to consider the new executive officers' salaries for the small portion of 2001 that remained, so we delegated authority to our CEO to set their salaries for that period, bearing in mind that the committee would examine all executive officers' salaries for 2002. Mr. Foss took no part in our deliberations concerning the new executive officers or their salaries, and Mr. Kay had not yet been elected to the board. Presented by the following members of the Board of Directors Ralph W. Babb, Jr. Peter M. Banks Jon E. Barfield J. Russell Fowler John W. Gelder Kenneth G. Herrick Todd W. Herrick Stephen L. Hickman COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION All members served on the Governance and Executive Compensation Committee throughout the period covered by its report. No one who served on the committee is or ever has been an officer or employee of Tecumseh Products Company or any of its subsidiaries. 6 Mr. Babb is an executive officer of Comerica Bank. In the normal course of its business, Comerica has various banking relationships (both credit and non-credit) with Tecumseh Products Company and with some of our executive officers. We employ Kent B. Herrick, the son of Todd W. Herrick and grandson of Kenneth G. Herrick, as Vice President and Assistant to the President and CEO. His 2001 compensation was $70,000. RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS Ciulla, Smith & Dale, LLP, our independent accountants for the fiscal year ended December 31, 2001 and for many years before, will continue to serve for the fiscal year ending December 31, 2002. A representative of Ciulla, Smith & Dale, LLP will be present at the annual meeting and available to respond to appropriate questions from shareholders. He will have an opportunity to make a statement if he so desires. AUDIT FEES The aggregate fees billed to us for professional services rendered for the audit of our annual financial statements for fiscal year 2001 and the reviews of our quarterly financial statements included in our quarterly reports on Form 10-Q for that fiscal year were approximately $499,000. ALL OTHER FEES Ciulla, Smith & Dale, LLP billed us approximately $19,000 for all other services it rendered in fiscal year 2001. None of those services involved financial information systems design or implementation. OTHER MATTERS We know of no business to be acted on at the annual meeting other than the matters listed in the accompanying notice. If any other matter does properly come before the meeting, the proxy holders will vote on it in accordance with their judgment. SHAREHOLDER PROPOSALS IN OUR 2003 PROXY STATEMENT In order for shareholder proposals for the 2003 annual meeting of shareholders to be eligible to be included in our proxy statement, they must be received at our principal office no later than November 15, 2002. We retain the right to omit any proposal if it does not satisfy the requirements of SEC Rule 14a-8. ADVANCE NOTICE REQUIREMENTS Our bylaws contain advance notice procedures which a shareholder must follow to nominate a person for election to our board or to present any other proposal at an annual meeting of shareholders. In general, these provisions require notice of a nomination or other proposal expected to be made at an annual meeting to be in writing, to contain specified information about the nominee or other proposal and the shareholder proponent, and to be delivered or sent by first class U.S. mail to our Secretary and received at our principal office. Except when an annual meeting is called for a date that is not within 20 days before or after the first anniversary of the prior year's annual meeting (in which case other time limits apply), we must receive the nomination or proposal no later than 60 days nor earlier than 90 days before the first anniversary of the prior year's annual meeting. This means that any nomination or proposal for next year's annual meeting must be received no later than February 23, 2003 and no earlier than January 24, 2003. Management proxies for the 2003 annual meeting may confer discretionary authority to vote on an untimely proposal without express direction from shareholders giving the proxies. PROXY SOLICITATION EXPENSES We will pay the expenses of this solicitation. We have engaged Georgeson Shareholder Communications Inc. to assist in soliciting proxies, for which we will pay approximately $7,500 plus out-of-pocket expenses. We also may pay brokers, nominees, fiduciaries, custodians, and other organizations performing similar functions their reasonable expenses for sending proxy material to principals and obtaining their instructions. In addition to solicitation by mail, our directors, officers, and employees may solicit proxies in person or by telephone, fax, or similar means. YOUR VOTE IS VERY IMPORTANT. 7 If you are a Class B shareholder, please complete and return the enclosed proxy, or vote by telephone or on the Internet, as soon as possible, even if you currently plan to attend the annual meeting in person. By Order of the Board of Directors, /s/ DARYL P. McDONALD Daryl P. McDonald General Counsel and Secretary Tecumseh, Michigan March 15, 2002 8 APPENDIX A SHARE OWNERSHIP 5% CLASS B SHAREHOLDERS This table shows the Class B shares held by persons we know to be beneficial owners of more than 5% of the class. We obtained the information about Comerica Bank and AXA (which is as of December 31, 2001) from the Schedules 13G they filed with the SEC. The other information is as of March 1, 2002.
Amount and Nature of Beneficial Ownership -------------------------------------------------------- Sole Sole Shared Shared Voting Investment Voting Investment Percent Power Power Power Power Total of Class ------ ---------- ------ ---------- ----- -------- Herrick Foundation 150 W. Jefferson Suite 2500 Detroit, MI 48226 1,367,525 1,367,525 1,367,525 26.9% Kenneth G. Herrick Tecumseh Products Co. 100 E. Patterson St Tecumseh, MI 49286 888,113 888,113 888,113 17.5% Comerica Bank One Detroit Center Detroit, MI 48275 6,954 11,944 1,209,695 1,204,705 1,216,649 24.0% John W. Gelder 150 W. Jefferson Suite 2500 Detroit, MI 48226 100 100 888,113 888,113 888,213 17.5% AXA 25, Avenue Matignon 75008 Paris, France 252,180 346,180 346,180 6.8%
Kenneth G. Herrick, Todd W. Herrick, and John W. Gelder, all of whom are directors and nominees for director, and Michael A. Indenbaum, a principal in Miller, Canfield, Paddock and Stone, P.L.C., are the members of the Board of Trustees of Herrick Foundation. Kenneth G. Herrick's shares are held as a trustee of trusts for the benefit of himself and his descendants. The shares for which Mr. Gelder is shown as having shared voting and investment power are held as a trustee of the Kenneth G. Herrick trusts. Comerica Bank's shares include shares it held on the date of its Schedule 13G as a trustee of the Kenneth G. Herrick trusts and of other trusts. The Schedule 13G filed by AXA and related entities states that AXA filed its Schedule 13G as a parent holding company with respect to the holdings of AXA Rosenberg Investment Management LLC. The Schedule 13G also states that AXA owns AXA Financial, Inc. and that the following entities, as a group, control AXA: AXA Conseil Vie Assurance Mutuelle, AXA Assurances I.A.R.D Mutuelle, AXA Assurances Vie Mutuelle, and AXA Courtage Assurance Mutuelle. A-1 MANAGEMENT'S BENEFICIAL OWNERSHIP
SHARES BENEFICIALLY OWNED AS OF MARCH 1, 2002 ---------------------------------------------------------------------------- Sole Voting Shared Voting Class of and and Common Investment Investment Stock Power Power Total Percentage -------- ----------- ------------- ----- ---------- Ralph W. Babb, Jr. Class B............... -0- 500 500 * Class A............... -0- -0- -0- -0- Peter M. Banks Class B............... -0- -0- -0- -0- Class A............... 200 -0- 200 * Jon E. Barfield Class B............... -0- -0- -0- -0- Class A............... 659 -0- 659 * J. Russell Fowler Class B............... 1,300 -0- 1,300 * Class A............... 900 -0- 900 * John W. Gelder Class B............... 100 -0- 100 * Class A............... 300 -0- 300 * Kenneth G. Herrick Class B............... -0- 2,328,188 2,328,188 45.9% Class A............... -0- 1,015,765 1,015,765 7.6% Todd W. Herrick Class B............... 21,906 -0- 21,906 * Class A............... -0- -0- -0- -0- Stephen L. Hickman Class B............... 100 -0- 100 * Class A............... 300 -0- 300 * David W. Kay Class B............... -0- -0- -0- -0- Class A............... -0- -0- -0- -0- Michael R. Forman Class B............... -0- -0- -0- -0- Class A............... -0- -0- -0- -0- John H. Foss Class B............... -0- -0- -0- -0- Class A............... -0- -0- -0- -0- James E. Martinco Class B............... 10 -0- 10 * Class A............... 30 -0- 30 * All directors and current Class B............... 23,406 2,328,688 2,352,094 46.3% executive officers as a group Class A............... 2,059 1,015,765 1,018,124 7.6% (10 persons) --------------------- * less than 1%
Mr. Babb holds his shares jointly with his wife. Herrick Foundation, of which Kenneth G. Herrick, Todd W. Herrick, and John W. Gelder are three of the four co-trustees, owns 1,367,525 Class B shares and 458,347 Class A shares. The shared voting and investment power column includes those shares for Kenneth G. Herrick but not for Todd W. Herrick or Mr. Gelder. All three of them disclaim beneficial ownership of the shares. Kenneth G. Herrick and Mr. Gelder are trustees of trusts that hold 888,113 Class B shares and 454,441 Class A shares for the benefit of Kenneth G. Herrick and his descendants. The shared voting and investment power column includes the trusts' shares for Mr. Herrick but not for Mr. Gelder. Mr. Gelder disclaims beneficial ownership of the shares. Todd W. Herrick is an income beneficiary of the trusts. Kenneth G. Herrick and Todd W. Herrick are members of the Board of Trustees of Howe Military School, which owns 72,550 Class B shares and 102,977 Class A shares. The shared voting and investment A-2 power column includes those shares for Kenneth G. Herrick but not for Todd W. Herrick. Both of them disclaim beneficial ownership of the shares. Messrs. Foss and Martinco retired effective October 1, 2001. In connection with his retirement, Mr. Foss also resigned from the board of directors. SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Directors, certain officers, and beneficial owners of more than 10% of the Class B shares are required to file reports about their ownership of our equity securities under Section 16(a) of the Securities Exchange Act of 1934 and to provide copies of the reports to us. Based on the copies we received and on written representations from the persons we know are subject to these requirements, we believe all 2001 filing requirements were met. A-3 APPENDIX B EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE This table provides compensation information for our Chief Executive Officer and each other person who served as an executive officer at any time during 2001 and whose total salary and bonus for that year exceeded $100,000.
--------------------------------------------------------------------------------------------------------------- Long-Term Annual Compensation Compensation Awards Restricted Stock All Other Name and Principal Position Year Salary Bonus Award Compensation --------------------------------------------------------------------------------------------------------------- Todd W. Herrick 2001 $475,000 $ -0- $ -0- $5,100 President & Chief 2000 475,000 16,783 33,066 4,800 Executive Officer 1999 435,000 -0- 273,543 4,800 David W. Kay 2001 $147,381 $ -0- $ -0- $4,024 Vice-President, Treasurer & Chief Financial Officer (since Oct. 1, 2001) Michael R. Forman 2001 $108,004 $ -0- $ -0- $3,765 Vice-President & Director of Corporate Human Resources (since Oct. 1, 2001) John H. Foss 2001 $258,756 $ -0- $ -0- $5,100 Vice-President, Treasurer & 2000 345,000 12,190 24,016 4,800 Chief Financial Officer 1999 315,000 -0- 198,265 4,800 (until Oct. 1, 2001) James E. Martinco 2001 $142,506 $ -0- $ -0- $4,559 Group Vice President, 2000 190,000 1,647 3,244 4,800 Engine & Power Train 1999 160,000 -0- 89,091 4,800 Components (until Oct. 1, 2001) ---------------------------------------------------------------------------------------------------------------
Salary includes any amounts deferred at the officer's election and contributed on his behalf to our Retirement Savings Plan (a 401(k) plan). Bonus consists of the one-third of 2000 awards under the Management Incentive Plan payable in cash. "Restricted Stock Awards" are restricted phantom stock units relating to Class A shares that were awarded under the Management Incentive Plan, which represent two-thirds of each total award for 2000 and the entirety of each award for 1999. As more fully discussed in the Governance and Executive Compensation Committee Report, awards under this plan and any deemed dividend reinvestments that may be credited on those awards generally are nontransferable and subject to forfeiture until three years (as to half of the phantom stock units awarded for 2000) or five years (as to the other half of the phantom stock units awarded for 2000 and all awards for 1999) after the end of the year for which they were granted. As required by SEC rules, for purposes of attributing a dollar value to the units reported, values have been calculated by multiplying the number of units awarded by the grant date closing price for a Class A share on the Nasdaq Stock Market. Please note, however, that plan awards are denominated in share units, not dollars, so that the potential payout on an award, when and if vested, is tied directly to the B-1 market value performance of Class A shares after the grant. Thus, the actual dollar amount ultimately realized will depend on our future performance and on general market conditions prevailing in the future. As cash dividends are paid on Class A shares, additional phantom stock units, which correspond to the dividends paid, are credited to employees' accounts. As of December 31, 2001, our current named executives held phantom stock units under the plan (valued based on the Class A share closing price on the Nasdaq Stock Market on the last trading day of 2001) as follows: - Todd W. Herrick -- 9,416.69 share units valued at $476,767 - David W. Kay -- 221.60 share units valued at $11,220 - Michael R. Forman -- 2,086.43 share units valued at $105,636 Amounts shown under "All Other Compensation" are matching contributions to the Retirement Savings Plan. RETIREMENT PLANS Our retirement plan, which is a broad-based defined benefit and (since 1985) noncontributory plan, and our supplemental retirement plan, which covers certain executives, provide benefits in the event of normal (i.e., at age 65), early, deferred, or disability retirement. Upon a participant's death, these plans provide a surviving spouse pension and a refund of any pre-1985 employee contributions. Participants are vested after five years of credited service. As of January 1, 2002, our current executives named in the Summary Compensation Table had the following years of credited service: - Todd W. Herrick -- 37.5 years - David W. Kay -- 2.2 years - Michael R. Forman -- 11.9 years These plans provide retirement benefits to a vested participant in the form of a life-time pension, the amount of which is equal to a percentage of the participant's average base salary over the 60 months immediately before his or her retirement date, multiplied by years of credited service (up to a maximum of 35 years), and reduced in the case of some benefits payable under the supplemental retirement plan by a percentage of Social Security benefits. B-2 The table below shows the estimated annual pension benefit (which is not subject to further deduction for Social Security benefits or other offset amounts) payable under the plans on a straight life annuity basis to executive officers retiring at age 65 in the earnings and years of service classifications specified, without considering any benefits which in some cases may be payable to a participant due to voluntary contributions made by the participant before 1985.
Estimated Annual Benefit at Age 65 for Years of Service Indicated Average -------------------------------------------------------------------- Annual 35 or Base Salary 15 20 25 30 Longer ----------- -------- -------- -------- -------- -------- $ 90,000................... $ 16,875 $ 22,500 $ 28,125 $ 33,750 $ 39,375 100,000................... 18,750 25,000 31,250 37,500 43,750 125,000................... 23,437 31,250 39,062 46,875 55,663 150,000................... 28,769 38,359 47,948 57,538 68,788 175,000................... 34,394 45,859 57,323 68,788 81,913 200,000................... 40,019 53,359 66,698 80,038 95,038 225,000................... 45,644 60,859 76,073 91,288 108,163 250,000................... 51,269 68,359 85,448 102,538 121,288 275,000................... 56,894 75,859 94,823 113,788 134,413 300,000................... 62,519 83,359 104,198 125,038 147,538 400,000................... 85,019 113,359 141,698 170,038 200,038 450,000................... 96,269 128,359 160,448 192,538 226,288 500,000................... 107,519 143,359 179,198 215,038 252,538 550,000................... 118,769 158,359 197,948 237,538 278,788 600,000................... 130,019 173,359 216,698 260,038 305,038
In accordance with the terms of our voluntary early retirement program, Mr. Foss is receiving a pension (with a joint and survivor option for his wife) of $10,662 per month, and Mr. Martinco is receiving a pension (with a joint and survivor option for his wife) of $5,996 per month. In addition, as provided under the program, the phantom stock units held by Messrs. Foss and Martinco under our Management Incentive Plan became non-forfeitable and will be paid out as originally scheduled, the same as if they had remained employed. B-3 APPENDIX C SHAREHOLDER RETURN PERFORMANCE PRESENTATION The graph which follows compares the performance over the last five years of our Class B shares (trading symbol TECUB) to the Standard & Poor's 500 Stock Index and to a composite industry group index made up of two Standard & Poor's indexes: Consumer Discretionary: Household Appliances (70%) and Industrials: Industrial Machinery (30%). The graph assumes an investment of $100 in the Class B shares and in each index on December 31, 1996 and reinvestment of all cash dividends in shares of the same class. COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN AMONG TECUMSEH PRODUCTS COMPANY, S&P 500 INDEX, AND S&P COMPOSITE INDUSTRY INDEX [GRAPH]
--------------------------------------------------------------------------------------------------------- 1996 1997 1998 1999 2000 2001 --------------------------------------------------------------------------------------------------------- TECUMSEH PRODUCTS COMPANY $100.00 $ 87.88 $ 83.29 $ 78.82 $ 74.94 $ 97.44 --------------------------------------------------------------------------------------------------------- S&P 500 INDEX 100.00 133.36 171.48 207.56 188.66 166.24 --------------------------------------------------------------------------------------------------------- S&P COMPOSITE INDUSTRY INDEX 100.00 145.83 160.23 164.53 138.36 169.83 ---------------------------------------------------------------------------------------------------------
C-1 2002 ANNUAL MEETING OF SHAREHOLDERS WEDNESDAY, APRIL 24, 2002 Tecumseh Country Club 5200 Milwaukee Road Tecumseh, MI 49286 [TECUMSEH PRODUCTS COMPANY LOGO] -------------------------------------------------------------------------------- INSTRUCTIONS FOR VOTING YOUR PROXY This proxy covers all Class B shares of Tecumseh Products Company held of record. THERE ARE THREE WAYS TO VOTE YOUR PROXY TELEPHONE VOTING This method of voting is available for residents of the U.S. and Canada. On a touch tone telephone, call TOLL FREE 1-877-260-0388, 24 hours a day, 7 days a week. You will be asked to enter ONLY the CONTROL NUMBER shown below. Have your proxy card ready, then follow the prerecorded instructions. Your vote will be confirmed and cast as you directed. Available 24 hours a day, 7 days a week until 5:00 p.m. Eastern time on April 23, 2002. INTERNET VOTING Visit our Internet voting Website at HTTP://PROXY.GEORGESON.COM. Enter the COMPANY NUMBER AND CONTROL NUMBER shown below and follow the instructions on your screen. You will incur only your usual Internet charges. Available 24 hours a day, 7 days a week until 5:00 p.m. Eastern time on April 23, 2002. VOTING BY MAIL Simply mark, sign and date your proxy card and return it in the postage-paid envelope. If you are voting by telephone or the Internet, please do not mail your proxy card. -------------- -------------- COMPANY NUMBER CONTROL NUMBER -------------- -------------- PLEASE DETACH AT PERFORATION BEFORE MAILING -------------------------------------------------------------------------------- [X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE ELECTION OF DIRECTORS. FOR ALL FOR WITHHOLD EXCEPT Kenneth G. Herrick, Todd W. Herrick, David W. Kay, J. Russell Fowler, John W. Gelder, Stephen L. Hickman, [ ] [ ] [ ] Peter M. Banks, Jon E. Barfield, Ralph W. Babb, Jr. (INSTRUCTIONS: To withhold authority to vote for any individual nominee, check the "For All Except" box and write that nominee's name in the space provided below.) -------------------------------------------------------------------------------- If you sign and return this proxy, the proxies will vote your shares as specified above. IF YOU DO NOT SPECIFY HOW TO VOTE, THE PROXIES WILL VOTE YOUR SHARES FOR THE ELECTION AS DIRECTORS OF ALL NOMINEES LISTED ABOVE AND IN THEIR DISCRETION ON ANY OTHER MATTERS THAT MAY COME BEFORE THE MEETING. WE APPRECIATE YOUR PROMPT ACTION IN SIGNING AND RETURNING THIS PROXY. ---------------------------------------- SIGNATURE ---------------------------------------- SIGNATURE DATED: , 2002 ---------------------------- NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR ABOVE. JOINT OWNERS SHOULD EACH SIGN. WHEN SIGNING AS AN ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE YOUR FULL TITLE. PLEASE PROMPTLY COMPLETE, DATE, SIGN AND RETURN THIS PROXY CARD USING THE ENCLOSED ENVELOPE. IF YOU HAVE ANY QUESTIONS OR NEED ASSISTANCE, PLEASE CONTACT GEORGESON SHAREHOLDER COMMUNICATIONS INC., OUR PROXY SOLICITOR, AT 1-800-223-2064. -------------------------------------------------------------------------------- PLEASE DETACH AT PERFORATION BEFORE MAILING -------------------------------------------------------------------------------- P R O X Y TECUMSEH PRODUCTS COMPANY THE BOARD OF DIRECTORS SOLICITS THIS PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 24, 2002 By signing on the reverse, I (or, if more than one person signs, we)-- - authorize either of Kenneth G. Herrick or Todd W. Herrick to act as my (or our) proxy at the Annual Meeting of Shareholders of Tecumseh Products Company to be held on Wednesday, April 24, 2002 and at any adjournments of that meeting, - give each proxy full power to name another person to substitute for him as proxy. - authorize each proxy to vote any and all shares of Tecumseh Products Company Class B Common Stock, $1.00 par value, registered in my name (or our names) or which for any reason I (or we) may be entitled to vote, and - direct the proxies to vote as specified on the reverse side and to vote in their discretion on any other matters that may come before the meeting. Continued and to be voted and signed on reverse