SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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[ ] Definitive Additional Materials
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GARDNER DENVER, INC.
.........................................................................
(Name of Registrant as Specified In Its Charter)
.........................................................................
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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and 0-11.
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which the filing fee is calculated and state how it was determined.):
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[GARDNER DENVER LOGO]
March 22, 2002
TO OUR STOCKHOLDERS:
You are cordially invited to attend the 2002 Annual Meeting of
Stockholders on Tuesday, May 7, 2002 at 1:30 p.m., at the Holiday
Inn Quincy, 201 South Third Street, Quincy, Illinois.
The attached Notice and Proxy Statement describe the business of
the meeting. After the transaction of formal business, a question
and answer period will follow.
We look forward to a significant vote of the Common Stock,
either in person or by proxy. This year, three convenient ways to
vote your proxy are offered by Gardner Denver. If you are a
stockholder of record, you may use the toll-free telephone number on
the proxy card to vote your shares. You may also vote your shares
via the Internet by following the simple instructions on the proxy
card. If you prefer, simply complete, date, sign and return your
proxy card in the enclosed stamped and addressed envelope.
Regardless of your method of voting, you may revoke your proxy and
vote in person if you decide to attend the Annual Meeting. Your
support is appreciated, and we hope that you will be able to join us
at the May 7 meeting.
Cordially,
/s/ Ross J. Centanni
Ross J. Centanni
Chairman, President and
Chief Executive Officer
GARDNER DENVER, INC.
1800 GARDNER EXPRESSWAY
QUINCY, ILLINOIS 62305
NOTICE OF 2002 ANNUAL MEETING OF STOCKHOLDERS
The 2002 Annual Meeting of Stockholders of Gardner Denver, Inc.
(the "Company") will be held at the Holiday Inn Quincy, 201 South
Third Street, Quincy, Illinois on Tuesday, May 7, 2002 at
1:30 p.m., for the following purposes:
1. To elect two directors to serve for a three-year term each;
2. To amend the Company's Long-Term Incentive Plan; and
3. To transact such other business as may properly come before
the meeting.
Stockholders of record at the close of business on March 8,
2002, are entitled to notice of and to vote at the meeting.
Stockholders of record may vote their proxy by completing the
enclosed proxy card, calling the toll-free number indicated on the
proxy card, or accessing the Internet web site specified in the
instructions included on the proxy card. A stockholder may revoke a
proxy at any time before it is voted at the meeting by following the
procedures described in the attached Proxy Statement.
FOR THE BOARD OF DIRECTORS
Tracy D. Pagliara
Vice President, General Counsel and Secretary
Quincy, Illinois
March 22, 2002
RETURN OF PROXIES REQUESTED
---------------------------------------------------------
TO ASSURE YOUR REPRESENTATION AT THE MEETING,
PLEASE (1) SIGN, DATE AND PROMPTLY MAIL THE
ENCLOSED PROXY CARD, FOR WHICH A RETURN ENVELOPE
IS PROVIDED; (2) CALL THE TOLL-FREE NUMBER
INDICATED ON THE ENCLOSED PROXY CARD; OR
(3) ACCESS THE INTERNET WEB SITE SPECIFIED IN THE
INSTRUCTIONS ON THE PROXY CARD.
---------------------------------------------------------
GARDNER DENVER, INC.
1800 GARDNER EXPRESSWAY
QUINCY, ILLINOIS 62305
PROXY STATEMENT
GENERAL INFORMATION
The accompanying proxy is solicited by the Board of Directors of
Gardner Denver, Inc. (the "Company" or "Gardner Denver") and will be
voted in accordance with the instruction given (either in a signed
proxy card or voted through the toll-free telephone or Internet
procedures described below) and not revoked. A stockholder may
revoke a proxy at any time before it is voted by (1) giving notice
to the Company in writing, (2) submitting another proxy that is
properly signed and later dated, or (3) voting in person at the
meeting. Attendance at the meeting will not in and of itself revoke
a proxy.
This Proxy Statement and the enclosed proxy card were first
mailed to stockholders on or about March 22, 2002. The record date
for determining the stockholders entitled to vote at the meeting was
the close of business on March 8, 2002 (the "Record Date"). On that
date, the outstanding voting securities of the Company were
15,785,096 shares of Common Stock, par value $0.01 ("Common Stock").
Each share of Common Stock is entitled to one vote. A majority of
the outstanding shares of Common Stock is required to establish a
quorum. The enclosed proxy card indicates on its face the total
number of shares of Common Stock registered in your name on the
Record Date, whether held in book entry or certificate form.
The Company is not aware of any matter that will be presented to
the meeting for action on the part of the stockholders other than
that stated in the notice. If any other matter is properly brought
before the meeting, it is the intention of the persons named in the
accompanying proxy to vote the shares to which the proxy relates in
accordance with their best judgment. Abstentions will be considered
present at the meeting for purposes of determining a quorum with
respect to items brought before the meeting but will not be counted
as voting for or against the proposal to which it relates.
Brokers holding shares for beneficial owners must vote these
shares according to specific instructions received from the owner.
If specific instructions are not received, brokers may vote these
shares in their discretion on certain routine matters, such as the
election of directors. However, the New York Stock Exchange rules
preclude brokers from exercising their voting discretion on certain
proposals. In these cases, if they have not received specific
instructions from the beneficial owner, brokers may not vote on the
proposals, resulting in what is known as a "broker non-vote." Any
"broker non-vote" will be considered present for quorum purposes
with respect to items brought before the meeting but will not be
counted as voting for or against the proposal to which it relates.
Stockholders of record may vote using the toll-free number
listed on the proxy card, or via the Internet or they may complete,
sign, date and mail the enclosed proxy card in the postage paid
envelope provided. The telephone and Internet voting procedures are
designed to authenticate stockholders' identities. The procedures
allow stockholders to give their voting instructions and confirm
that their instructions have been properly recorded. Specific
instructions to be followed by any stockholder of record interested
in voting by telephone or the Internet are set forth on the enclosed
proxy card.
Stockholders may vote by telephone or through the Internet 24
hours a day, 7 days a week. Telephone or Internet votes must be
received by 12:00 midnight Eastern time on May 6, 2002 for all
shares of Common Stock, except shares held in the Gardner Denver,
Inc. Retirement Savings Plan (and the Gardner Denver Supplemental
Excess Defined Contribution Plan) and/or the Gardner Denver, Inc.
Savings Plan (the "Savings Plans").
1
Shares of Common Stock held in the Savings Plans will be voted
by UMB Bank, N.A. ("UMB Bank"), as trustee of the Savings Plans. The
enclosed proxy card includes the number of equivalent shares
credited to your account. Voting instructions to UMB Bank regarding
your Savings Plans shares must be received by 12:00 midnight Eastern
time on May 3, 2002. Such voting instructions can be made in the
same manner as other shares of Common Stock are voted by proxy
(i.e., by returning the proxy card by mail or voting by telephone or
through the Internet as described above).
After May 3, 2002, all Savings Plans shares for which voting
instructions have not been received and shares not yet allocated to
participants' accounts will be voted by UMB Bank in the same
proportion (for or against) as the shares for which instructions are
received from participants. If you fail to return a proxy properly
signed or to cast your votes via the Internet or by phone by May 3,
2002, the equivalent shares of Common Stock credited to your Savings
Plans account will be voted by UMB Bank in the same proportion as
the shares for which instructions were received from other Savings
Plans participants.
A vote by telephone or through the Internet authorizes UMB Bank
and the proxies named on the above proxy card to vote your shares in
the same manner as if you marked, signed and returned your proxy
card. Therefore, if you vote by telephone or Internet, there is no
need to return the proxy card.
The cost of soliciting proxies will be paid by the Company. The
Company will, upon request, reimburse brokerage houses, custodians,
nominees and others for their out-of-pocket and reasonable clerical
expenses incurred in connection with such solicitation. For the
purpose of obtaining broad representation at the meeting, Georgeson
Shareholder Communications Inc. has been retained by the Company to
assist in the solicitation of proxies at an anticipated cost of
approximately $10,000 plus reimbursement of reasonable expenses.
Officers and employees of the Company, without being additionally
compensated, may also make requests for the return of proxies by
letter, telephone or other means or in person.
PROPOSAL I--ELECTION OF DIRECTORS
The authorized number of directors of the Company is presently
fixed at seven. The directors are divided into three classes, with
one class having three members and two classes having two members
each. Directors in each class are elected for three-year terms so
that the term of office of one class of directors expires at each
annual meeting.
For election as directors at the Annual Meeting of Stockholders
to be held on May 7, 2002, the Board of Directors has approved the
nominations of Donald G. Barger, Jr. and Raymond R. Hipp, who are
currently directors, to serve for three-year terms expiring in 2005.
The affirmative vote of a majority of the outstanding shares of
Common Stock having voting power present at the meeting, in person
or by proxy, is required to elect each of the nominees to the
director positions. If you vote your proxy through a signed proxy
card or by using the telephone or Internet procedures available, but
do not indicate your voting preference, the shares represented by
your proxy will be voted for the election of the nominees for
director named in this Proxy Statement.
If any one of the nominees becomes unavailable for election, the
accompanying proxy will be voted for the election of such person, if
any, as shall be recommended by the Board of Directors, or will be
voted in favor of holding a vacancy to be filled by the directors.
The Company has no reason to believe that any nominee will be
unavailable.
The following information is provided regarding the nominees for
election as a director and each of the other directors who will
continue in office after the meeting.
2
NOMINEES FOR ELECTION
TERMS EXPIRING AT THE 2005 ANNUAL MEETING OF STOCKHOLDERS
[PHOTO] DONALD G. BARGER, JR., age 59, has been a director of
Gardner Denver since its spin-off from Cooper
Industries, Inc. ("Cooper") in April 1994. Mr. Barger
has been the Senior Vice President and Chief Financial
Officer of Yellow Corporation ("Yellow"), a publicly
held company specializing in the transportation of
goods and materials, since December 2000. Prior to
joining Yellow, he served as Vice President and Chief
Financial Officer of Hillenbrand Industries Inc.
("Hillenbrand"), a publicly held company serving
healthcare and funeral services, from March 1998 until
December 2000. Mr. Barger was also Vice President,
Chief Financial Officer of Worthington Industries,
Inc., a publicly held manufacturer of metal and
plastic products and processed steel products, from
September 1993 until joining Hillenbrand. Mr. Barger
has a B.S. degree from the United States Naval Academy
and an M.B.A. from the University of Pennsylvania,
Wharton School of Business. Mr. Barger is a director
of the Quanex Corporation.
[PHOTO] RAYMOND R. HIPP, age 59, has been a director of
Gardner Denver since November 1998. Mr. Hipp serves as
Chairman, President and CEO of Alternative Resources
Corporation ("ARC"), a provider of information
technology staffing and component outsourcing, a
position he has held since July 1998. From August 1996
until May 1998, Mr. Hipp was the Chief Executive
Officer of ITI Marketing Services, a provider of
telemarketing services. Mr. Hipp has a B.S. degree
from Southeast Missouri State University and is a
director of ARC.
DIRECTORS WHOSE TERMS OF OFFICE WILL CONTINUE AFTER THE MEETING
TERMS EXPIRING AT THE 2003 ANNUAL MEETING OF STOCKHOLDERS
[PHOTO] ROSS J. CENTANNI, age 56, has been President and Chief
Executive Officer and a director of Gardner Denver
since its incorporation in November 1993. He has been
Chairman of Gardner Denver's Board of Directors since
November 1998. Prior to Gardner Denver's spin-off from
Cooper, he was Vice President and General Manager of
Gardner Denver's predecessor, the Gardner-Denver
Industrial Machinery Division, where he also served as
Director of Marketing from August 1985 to June 1990.
He has a B.S. degree in industrial technology and an
M.B.A. degree from Louisiana State University.
Mr. Centanni is a director of Esterline Technologies, a
publicly held manufacturer of components for avionics,
propulsion and guidance systems, and Denman Services,
Inc., a privately held supplier of medical products.
He is also a member of the Petroleum Equipment
Suppliers Association Board of Directors and the
Quincy University Board of Trustees.
3
[PHOTO] RICHARD L. THOMPSON, age 62, was elected to the
Gardner Denver Board of Directors in November 1998.
Since 1995, Mr. Thompson has served as a Group
President and Executive Office Member of Caterpillar
Inc. ("Caterpillar"), a publicly held manufacturer of
construction machinery and equipment. He earned a B.S.
in electrical engineering and an M.B.A. from Stanford
University and has completed the Caterpillar Advanced
Management Program. Mr. Thompson is a Director of the
National Association of Manufacturers in Washington,
DC and also presently serves on the Boards of
Directors of Hindustan Powerplus Ltd., Lennox
International, Inc. and Proctor Community Hospital.
TERMS EXPIRING AT THE 2004 ANNUAL MEETING OF STOCKHOLDERS
[PHOTO] FRANK J. HANSEN, age 60, has been a director of
Gardner Denver since June 1997. Mr. Hansen was the
President and Chief Executive Officer of IDEX
Corporation ("IDEX"), a publicly held manufacturer of
proprietary fluid handling and industrial products,
from April 1999 until his retirement in April 2000. He
was President and Chief Operating Officer from January
1998 to April 1999 and Senior Vice President and Chief
Operating Officer from July 1994 until January 1998.
Mr. Hansen has a B.S. degree in Business
Administration from Portland State University.
[PHOTO] THOMAS M. MCKENNA, age 64, has been a director of
Gardner Denver since its spin-off from Cooper in April
1994. Mr. McKenna is the President of United Sugars
Corporation, a marketing cooperative which is one of
the nation's largest sugar marketers to both the
industrial and retail markets, a position he has held
since December 1998. He was President and Chief
Executive Officer of Moorman Manufacturing Company
("Moorman"), a privately held manufacturer of
agricultural supplies, from August 1993 until January
1998. Mr. McKenna has a B.A. degree from St. Mary's
College and an M.B.A. from Loyola University.
[PHOTO] DIANE K. SCHUMACHER, age 48, has been a director of
Gardner Denver since August 2000. Ms. Schumacher has
served as Senior Vice President, General Counsel and
Secretary of Cooper since 1995. Ms. Schumacher holds a
B.A. degree in economics from Southern Illinois
University and a JD degree from DePaul University
College of Law. She has also completed the Harvard
Advanced Management Program and serves as a director
of the American Arbitration Association. Ms. Schumacher
serves as Director, Society for the Performing Arts,
Houston, and is a member of the External Advisory Board
for Southern Illinois University College of Business
Administration.
COMMITTEES, COMPENSATION AND GOVERNANCE OF
THE BOARD OF DIRECTORS
The Company's Board of Directors (the "Board") held four meetings
during 2001. The Board has a standing Audit and Finance Committee and
a standing Management Development and Compensation Committee, each
composed exclusively of nonemployee directors. The Board does not have
a standing Nominating Committee. Director nominations are made by the
full Board.
4
BOARD OF DIRECTORS COMMITTEES
The Audit and Finance Committee, currently composed of Donald G.
Barger, Jr., Chairman, Frank J. Hansen and Raymond R. Hipp, held
three meetings during 2001. All members of the Audit and Finance
Committee are independent, in accordance with Section 303.01 of the
New York Stock Exchange listing standards. The Board adopted a new
written charter for the Audit Committee, effective August 1, 2000.
The functions of the Audit and Finance Committee are to instruct
the independent auditors that the Board is the representative of the
stockholders and as such is the client of the auditors; review the
Company's audited financial statements and meet with management, as
well as with the Company's independent auditors, to discuss such
statements; recommend the nomination of independent auditors for
appointment by the Board; review the independence of the auditors,
the planned scope and results of their examination and the scope of
any significant non-audit work performed; review the scope and
results of the Company's internal control activities; review
accounting changes having a material impact on the financial
statements of the Company and filings made with the Securities and
Exchange Commission as required; hold conferences and reviews with
the auditors as may be deemed desirable by either the Audit and
Finance Committee, the auditors or management, and report to the
Board the results of such reviews and conferences; monitor
compliance with the Company's Corporate Conflicts of Interest and
Ethical Conduct Policy; review information concerning environmental,
legal and other matters which may represent material financial
exposure; and submit to the Board any recommendations the Committee
may have. The Audit and Finance Committee also oversees the
Company's Benefits Committee in their establishment of investment
objectives, policies and performance criteria for the management of
the Company's retirement and benefit plan assets.
The Management Development and Compensation Committee, currently
composed of Richard L. Thompson, Chairman, Thomas M. McKenna and
Diane K. Schumacher, held three meetings during 2001. The functions
of the Management Development and Compensation Committee are to
review and consider succession planning, executive performance and
organizational structure and to assist the Chief Executive Officer
in developing recommendations in these areas for Board
consideration; review and consult with the Chief Executive Officer
concerning the selection of officers of the Company and establish
reasonable compensation for officers, including incentive
compensation and bonuses, deferred compensation, pensions, and other
benefits; designate those employees who will receive grants of stock
options and other awards under the Company's Incentive Plan and the
Management Annual Incentive Plan (the "Annual Incentive Plan") and
the type and size of such grants; administer the Employee Stock
Purchase Plan, including amendments and restatements as appropriate;
and recommend to the Board one or more candidates for Chief
Executive Officer in the event the position becomes unexpectedly
vacant.
COMPENSATION OF DIRECTORS
For 2001, the Company's nonemployee directors each received an
annual retainer of $16,000. Additionally, nonemployee directors
received meeting attendance fees of $1,250 per meeting for board
meetings and $1,000 per meeting for committee meetings. Directors
were also reimbursed for reasonable expenses incurred in connection
with attending board and committee meetings.
The Gardner Denver, Inc. Phantom Stock Plan for Outside
Directors (the "Phantom Stock Plan") has been established to more
closely align the interests of the nonemployee directors and the
Company's stockholders by increasing each nonemployee director's
proprietary interest in the Company in the form of "phantom stock
units."
Under the Phantom Stock Plan, which is an unfunded plan, the
Company credits the equivalent of $7,000 annually, in equal monthly
amounts, to the phantom stock unit account of each nonemployee
director. Phantom stock units are credited based upon the previous
month's average closing price per share for the Company's Common
Stock. Each nonemployee director may also elect to defer all or some
portion of his annual director's fees under the Phantom Stock Plan
and have such amount credited on a monthly basis as phantom stock
units, based on the previous month's average closing price per share
for the Company's Common Stock. If the Company were to pay
dividends, dividend equivalents would be credited to each
nonemployee director's account on the dividend record date.
5
The fair market value of a director's account will be
distributed as a cash payment to the director (or his beneficiary)
on the first day of the month following the month in which the
director ceases to be a director of the Company for any reason.
Alternatively, a director may elect to have the fair market value of
his or her account distributed in twelve or fewer equal monthly
installments, or in a single payment on a predetermined date within
one year after he ceases to be a director, but without interest on
the deferred payments. The fair market value of a director's account
is determined by reference to the average closing price per share
for the Company's Common Stock during the thirty trading days
immediately preceding the date the director ceases to be a director.
The following table summarizes the number of phantom stock units
credited to each nonemployee director as of March 8, 2002.
PHANTOM STOCK
NAME UNITS
---- -------------
Donald G. Barger, Jr.................... 2,915
Frank J. Hansen......................... 1,309
Raymond R. Hipp......................... 1,992
Thomas M. McKenna....................... 8,780
Diane K. Schumacher..................... 471
Richard L. Thompson..................... 3,953
------
Total............................... 19,420
Under the Incentive Plan, for 2001 each nonemployee director was
automatically granted options to purchase 3,000 shares of the
Company's Common Stock on the date immediately following the Annual
Meeting of Stockholders. Nonemployee director stock options become
exercisable on the first anniversary of the date of grant and
terminate upon the expiration of five years from such date. If a
person ceases to be a nonemployee director by virtue of disability
or retirement (after having completed at least one three-year term),
outstanding options generally remain exercisable for a period of
five years (but not later than the expiration date of the options).
If a person ceases to be a nonemployee director by virtue of death
(or dies during the five year exercise period after disability or
retirement described above), outstanding options generally remain
exercisable for a period of one year (but not later than the
expiration date of the options). If a nonemployee director's service
terminates for any other reason, options not then exercisable are
canceled and options that are exercisable may be exercised at any
time within ninety days after such termination (but not later than
the expiration date of the options). Additionally, upon the
occurrence of a change of control, as defined in the plan, these
options will be canceled in exchange for a cash payment equal to the
appreciation in value of the options over the exercise price as set
forth in the plan. The exercise price of these options is the fair
market value of the Common Stock on the date of grant.
In early 2002, the Company engaged William M. Mercer, a
compensation consultant ("Mercer"), to evaluate the Company's
executive compensation practices, including the Company's
nonemployee director incentives. Mercer advised Company
representatives that the 2001 compensation was below the 65th
percentile of the competitive market, and recommended the following
changes: (a) a $12,000 increase in the annual retainer for each
Board member (from $16,000 to $28,000); and (b) an amendment to the
Incentive Plan which authorizes the Management Development and
Compensation Committee to award nonemployee directors an option to
purchase up to 9,000 shares of Common Stock in a given year, instead
of the current mandatory requirement that each such director be
granted an option to purchase 3,000 shares. At its February 2002
meeting, the Company's Board of Directors adopted the Mercer
recommendations, subject to stockholder approval with respect to the
amendment of the Incentive Plan, as described below in Proposal II.
CORPORATE GOVERNANCE
The Company's Board of Directors has adopted a policy regarding
Corporate Governance. The objective of this policy is to ensure that
the Board maintains its independence, objectivity and effectiveness
in fulfilling its responsibilities to the Company's stockholders.
The policy describes the criteria for selection and retention of
outside directors; factors to ensure the Board remains independent;
administrative practices of the Board; and the composition and
compensation of the Board. The policy requires that the majority of
the Board be nonemployee directors, with varied and complementary
backgrounds. Directors may serve on the boards of
6
directors of no more than four for-profit organizations, including
the Company, and interlocking directorships are prohibited. The
policy specifies that a nonemployee director will retire at age 70
years and that, at any one time, at least 50% of the number of
nonemployee directors shall be actively employed.
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The Company maintains Stock Ownership Guidelines for its
nonemployee directors, executive officers and other key employees.
Under these guidelines, each nonemployee director is expected to
maintain an equity interest in the Company equal to one times his
annual cash compensation by the end of his first year as a director
and three times his annual cash compensation at the end of five
years of service on the Board. The guidelines also require that the
CEO maintain an equity interest equal to five times his annual base
salary and each executive officer maintain an equity interest in the
Company equal to three times his annual base salary. These equity
interests are to be achieved by the fifth anniversary of each
individual's appointment as an executive officer. Common Stock held
directly by the officer and indirectly for the benefit of the
officer in the Savings Plans and the related Supplemental Excess
Defined Contribution Plan ("Excess Defined Contribution Plan") are
considered in determining compliance with these guidelines.
The following table sets forth, as of March 8, 2002, information
with respect to the beneficial ownership of the Company's Common
Stock by (a) each director, (b) each of the Company's four most
highly compensated executive officers in 2001 who is not a director
and, (c) all directors and executive officers as a group. A separate
table is also included which sets forth each person known by the
Company to be the beneficial owner of more than 5% of the Company's
outstanding Common Stock as of December 31, 2001 (except as
otherwise indicated).
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
-------------------------------------
DIRECT EMPLOYEE PERCENT
NAME OF BENEFICIAL OWNERS OWNERSHIP(1) 401(K) PLANS(2) OF CLASS
------------------------- ------------ --------------- --------
DIRECTORS
Donald G. Barger, Jr....................................... 27,032(3) *
Ross J. Centanni........................................... 450,274(3),(4) 19,879 2.98%
Frank J. Hansen............................................ 14,900(3) *
Raymond R. Hipp............................................ 12,000(3) *
Thomas M. McKenna.......................................... 23,780(3) *
Diane K. Schumacher........................................ 4,438(3) *
Richard L. Thompson........................................ 10,200(3) *
NAMED EXECUTIVE OFFICERS (NOT DIRECTORS)
Steven M. Krivacek......................................... 86,329(3) 5,943 *
Tracy D. Pagliara.......................................... 7,640(3) 648 *
Philip R. Roth............................................. 93,030(3) 4,568 *
J. Dennis Shull............................................ 119,154(3),(5) 7,935 *
All directors and executive officers as a group............ 848,777(3),(4),(5) 38,973 5.62%
----------
* Less than 1%
(1) Each beneficial owner has sole voting and investment power with respect to all shares, except as indicated
below.
(2) Each beneficial owner has sole voting power, but limited investment power with respect to all shares held in
the Savings Plans, which are 401(k) plans, and the related Excess Defined Contribution Plan.
7
(3) Includes shares that could be acquired by the exercise of stock options granted under the Incentive Plan that
are currently exercisable or exercisable within 60 days after March 8, 2002, as follows: 12,000 shares for
Mr. Barger; 268,335 shares for Mr. Centanni; 12,000 shares for Mr. Hansen; 9,000 shares for Mr. Hipp;
15,000 shares for Mr. McKenna; 3,000 shares for Ms. Schumacher; 9,000 shares for Mr. Thompson; 50,667 shares
for Mr. Krivacek; 7,167 for Mr. Pagliara; 58,903 shares for Mr. Roth; 64,334 shares for Mr. Shull; and
509,406 shares for the group.
(4) Includes 4,050 shares owned by Mr. Centanni's wife, as to which Mr. Centanni shares voting and investment
power pursuant to a trust arrangement.
(5) Includes 228 shares owned by Mr. Shull's daughter, as to which Mr. Shull shares voting and investment power
pursuant to a trust arrangement.
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
------------------- -------------------- --------
Capital Group Int'l, Inc. et. al. ....... 1,560,100(1) 10.00%
11100 Santa Monica Blvd.
Los Angeles, CA 90025
FMR Corporation et. al. ................. 1,522,455(2) 9.75%
82 Devonshire Street
Boston, Massachusetts 02109
David L. Babson & Company, Inc. ......... 1,118,166(3) 7.09%
One Memorial Drive
Cambridge, Massachusetts 02142-1300
AXA Financial, Inc., et. al. ............ 1,055,419(4) 6.69%
1290 Avenue of the Americas
New York, New York 10104
----------
(1) Based on a Schedule 13G filing, dated as of February 11, 2002, made by Capital Group International, Inc.
("CGI") and its subsidiary Capital Guardian Trust Company ("CGT"). CGI reported that it has sole voting power
with respect to 1,181,300 shares of Common Stock and sole investment power with respect to 1,560,100 shares
of Common Stock through its subsidiaries, which are investment management companies, but has disclaimed any
voting or investment power itself. CGT is the beneficial owner of 1,435,700 of such shares of Common Stock,
of which it has sole voting power over 1,056,900 shares and sole investment power over all 1,435,700 shares.
(2) Based on Amendment No. 4 to Schedule 13G, dated as of February 14, 2002, made by FMR Corp., Edward C. Johnson
3rd, and Abigail P. Johnson. FMR Corp. reported that Fidelity Management & Research Company ("Fidelity"), a
wholly-owned subsidiary of FMR Corp., is the beneficial owner of 1,522,455 shares of Common Stock as a result
of acting as an investment adviser to various investment companies, one of which is Fidelity Low Priced Stock
Fund, which owns 1,521,300 shares or 9.74% of the Common Stock. Edward C. Johnson 3rd, FMR Corp., through its
control of Fidelity, and the funds report sole investment power with respect to all shares beneficially
owned. However, they report that voting power resides with the trustees of the funds, and that Fidelity
carries out the voting under written guidelines from such trustees. Through their ownership of approximately
49% of the voting power of FMR Corp. and the execution of a shareholders' voting agreement, members of the
Johnson family, including Edward C. Johnson 3rd and Abigail P. Johnson, may be deemed to control FMR Corp.
(3) Based on Amendment No. 1 to Schedule 13G, dated as of January 10, 2002, made by David L. Babson & Company,
Inc. ("Babson"). Babson subsequently advised Company representatives that its investment in Common Stock had
increased to 1,118,166 shares, effective January 31, 2002, notwithstanding the 1,089,366 shares reported in
its January 10, 2002 Schedule 13G filing. Babson reported that it had sole voting and investment power with
respect to all shares of Common Stock, which are owned by investment advisory client(s).
(4) Based on Amendment No. 1 to Schedule 13G, dated as of February 11, 2002, made by AXA Financial, Inc. ("AXA
Financial") and certain affiliates, including AXA Conseil Vie Assurance Mutuelle, AXA Assurances I.A.R.D.
Mutuelle, AXA Assurances Vie Mutuelle, AXA Courtage Assurance Mutuelle, and AXA,
8
(collectively "AXA"). AXA subsequently advised Company representatives that its investment in Common Stock
had increased to 1,055,419 shares, effective January 31, 2002, notwithstanding the 1,055,119 shares reported
in its February 11, 2002, Schedule 13G filing. AXA reported that it has sole voting power with respect to
923,075 shares of Common Stock, shared voting power with respect to 10,450 shares of Common Stock, and sole
investment power as to all shares beneficially owned. Alliance Capital Management L.P., a subsidiary of AXA
Financial, is the beneficial owner of all such shares, which were acquired for investment purposes on behalf
of discretionary investment advisory accounts.
EXECUTIVE MANAGEMENT COMPENSATION
The following tables present compensation earned by the Chief
Executive Officer and the next four most highly compensated executive
officers of the Company for the years indicated and information
regarding stock option transactions by each officer in 2001.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES ALL OTHER
----------------------- UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) ($)(1)
--------------------------- ---- --------- -------- ---------- ------------
Ross J. Centanni........................ 2001 $520,833 $515,000 35,000 $34,463
Chairman, President & CEO 2000 493,333 245,000 70,000 30,075
1999 453,333 175,000 70,000 44,295
Philip R. Roth.......................... 2001 $227,500 165,000 9,000 $13,163
Vice President, Finance & CFO 2000 215,000 65,000 17,000 11,925
1999 205,000 50,000 17,000 17,505
J. Dennis Shull......................... 2001 $220,000 100,000 9,000 $12,600
Vice President & General Manager, 2000 208,750 60,000 17,000 11,644
Compressor Division 1999 191,667 50,000 17,000 15,375
Tracy D. Pagliara (2)................... 2001 $157,504 107,000 6,500 $ 8,887
Vice President, General Counsel 2000 48,336 40,000 15,000 2,276
& Secretary
Steven M. Krivacek...................... 2001 $160,000 100,000 6,500 $ 9,000
Vice President, 2000 148,500 40,000 12,000 8,257
Human Resources 1999 136,000 35,000 12,000 10,890
----------
(1) Amounts under "All Other Compensation" reflect the Company's matching contributions on behalf of each of the
named executive officers to the Savings Plans and the related Excess Defined Contribution Plan, broken down
as follows: Mr. Centanni ($4,725--Savings Plans and $29,738--Excess Plan); Mr. Roth ($7,650--Savings Plans
and $5,513--Excess Plan); Mr. Shull ($3,150--Savings Plans and $9,450--Excess Plan); Mr. Pagliara
($5,934--Savings Plans and $2,953--Excess Plan); and Mr. Krivacek ($2,953--Savings Plans and $6,047--Excess
Plan).
(2) Mr. Pagliara did not become employed by the Company until August 2000.
9
OPTION GRANTS IN 2001
INDIVIDUAL GRANTS
------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES PRICE EXPIRATION GRANT DATE
NAME GRANTED(#)(1) IN 2001 ($/SH)(1) DATE(2) PRESENT VALUE(3)
---- ------------- ---------- --------- ---------- ----------------
Ross J. Centanni................... 35,000 18.9% $19.695 02/26/11 $259,014
Philip R. Roth..................... 9,000 4.9% 19.695 02/26/11 66,604
J. Dennis Shull.................... 9,000 4.9% 19.695 02/26/11 66,604
Tracy D. Pagliara.................. 6,500 3.5% 19.695 02/26/11 48,103
Steven M. Krivacek................. 6,500 3.5% 19.695 02/26/11 48,103
----------
(1) The exercise price is equal to the average of the high and low sales price of the Company's Common Stock on
the date of grant and shall be payable in cash, shares of Common Stock, or stock appreciation rights or by a
combination of the foregoing.
(2) These options have a ten-year term from the date of grant and are exercisable in increments of one-third each
on the first, second and third anniversary dates following the date of grant. In the event of a change in
control, holders may receive a cash payment equal to the fair value, as determined in accordance with the
Plan, of that portion of any option that is not fully exercisable.
(3) The Black-Scholes option pricing model was used assuming a dividend yield of 0%, a risk-free interest rate of
4.680%, an expected stock price volatility based on historical experience of 36.81% and an expected option
life based on historical experience of 4.46 years. While the assumptions are believed to be reasonable, the
reader is cautioned not to infer a forecast of value either from the model's use or from the values adopted
for the model's assumptions. Any future values realized will ultimately depend upon the excess of the stock
price on the date the option is exercised over the exercise price.
AGGREGATED OPTION EXERCISES IN 2001
AND DECEMBER 31, 2001 OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
DECEMBER 31, 2001(#) AT DECEMBER 31, 2001($)(2)
SHARES ---------------------- ---------------------------
ACQUIRED ON VALUE
NAME EXERCISE(#) RECEIVED($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- -------------- ------------------------- ---------------------------
Ross J. Centanni......... 45,000 $227,184 210,002 104,999 $1,749,456 $512,511
Philip R. Roth........... 15,001 84,880 44,570 25,999 293,818 125,656
J. Dennis Shull.......... 11,251 63,662 50,001 25,999 373,275 125,656
Tracy D. Pagliara........ -0- n/a 5,000 16,500 35,581 86,697
Steven M. Krivacek....... 7,501 42,443 40,500 18,500 334,301 89,055
----------
(1) The value received for shares acquired on exercise in 2001 is calculated using the difference between the
fair market value of the Company's Common Stock, as indicated by the average high and low sales price of the
Common Stock on the exercise date, and the option exercise prices.
(2) The value of the unexercised in-the-money options at December 31, 2001 is calculated using the difference
between the fair market value of the Company's Common Stock, as indicated by the average high and low sales
price of the Common Stock on December 31, 2001 ($22.0850), and the option exercise prices.
10
LONG-TERM CASH BONUS AWARDS IN 2001
The following table shows the long-term cash bonus awards that
were granted under the Incentive Plan for 2001 to each of the named
executive officers.
ESTIMATED FUTURE PAYOUTS UNDER
NUMBER OF PERFORMANCE OR NON-STOCK PRICE-BASED PLANS
SHARES, UNITS OR OTHER PERIOD -------------------------------------
OTHER RIGHTS UNTIL MATURATION THRESHOLD TARGET MAXIMUM
NAME & TITLE (#)(1) OR PAYOUT(2) ($ OR #)(2) ($ OR #)(2) ($ OR #)(2)
------------ ---------------- ---------------- ----------- ----------- -----------
Ross J. Centanni............... 85% 2001-2003 50% 100% 150%
Chairman, President & CEO
Philip R. Roth................. 50% 2001-2003 50% 100% 150%
Vice President, Finance &
CFO
J. Dennis Shull................ 50% 2001-2003 50% 100% 150%
Vice President & General
Manager, Compressor
Division
Tracy D. Pagliara.............. 50% 2001-2003 50% 100% 150%
Vice President, General
Counsel & Secretary
Steven M. Krivacek............. 50% 2001-2003 50% 100% 150%
Vice President, Human
Resources
----------
(1) Represents the percentage of the participants' base salary at the end of 2003 that shall be eligible for
calculation of the long-term cash bonus (the "Bonus Eligible Salary").
(2) The long-term cash bonus percentage will be tied to the compound growth rate of earnings before taxes for the
Company's industrial businesses (i.e., excluding petroleum products) ("EBT") during the period January 1,
2001 through December 31, 2003. The utilization of the threshold, target or maximum percentages will depend
upon the achievement of certain levels of compound growth rate of EBT during this period, subject to
adjustment as provided under the Plan. These percentages will be applied to the Bonus Eligible Salary to
determine the long-term cash bonus for the period.
REPORT OF THE MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The goal of the Management Development and Compensation
Committee (the "Committee") is to compensate the executive officers
of Gardner Denver based on the scope of their responsibilities, the
achievement of specific annual objectives and the Company's annual
and longer term performance. Annually, the Committee reviews and
establishes the compensation and benefits of the executives,
including base salaries, annual bonus opportunities and grants of
awards under the Incentive Plan. These elements are blended to
provide competitive pay, reward achievement of financial and
strategic objectives and align the interests of the Company's
executives with those of the Company's stockholders.
EXECUTIVE COMPENSATION REPORT
The Company maintains a compensation plan for executive officers
that consists of (i) base salary, (ii) annual incentive compensation
through cash bonus opportunities and (iii) long-term incentives in
the form of stock option grants and cash bonuses. At the Committee's
direction, the Company hired Towers Perrin ("Towers") in late 2000 to
review the Company's existing executive compensation practices and
mix of pay (i.e., salary, bonus and long-term incentive), for
competitiveness with independent manufacturing companies with annual
revenues of $350 million to $750 million, which are believed to be
generally comparable to the Company (the "Peer Companies"). Data from
national surveys was used to calculate competitive consensus data, to
11
benchmark the compensation practices of the Company and to develop
compensation projections and recommendations for each of the Company
executive officers for 2001. Towers confirmed to the Company that
such practices were consistent with the Company's goal of attracting
and retaining the best qualified executives. At the Committee's
direction, the Company also retained Mercer in late 2001 to perform a
comprehensive review of the Company's executive officer and board of
director compensation and retention practices, including annual
compensation, long-term incentives and management continuity
arrangements.
ANNUAL CASH COMPENSATION
Base Salary. In February 2001, the Committee established a base
salary target for each executive officer at approximately the 60th
percentile of market levels based on the competitive consensus data.
The goal in establishing the base salaries was to position the
Company for future growth, to make the compensation program more
competitive and to increase the Company's ability to attract and to
retain executives. In addition to the Towers 2001 salary
recommendations, the Committee also took into account the
individual's responsibilities, experience, actual performance and
impact on the business when setting each executive's actual base
salary.
Annual Incentive Compensation. An annual cash bonus opportunity
is awarded by the Committee pursuant to the Annual Incentive Plan.
The Annual Incentive Plan furthers the Board's policy of linking
executive compensation to the Company's performance and
shareholders' interests as a whole.
Pursuant to the Annual Incentive Plan, the Committee is required
to establish, no later than ninety days after the beginning of each
year, performance goals for such year based upon one or more of the
following performance measures: return on equity, assets, capital or
investment; pre-tax or after-tax profit levels expressed in absolute
dollars or earnings per share; and cash flow or similar measures.
Performance goals may be identical for all participants or may be
different to reflect more appropriate measures of individual
performance. Performance goals must include a threshold level below
which no award will be payable and a maximum award opportunity for
each participant. The Committee is authorized to adjust the method
of calculating attainment of performance goals in recognition of
(i) extraordinary or nonrecurring items, (ii) changes in tax laws,
(iii) changes in generally accepted accounting principles or changes
in accounting policies, (iv) charges related to restructured or
discontinued operations, (v) restatement of prior period financial
results, and (vi) any other unusual, non-recurring gain or loss that
is separately identified and quantified in the Company's financial
statements. In addition, notwithstanding the attainment of the
performance goals, annual incentive awards for participants may
be denied or adjusted by the Committee, in its sole judgment, based
on its assessment of the participant's performance. However, no
upward adjustment may be made to an award for a participant if
Section 162(m) of the Code would limit the deduction the Company
may claim for that participant's compensation.
In February 2001, the Committee established the performance
goals and maximum bonus opportunities for the Annual Incentive Plan
participants for 2001. Except for the Division General Managers, the
performance goals were based on a weighted average of earnings per
share (weighted at 60%) and the level of cash flow (weighted at 40%)
generated by the Company in 2001. For Division General Managers, the
measures were based on a weighted average of unit earnings before
taxes (weighted at 60%) and earnings per share (weighted at 40%).
The target bonus percentage range was 45-70% of participant base
salaries for 2001, and was subject to increase to a maximum range of
90-140%, depending on the level of performance goal achievement.
Bonus payments increase as performance levels increase. The maximum
bonus payment, which was 200% of the median bonus payment, would
have resulted in total cash compensation (i.e., salary and cash
bonus) for the executive officers in the 75th percentile or higher
of market levels based on the competitive consensus data.
As noted above, except for the Division General Managers, the
measures of corporate performance were based on earnings per share
and the level of cash flow generated by the Company in 2001. Diluted
earnings per share was included in the benchmark to reflect the
effect of management's performance on stockholder return. Free cash
flow was utilized in the benchmark due to the continued importance
of cash flow in providing funds to pursue the Company's growth
strategies. Free cash flow was defined as the sum of the Company's
net cash provided by operating activities and net cash used for
investing activities, excluding any cash related to the
12
acquisitions completed in 2001. Division performance for each
General Manager was assessed based on the respective division's
earnings before taxes.
Considering the performance goals for the 2001 Annual Incentive
Plan, the Company had to generate diluted earnings per share of
$1.40 and $21.5 million of free cash flow in 2001 for the resulting
bonus payments to provide market median cash compensation based on
the competitive consensus data. In February 2002, the Committee
evaluated and determined the degree to which the 2001 Annual
Incentive Plan criteria had been met, as well as the performance of
individual Plan participants. Based on this analysis, the Committee
awarded 2001 cash bonus payments at an average of 128% of target
levels. The actual bonus payments for each of the named executive
officers are shown on the Summary Compensation Table.
LONG-TERM INCENTIVES
Under the Incentive Plan, designated employees are eligible from
time to time to receive awards in the form of stock options, stock
appreciation rights, restricted stock grants or performance shares
or long-term cash bonuses, as determined by the Committee. The
purpose of these awards is to promote the long-term financial
interests of the Company by encouraging employees to acquire an
ownership position in the Company and to provide incentives for
specific employee performance. In selecting the recipients and size
of the awards, the Committee considers each recipient's opportunity
for significant contribution to the Company's future growth and
profitability, without regard to their existing stock ownership. The
Committee's goal for the executive officer's 2001 aggregate
long-term incentive awards was to make grants at approximately the
60th percentile of market levels based on the competitive consensus
data.
Stock Options. The Committee currently utilizes stock options to
provide the named executive officers and other key employees with
incentives that are related to the long-term performance of the
Company. The specific number of stock options granted to an
executive is determined by the Committee, with the advice and
counsel of Mr. Centanni and Towers, based upon the individual's
level of responsibility and a subjective judgment by the Committee
of the executive's contribution to the financial performance of the
Company. In 2001, the stock options granted to executive officers
were at approximately 50% of the market median, due to the
introduction of the long-term bonus plan described in further detail
below. Options are granted at the average market price for the
Common Stock on the date of grant and have value only if the market
price of the underlying Common Stock appreciates. In 2001, the
Committee granted options with ten-year terms. Furthermore, since
options are exercisable in cumulative increments of one-third each
year over a three-year period, the Committee believes options
provide an appropriate long-term incentive for those receiving
grants, as well as stability in the work force.
Long-Term Bonuses. As noted above, under the Incentive Plan, the
Committee may also grant long-term cash bonus awards to the
Chairman, Chief Executive Officer, President, any Executive Vice
President, any Senior Vice President, any senior officer reporting
directly to the Chief Executive Officer and any other Vice President
or senior executive or officer designated by the Chief Executive
Officer. Eligibility to receive a long-term cash bonus is tied to
the achievement of certain Company performance targets over a
pre-determined performance period.
The Committee is responsible for (i) determining the duration of
each performance period, (ii) selecting which executive officers of
the Company will be eligible to receive a long-term cash bonus for
the performance period, (iii) selecting the business criteria to be
applicable to the performance period from among those authorized,
(iv) establishing Company performance targets relative to the
business criteria selected, (v) setting a base salary factor for
each executive officer eligible to receive a long-term cash bonus
for the performance period, and (vi) at the end of the performance
period, determining the extent to which the performance targets have
been achieved and the long-term cash bonuses payable to each
eligible executive officer. The Company performance targets may be
based on any one, or a combination, of the business criteria
available for performance share awards, as described above.
Concurrently with the selection of performance targets, the
Committee must establish an objective formula or standard for
calculating the maximum long-term cash bonus payable to each
participating executive officer. All long-term cash bonuses are to
be denominated in cash or restricted stock awards, as determined by
the Committee and subject to the remaining provisions of the Plan.
Except as otherwise determined by the Committee, in its discretion,
each executive selected by the Committee
13
as eligible to receive a long-term cash bonus with respect to a
particular performance period must continue to be employed by the
Company on the last day of such performance period to continue to be
eligible to receive the long-term cash bonus.
In February 2001, the Committee granted long-term cash bonus
awards to certain executives. The long-term cash bonus percentage
for the 2001 awards is tied to the compound growth rate of earnings
before taxes, or EBT, for the Company's industrial businesses during
the period January 1, 2001 through December 31, 2003. The
utilization of threshold, target or maximum percentages will depend
upon the achievement of certain levels of compound growth rate of
EBT during this period, subject to adjustment as provided under the
Plan. These percentages will be applied to participants' base salary
at the end of 2003 to determine the long-term cash bonus for the
period.
COMPENSATION OF CEO
Mr. Centanni's base salary, annual bonus and long-term incentive
awards for 2001 were determined as described above. In addition, the
Committee also considered Mr. Centanni's individual performance for
purposes of the annual bonus. Individual goals agreed upon between
the Committee and Mr. Centanni included: safety frequency rates,
improvement of MIS systems and utilization, quality and material
cost reductions, lean manufacturing implementation and the
improvement of underperforming businesses. The Committee did not
assign weights or apply any formula to these factors.
OTHER
Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"), limits the deductibility by public corporations of
non-performance based compensation paid to specified executive
officers. The Company endeavors to maximize deductibility of
compensation by qualifying certain compensation as performance-based
under Section 162(m) to the extent practicable while maintaining
competitive compensation. All compensation for 2001 paid to the
Company's executive officers, including the compensation element of
shares received under the Company's Incentive Plan, qualified for
deduction under the Code.
March 22, 2002
Richard L. Thompson, Chairman
Thomas M. McKenna
Diane K. Schumacher
14
STOCK PERFORMANCE GRAPH
The following table compares the cumulative total stockholder
return for the Company's Common Stock on an annual basis through
December 31, 2001 to the cumulative total returns for the same
periods of the: (a) Standard & Poor's 500 Stock Index; (b) Standard
and Poor's MidCap Index for Manufacturing (Specialized Industries),
a pre-established industry index believed by the Company to have a
peer group relationship with the Company; and (c) Standard & Poor's
SmallCap 600, an industry index which includes the Company's Common
Stock as of August 26, 1998. All information presented assumes the
reinvestment of dividends. These indices are included for
comparative purposes only and do not necessarily reflect
management's opinion that such indices are an appropriate measure of
the relative performance of the stock involved, and are not intended
to forecast or be indicative of possible future performance of the
Common Stock.
[GRAPH]
-----------------------------------------------------------------
12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
---------------------------------------------------------------------------------------
Gardner Denver 100 222 129 146 187 196
S&P 500 100 133 171 208 189 166
MidCap Specialized 100 111 97 108 107 151
SmallCap 600 100 126 124 139 156 166
---------------------------------------------------------------------------------------
15
EMPLOYEE AND EXECUTIVE BENEFIT PLANS
In addition to the Incentive Plan, the Savings Plans and group
health, hospitalization and life insurance plans generally available
to all employees, the Company also provides other benefit plans for
employees and executive officers, some of which are described below.
RETIREMENT PLANS
The Company maintains the Gardner Denver, Inc. Pension Plan (the
"Pension Plan") and the Gardner Denver, Inc. Supplemental Excess
Defined Benefit Plan (the "Excess Defined Benefit Plan") for the
benefit of certain employees as defined in the Pension Plan. The
Company also maintains certain other pension plans.
Under the Pension Plan, the Company credits 4% of total
compensation paid up to the Social Security wage base for the year,
plus 8% of total compensation paid in excess of the Social Security
wage base, annually to each individual's account. For purposes of
the Pension Plan, total compensation is cash remuneration paid
during the year by the Company to or for the benefit of a
participant, including base salary for the current year and annual
cash bonus earned during the prior year but paid in the current year
for the executives named in the Summary Compensation Table.
Benefits at retirement are payable, as the participant elects,
in the form of a level annuity with or without survivorship or a
lump-sum payment. The Company will maintain the status of the plans
as qualified defined benefit plans through sufficient contributions
to a trust fund to meet the minimum requirements under the Code.
The Company also maintains the Excess Defined Benefit Plan. The
Excess Defined Benefit Plan is a nonqualified plan providing certain
employees, including those named in the Summary Compensation Table,
Pension Plan benefits that cannot be paid from a qualified, defined
benefit plan due to provisions of the Code. Under the Excess Defined
Benefit Plan, for 2001, the Company credited 12% of annual
compensation paid in excess of the IRS annual compensation limit for
qualified retirement plans to the individual accounts of the
participating employees, including those named in the Summary
Compensation Table. The Excess Defined Benefit Plan is funded
through contributions by the Company to a Rabbi Trust.
For each of the individuals shown in the Summary Compensation
Table, the following table shows current credited years of service,
the year each attains age 65, and the projected annual pension
benefit (including amounts payable under the Excess Defined Benefit
Plan) at age 65. The projected annual pension benefit assumes that
benefits will be paid on a straight-life annuity basis, compensation
for each executive officer continues at December 31, 2001 base
salary levels plus an annual cash bonus equal to the average cash
bonus received by each officer in 2001 and 2000, and an interest
rate of 6% until March 31, 2002 and 5.48% thereafter.
YEARS OF
CREDITED YEAR
SERVICE AS OF INDIVIDUAL ESTIMATED ANNUAL
MARCH 8, 2002 REACHES AGE 65 BENEFIT AT AGE 65
------------- -------------- -----------------
Ross J. Centanni............... 22 2010 $194,604
Philip R. Roth................. 5 2016 77,196
J. Dennis Shull................ 26 2014 85,450
Tracy D. Pagliara.............. 1 2028 76,208
Steven M. Krivacek............. 20 2013 46,547
STOCK REPURCHASE PROGRAM FOR EXECUTIVE OFFICERS
The Company has granted stock options under the Incentive Plan
to promote the Company's long-term interests, and executive officers
have exercised a portion of such stock options in accordance with
the Incentive Plan and applicable stock option agreements. The
cumulative increase in the market price of the Company's Common
Stock since the grant of some of these stock options resulted in the
imposition of significant alternative minimum taxes on these
employees. Therefore, the Company has established a Stock Repurchase
Program for its executive officers, to provide a means for them to
sell Gardner Denver Common Stock and obtain sufficient funds to meet
alternative minimum tax obligations which arise from the exercise of
incentive
16
stock options. The program is intended to mitigate any potential
disruption to an orderly trading market in the Company's Common
Stock, which could result if the executives' trades were effected
through securities brokers, in the context of the Company's
relatively small average trading volume. The sales price under this
program is the average of the high and low sales prices of the
Company's Common Stock on the composite tape of the New York Stock
Exchange on the date of the repurchase. The determination to sell
shares under this program is final and must be submitted either on
the day of the sale or no later than prior to the initiation of
trading the following day. There were no share repurchases under the
Plan from January 1, 2001 through March 8, 2002.
MANAGEMENT CONTINUITY AGREEMENTS
The Company has a Management Continuity Agreement (the
"Agreement") with each of the individuals named in the Summary
Compensation Table. The purpose of the Agreement is to encourage
each of the executive officers to continue to carry out the
officer's duties in the event of a possible change in control of the
Company.
Benefits are payable under the Agreement only if a "Change of
Control" has occurred and within two years the executive officer's
employment is terminated (a) by the Company or its successor for
reasons other than "cause," or (b) voluntarily by the officer for
"good reason," in each case as defined in the Agreement. A "Change
of Control" will be deemed to have occurred if either (i) any person
or group acquires beneficial ownership of 20% of the voting
securities of the Company, (ii) there is a change in the composition
of a majority of the Board of Directors within any two-year period
which change is not approved by certain of the directors who were
directors at the beginning of such two-year period, or (iii) a
change in control (as such term is used in Schedule 14A promulgated
under the Securities Exchange Act of 1934) otherwise occurs. The
principal benefits to be provided to the executive officers under
the Agreements are (i) a lump sum payment equal to a year's
compensation (base salary and incentive compensation) multiplied by
a factor of two, and (ii) continued participation in the Company's
other employee benefit programs for two years following termination,
but not beyond age 65.
PROPOSAL II--AMENDMENT TO THE LONG-TERM INCENTIVE PLAN
The Incentive Plan (a copy of which, as proposed to be amended,
is included in this proxy statement as Appendix A) was adopted by
the Board of Directors and sole stockholder of the Company in
December 1993. The Incentive Plan was amended by the stockholders of
the Company in May 1996, May 1999 and May 2001 and by the Management
Development and Compensation Committee (the "Committee") in May
1998, November 1998 and March 2000. In early 2002, the Company
engaged Mercer to evaluate the Incentive Plan and advise the
Committee on alternative methods of providing long-term incentives.
Subject to the approval of the stockholders, the Board has adopted
the amendment to the Incentive Plan described below, and authorized
its submission as this Proposal II. Shareholder approval of this
amendment is necessary in accordance with the terms of the Incentive
Plan.
DESCRIPTION OF THE AMENDMENTS
It is proposed that the Incentive Plan be amended so that the
Committee would have discretion to award nonemployee directors an
option to purchase up to 9,000 shares of Common Stock in a given
year instead of the current requirement that each such director be
granted an option to purchase 3,000 shares of Common Stock each
year. Specifically, Section 11.1 of the Incentive Plan would be
revised to read as follows:
11.1 Grants. Awards may be granted to nonemployee directors only
in the form of stock options satisfying the requirements of this
Section 11 ("Director Stock Options"). Subject to Section 16
hereof, on the date following the commencement of the Company's
annual meeting of stockholders each year, there shall be granted
to each nonemployee director an option to purchase up to a
maximum of 9,000 shares of Common Stock. The amount of shares
subject to the option shall be determined in the Committee's
discretion. All such options shall be nonstatutory stock
options.
17
The Incentive Plan currently provides for the issuance of
3,500,000 shares. As of March 8, 2002, 1,491,679 shares had been
issued upon the exercise of options granted under the Incentive
Plan, there were outstanding options to purchase 1,270,256 shares of
Common Stock and only 738,065 shares remained available for grants.
The proposed amendment would not increase the number of shares
available for grant. The closing price of the Company's Common Stock
as quoted on the New York Stock Exchange on March 8, 2002 was
$21.05.
The Board believes stock awards and cash bonuses are a useful
form of incentive compensation and increasing the number of shares
issuable under the Incentive Plan would permit the Company to
continue to provide such incentives in the future.
MATERIAL TERMS OF THE INCENTIVE PLAN
Purpose and Administration
The Incentive Plan was established to promote the long-term
financial interests of the Company, including its growth and
performance, by encouraging its employees to acquire an ownership
interest in the Company, enhancing the Company's ability to attract
and retain employees of outstanding ability and aligning employees'
interests with those of the Company's stockholders.
The Incentive Plan is administered by the Committee. Except with
respect to nonemployee director stock options, and subject to
limitations concerning the number of restricted stock awards which
may be granted, the Committee is authorized to determine who may
participate in the Incentive Plan, the number and types of awards to
be made to each participant and the terms, conditions and
limitations applicable to each award, as set forth in an award
agreement. The Committee designates participants from those
employees who have demonstrated significant management potential or
who have the capacity for a substantial contribution to the
successful performance of the Company. The Company is unable to
determine the number of individuals who are likely to participate in
the Incentive Plan. As of March 8, 2002, a total of 496 stock option
awards had been granted under the Incentive Plan.
Employee Awards
Awards granted to employees under the Incentive Plan may consist
of stock options, stock appreciation rights, restricted stock
grants, performance shares, and long-term cash bonuses. No
participant may be granted awards during any calendar year with
respect thereto in excess of 180,000 shares of Common Stock, subject
to adjustment for changes in capitalization. Additionally, the
maximum aggregate number of shares of Common Stock that may be
granted under the Plan in the form of restricted stock grants may
not exceed 50% of the aggregate shares of Common Stock available
under the Plan, subject to adjustments for capitalization.
Stock options may be in the form of incentive stock options or
nonstatutory stock options. Awards of stock options made to
participants subject to Section 162(m) of the Code are intended to
qualify as "qualified performance-based compensation" under
Section 162(m). Options are exercisable at such times, whether during
or following termination of service, and in such installments as are
determined by the Committee, provided that no stock option is
exercisable more than ten years after the date of grant. The option
exercise price is established by the Committee, but it cannot be
less than the fair market value on the date of grant, which, as
defined, generally means the average of the high and low prices of a
share of Common Stock as reported on the composite tape for
securities listed on the New York Stock Exchange for the applicable
date. Payment of the option exercise price is made at the time of
exercise and may be in cash, shares of Common Stock, stock
appreciation rights, or a combination thereof, or such other
consideration as the Committee deems appropriate. The Committee may
condition the vesting of stock options on the achievement of
financial performance criteria established by the Committee at the
time of grant.
Stock options issued in the form of incentive stock options are
required to comply with Section 422 of the Code. Incentive stock
options may be granted only to full time employees of the Company
and its subsidiaries within the meaning of Section 424 of the Code.
The aggregate fair market value (determined as of the date the
option is granted) of shares with respect to which incentive stock
options are exercisable for the first time by an individual during
any calendar year (under any plan of the Company which provides for
the granting of
18
incentive stock options) may not exceed $100,000 or any other number
applicable under the Code from time to time.
Stock appreciation rights granted under the Incentive Plan
entitle the participant to receive a payment equal to the increase,
as of the date of exercise or surrender, in the fair market value of
a stated number of shares of Common Stock over the option or base
price stated in an award agreement. Awards of stock options made to
participants subject to Section 162(m) of the Code are intended to
qualify as "qualified performance-based compensation" under
Section 162(m). Stock appreciation rights may be granted in tandem
with stock options or alone. A tandem stock appreciation right is
exercisable only to the extent that the related stock option is
exercisable. Upon the exercise of a tandem stock appreciation right,
the related stock option is automatically canceled to the extent of
the number of stock appreciation rights exercised. The base price of
a freestanding SAR will be determined by the Committee, provided,
however, that such price may not be less than the fair market value
on the date of the award of the freestanding SAR. The Committee may
establish such other terms, conditions or restrictions, if any, on
any stock option award or SAR award, provided they are consistent
with the Incentive Plan.
Restricted stock awards granted under the Incentive Plan are
subject to forfeiture under such conditions and for such period of
time as the Committee may establish at the time of grant. Such
conditions may include restrictions on transferability, requirements
of continued employment and the individual or Company performance.
To the extent restricted stock awards are subject to Company
performance criteria, it is intended that all such restricted stock
awards granted to participants subject to Section 162(m) of the Code
will qualify as "qualified performance-based compensation" under
Section 162(m) of the Code. During the period in which any shares of
Common Stock are subject to forfeiture restrictions, the Committee
may grant to the participant all or any of the rights of a
stockholder with respect to such shares. The number of shares of
restricted stock awarded and/or issued under the Incentive Plan, as
amended, must not exceed 50% of the total number of shares available
for issuance under the Incentive Plan.
Performance share awards may be granted in the form of shares of
Common Stock that are earned only after the attainment of
predetermined performance targets during a performance period
established by the Committee. At the end of the performance period,
any performance shares earned are converted into Common Stock, cash
or a combination of both. A performance target shall be established
by the Committee at the beginning of each performance period and
based upon one or any combination of the following goals or business
criteria: (i) revenues of the Company; (ii) operating income of the
Company; (iii) net income of the Company; (iv) earnings per share of
the Company's Common Stock; (v) the Company's return on equity;
(vi) cash flow of the Company; (vii) Company stockholder total return;
or (viii) earnings before taxes of the Company. Awards of performance
shares (and restricted stock awards based on performance) made to
participants subject to Section 162(m) of the Code are intended to
qualify under Section 162(m) and provisions of such awards shall be
interpreted in a manner consistent with that intent to the extent
appropriate. The foregoing provisions and goals or business criteria
shall also be applicable to grants of restricted stock awards to the
extent such restricted stock awards are subject to the financial
performance of the Company.
If an award is granted in the form of restricted stock or
performance shares, the Committee may choose, at the time of the
grant, to include an entitlement to receive dividends or dividend
equivalents, payable as determined by the Committee. The Committee
may permit participants to elect to defer the issuance of shares or
the settlement of awards in cash under administrative policies
established by the Committee. It may also provide that deferred
settlements include the payment or crediting of interest on the
deferral amounts or the payment or crediting of dividend equivalents
on deferred settlements denominated in shares. The Committee may
also determine the manner of payment of awards of performance shares
and other terms, conditions or restrictions, if any, on any award of
performance shares, provided they are consistent with the Incentive
Plan.
Shares of Common Stock subject to an award that expires
unexercised or that is forfeited, terminated or canceled, in whole
or in part, or is paid in cash in lieu of Common Stock, will
thereafter again be available for grant under the Incentive Plan.
19
Long-Term Cash Bonus
Under the Incentive Plan, the Committee may also grant long-term
cash bonus awards to the Chairman, Chief Executive Officer,
President, any Executive Vice President, any Senior Vice President,
any senior officer reporting directly to the Chief Executive Officer
and any other Vice President or senior executive or officer
designated by the Chief Executive Officer. Long-term cash bonus
awards paid to the Company's executive officers are intended to
qualify as "performance-based compensation" under Section 162(m) of
the Code.
Under the Plan, executive officers are eligible to receive a
long-term cash bonus based on the achievement of certain Company
performance targets over a pre-determined performance period. The
Committee is responsible for (i) determining the duration of each
performance period, (ii) selecting which executive officers of the
Company will be eligible to receive a long-term cash bonus for the
performance period, (iii) selecting the business criteria to be
applicable to the performance period from among those authorized,
(iv) establishing Company performance targets relative to the
business criteria selected, (v) setting a base salary factor for
each executive officer eligible to receive a long-term cash bonus
for the performance period, and (vi) at the end of the performance
period, determining the extent to which the performance targets have
been achieved and the long-term cash bonuses payable to each
eligible executive officer.
The Company performance targets may be based on any one, or a
combination, of the business criteria available for performance
share awards, as described above. The Committee must establish the
performance targets with respect to the business criteria selected
for a given performance period while the performance relative to the
target remains substantially uncertain within the meaning of
Section 162(m) of the Code.
Concurrently with the selection of performance targets, the
Committee must establish an objective formula or standard for
calculating the maximum long-term cash bonus payable to each
participating executive officer. The maximum payment opportunity for
any performance period may not exceed $3,000,000 or, if less, three
times the executive officer's base salary as of the last day of the
applicable performance period. All long-term cash bonuses are to be
denominated in cash or restricted stock awards, as determined by the
Committee and subject to the remaining provisions of the Plan.
Notwithstanding the attainment of the performance targets,
long-term cash bonuses for participating executive officers may be
denied or adjusted by the Committee, in its sole judgment, based on
its assessment of the executive officer's performance. However, no
upward adjustment may be made to a long-term cash bonus for an
executive officer if Section 162(m) of the Code would limit the
deduction the Company may claim for that executive officer's
compensation. Except as otherwise determined by the Committee, in
its discretion, each executive officer selected by the Committee as
eligible to receive a long-term cash bonus with respect to a
particular performance period must continue to be employed by the
Company on the last day of such performance period to continue to be
eligible to receive the long-term cash bonus.
Nonemployee Director Stock Options
Under the Incentive Plan, as amended, each nonemployee director
automatically receives a grant of stock options to purchase up to
9,000 shares of Common Stock on the date following each Annual
Meeting of Stockholders. The number of shares subject to the option
is determined in the Committee's discretion. Nonemployee director
stock options become exercisable on the first anniversary of the
date of grant and terminate upon the expiration of five years from
such date. If a person ceases to be a nonemployee director by virtue
of disability or retirement, outstanding options generally remain
exercisable for a period of five years (but not later than the
expiration date of the options). If a person ceases to be a
nonemployee director by virtue of death (or dies during the
five-year exercise period after disability or retirement described
above), outstanding options generally remain exercisable for a
period of one year (but not later than the expiration date of the
options). If a nonemployee director's service terminates for any
other reason, options not then exercisable are canceled, and options
that are exercisable may be exercised at any time within ninety days
after such termination (but not later than the expiration date of
the options). The option exercise price of a nonemployee director
stock option is the fair market value on the date of grant, which
generally means the average of the high and low sales prices of the
Company's Common Stock on the composite tape of the New York Stock
Exchange on such date. Options granted to nonemployee directors are
not transferable by the director except by will or the laws of
descent and distribution.
20
Effect of Change of Control
The Incentive Plan provides for the acceleration of certain
benefits in the event of a "Change of Control" (as defined in
Section 2.5 of the Incentive Plan) of the Company. Upon the
occurrence of a Change of Control, options not otherwise exercisable
at the time of a Change of Control will become fully exercisable
upon such Change of Control. In the case of a Change of Control:
(i) The Company will make payment to directors with respect
to director stock options in cash, immediately upon the
occurrence of such Change of Control, in an amount equal to the
appreciation in the value of the director stock option from the
option exercise price specified in the award agreement to the
price payable upon a Change of Control;
(ii) all SARs which have not been granted in tandem with
stock options will become exercisable in full;
(iii) the restrictions applicable to all shares of
restricted stock shall lapse and such shares will be deemed
fully vested and all restricted stock granted in the form of
share units will be paid in cash;
(iv) all performance shares and long-term cash bonuses will
be deemed to be earned in full and all performance shares
granted in the form of share units shall be paid in cash; and
(v) any participant who has been granted a stock option
which is not exercisable in full will be entitled, in lieu of
the exercise of the portion of the stock option which is not
exercisable, to obtain a cash payment in an amount equal to the
difference between the option price of such stock option and
(A) in the event the Change of Control is the result of a tender
offer or exchange offer for the Common Stock, the final offer
price per share paid for the Common Stock, or such lower price
as the Committee may determine with respect to any incentive
stock option to preserve its incentive stock option status,
multiplied by the number of shares of Common Stock covered by
such portion of the stock option, or (B) in the event the Change
of Control is the result of any other occurrence, the aggregate
value of the Common Stock covered by such portion of the stock
option, as determined by the Committee at such time.
The Committee may, in its discretion, include such further
provisions and limitations in any agreement documenting such awards
as it may deem equitable and in the best interests of the Company.
Federal Income Tax Consequences
Stock Options. In general, the grant of a stock option will not
be a taxable event to a recipient and it will not result in a
deduction to the Company. The tax consequences associated with the
exercise of a stock option, and the subsequent disposition of Common
Stock acquired on exercise of such an option, depend in part on
whether the option is an incentive stock option or a nonstatutory
stock option.
Upon the exercise of a nonstatutory stock option, the
participant will recognize ordinary compensation income equal to the
excess of the fair market value of the Common Stock received upon
exercise over the exercise price. The Company will be able to claim
a deduction in an equivalent amount, provided it satisfies federal
income tax withholding requirements and is not otherwise precluded
from taking a deduction because of the Section 162(m) deduction
limitations described below. Any gain or loss upon a subsequent sale
or exchange of the Common Stock will be capital gain or loss,
long-term or short-term, depending on the holding period for the
Common Stock.
Generally, a participant will not recognize ordinary income at
the time of exercise of an incentive stock option and no deduction
will be available to the Company, provided the option is exercised
while the participant is an employee or, in certain circumstances,
for a limited period of time thereafter. However, the difference
between the option price and the fair market value of the stock on
the date of exercise is treated as an item of adjustment for
purposes of the alternative minimum tax. If the sale of shares
acquired under an incentive stock option does not occur within two
years after the date of grant and within one year after the date of
exercise, any gain or loss realized will be treated as a long-term
capital gain or loss. If a disposition occurs prior to the
expiration of these one-year or two-year holding periods, the
participant recognizes ordinary income at the time of disposition,
and the Company is entitled to a deduction in an amount equal to the
excess of the fair market value of the Common stock at the date of
exercise (or the fair market value of the Common Stock on the
disposition date, if lower) over the exercise price.
21
Stock Appreciation Rights. Generally, when a participant
receives payment with respect to a stock appreciation right granted
to him under the Incentive Plan, the amount of cash and the fair
market value of the Common Stock received will be ordinary
compensation income to such participant and the Company will be
entitled to a corresponding deduction, subject to the Section 162(m)
deduction limitations described below.
Restricted Stock. A participant who receives shares of
restricted stock generally will recognize ordinary compensation
income at the time the forfeiture or transferability restrictions
lapse, based on the fair market value of the Common Stock at that
time. Subject to the Section 162(m) deduction limitations described
below, this amount is deductible for federal income tax purposes by
the Company. Dividends paid with respect to Common Stock that is
subject to forfeiture and nontransferable will be ordinary
compensation income to the participant and generally deductible by
the Company. Alternatively, a participant may elect immediate
recognition of income at the time of receipt of restricted stock. In
such event, the participant will recognize the fair market value of
the restricted stock at the time of grant as income, and the Company
will be entitled to a corresponding deduction. Dividends paid with
respect to these shares will not be deductible by the Company. If
this tax treatment is elected, and the restricted stock is
subsequently forfeited, the participant will not be entitled to any
offsetting tax deduction.
Performance Shares. When performance shares are earned and stock
is issued, a participant will realize ordinary income equal to the
fair market value of the performance shares. If a participant is
subject to the provisions of Section 16(b) of the Exchange Act
regarding short-swing purchases and sales, the participant may not
be required to recognize income upon receipt of performance shares,
but generally may recognize ordinary income six months thereafter in
an amount equal to the fair market value of the performance shares
at that time. Subject to the Section 162(m) deduction limitations
described below, the Company generally will be entitled to a
deduction equal to the ordinary income recognized by the participant
in the same taxable year in which the participant recognizes
ordinary income with respect to the performance shares.
Long-Term Cash Bonuses. Generally, a participant will recognize
ordinary income upon the receipt of a long-term cash bonus equal to
the aggregate amount of cash received. Subject to the Section 162(m)
deduction limitations described below, the Company generally will be
entitled to a corresponding tax deduction equal to the amount of
cash bonus includible in the participant's income.
Potential Limitation on Company Deductions. Section 162(m) of
the Code denies a deduction to any publicly-held corporation for
compensation paid to certain "covered employees" in a taxable year
to the extent that compensation to such covered employee exceeds
$1 million. It is possible that compensation attributable to awards,
when combined with all other types of compensation received by a
"covered employee" from the Company, may cause this limitation to be
exceeded in any particular year. However, certain kinds of
compensation, including "qualified performance-based compensation,"
are disregarded for purposes of the Code Section 162(m) deduction
limitation. The Plan is structured so that awards (e.g., stock
options, performance-based restricted stock, stock appreciation
rights, performance shares and long-term incentive bonuses) granted
to covered employees under the Plan should qualify as "qualified
performance-based compensation" under Section 162(m). Stockholder
approval of the material terms of the performance goals with respect
to such awards is required, however, in order for the awards to
constitute "qualified performance-based compensation." The material
terms include (i) the class of employees eligible for such award,
(ii) the business criteria on which the performance goal is based,
and (iii) the maximum amount, or the formula used to calculate the
amount payable, upon attainment of the performance goal. Such terms
are disclosed above in the section entitled "Material Terms of the
Incentive Plan."
Other Provisions
The rights and interests of a participant under the Incentive
Plan may not be assigned, encumbered or transferred except, in the
event of the death of a participant, by will or the laws of descent
and distribution. However, the Committee may, in its discretion,
grant stock options to one or more executive officers of the Company
on terms that permit the stock options to be transferred by any such
executive officer, for estate planning purposes, to (a) the
executive officer's spouse, children, grandchildren, parents,
siblings, stepchildren, stepgrandchildren or in-laws ("Family
Members"), (b) entities that are exclusively family-related,
including trusts for the exclusive benefit of Family Members and
limited partnerships or limited liability companies in
22
which Family Members are the only partners or members, or (c) such
other persons or entities specifically approved by the Committee.
In the event of any change in the outstanding shares of Common
Stock by reason of a reorganization, recapitalization, stock split,
stock dividend, combination or exchange of shares, merger,
consolidation or any change in the corporate structure or shares of
the Company, the maximum aggregate number and class of shares as to
which awards may be granted under the Incentive Plan, including any
limitations upon individual participants or regarding director stock
options, as well as the number and class of shares issuable,
pursuant to then outstanding awards, shall be appropriately adjusted
by the Committee, whose determination shall be final.
Notwithstanding the foregoing, the Committee shall not permit the
repricing of stock options by any method, including by cancellation
and reissuance.
The Company may withhold, or require a participant to remit to
the Company, an amount sufficient to satisfy any federal, state or
local withholding tax requirements associated with awards under the
Incentive Plan. The Committee may permit a participant to elect to
satisfy such withholding obligation by having the Company retain the
number of shares of Common Stock whose fair market value equals the
amount required to be withheld.
The Committee may permit participants to elect to defer the
issuance of shares or the settlement of awards in cash in accordance
with its policies. It may also provide that deferred settlements
include interest on the deferral amounts or dividend equivalents on
deferred settlements denominated in shares. Notwithstanding the
foregoing, if a participant subject to Section 162(m) of the Code
elects to defer an award, the Committee will ensure that any
increase in the award is based on actual returns, including any
decrease or increase in the value of the investment(s).
The Board may amend, suspend or terminate the Incentive Plan or
any portion thereof at any time, provided that no amendment may be
made that would impair the rights of a participant under an
outstanding award without the participant's consent, and no
amendment may be made without stockholder approval if such approval
is necessary in order to preserve the applicability of any exemption
under Rule 16b-3 under the Exchange Act or the qualification of any
awards as "performance-based compensation" under Section 162(m) of
the Code. If not terminated earlier by the Company, the Incentive
Plan, as amended, will expire on December 31, 2005.
In order to enable participants who are foreign nationals or
employed outside the United States, or both, to receive awards under
the Incentive Plan, the Committee may adopt such amendments,
administrative policies, subplans and the like as are necessary or
advisable, in the opinion of the Committee, to effectuate the
purposes of the Incentive Plan.
23
STOCK OPTION AWARDS
The following table shows options that were granted under the
Incentive Plan for 2002 (as of March 8, 2002) to each of the named
executive officers and certain specified groups. These awards are
not conditioned upon stockholder approval of the proposed amendments
to the Incentive Plan described above.
2002 2002
NUMBER OF EXERCISE PRICE
NAME AND POSITION SHARES PER SHARE(1)(3)
----------------- --------- ----------------
Ross J. Centanni..................................... 34,500 $19.95
Chairman, President & CEO
Philip R. Roth....................................... 9,700 $19.95
Vice President, Finance & CFO
J. Dennis Shull...................................... 9,300 $19.95
Vice President & General Manager,
Compressor Division
Tracy D. Pagliara.................................... 7,000 $19.95
Vice President, General Counsel & Secretary
Steven M. Krivacek................................... 6,800 $19.95
Vice President, Human Resources
Executive Group(2)................................... 86,300 $19.95
Non-Executive Director Group(4)...................... 0(6) N/A
Non-Executive Officer Employee Group(5).............. 93,200 $19.95
----------
(1) The closing price of the Company's Common Stock as reported on the composite tape of the New York Stock
Exchange on March 8, 2002 was $21.05.
(2) Consists of 8 persons.
(3) Exercise prices shown are weighted averages of the actual exercise prices for stock options granted to
members of the group.
(4) Consists of 6 persons.
(5) Consists of 69 persons for 2002.
(6) Non-Executive Director option awards for 2002 will not be granted until May 2002.
24
LONG-TERM CASH BONUS AWARDS
The following table shows the long-term cash bonus award
opportunity that was granted under the Incentive Plan for 2002 to
each of the named executive officers and certain specified groups.
These awards are not conditioned upon stockholder approval of the
proposed amendments to the Incentive Plan described above.
2002 AWARDS
ESTIMATED FUTURE PAYOUTS UNDER
NUMBER OF PERFORMANCE OR NON-STOCK PRICE-BASED PLANS
SHARES, UNITS OR OTHER PERIOD -------------------------------------
OTHER RIGHTS UNTIL MATURATION THRESHOLD TARGET MAXIMUM
NAME & TITLE (#)(1) OR PAYOUT(2) ($ OR #)(2) ($ OR #)(2) ($ OR #)(2)
------------ ---------------- ---------------- ----------- ----------- -----------
Ross J. Centanni.................. 85% 2002-2004 50% 100% 150%
Chairman, President & CEO
Philip R. Roth.................... 50% 2002-2004 50% 100% 150%
Vice President, Finance & CFO
J. Dennis Shull................... 50% 2002-2004 50% 100% 150%
Vice President & General
Manager, Compressor Division
Tracy D. Pagliara................. 50% 2002-2004 50% 100% 150%
Vice President, General
Counsel & Secretary
Steven M. Krivacek................ 50% 2002-2004 50% 100% 150%
Vice President, Human
Resources
Executive Group(3)................ 50% for all executives 2002-2004 50% 100% 150%
other than Mr. Centanni
(as described above)
Non-Executive Director Group...... N/A N/A N/A N/A N/A
Non-Executive Officer Employee
Group......................... N/A N/A N/A N/A N/A
----------
(1) Represents the percentage of the participants' base salary at the end of 2004 that shall be eligible for
calculation of the long-term cash bonus (the "Bonus Eligible Salary").
(2) The long-term cash bonus percentage will be tied to the compound growth rate of earnings before taxes for the
Company's industrial businesses (i.e., excluding petroleum products) ("EBT") during the period January 1,
2002 through December 31, 2004. The utilization of the threshold, target or maximum percentages will depend
upon the achievement of certain levels of compound growth rate of EBT during this period, subject to
adjustment as provided under the Plan. These percentages will be applied to the Bonus Eligible Salary to
determine the long-term cash bonus for the period.
(3) Consists of 8 persons.
APPROVAL OF AMENDMENT
Approval of the Amendment requires the affirmative vote of a
majority of the outstanding shares of Common Stock having voting
power present at the meeting, in person or by proxy, and voting
thereon.
The Board of Directors believes that the adoption of the
Amendment will be in the best interests of the stockholders and,
accordingly, recommends a vote FOR this proposal, which is Item 2 on
the proxy card. Proxies received in response to the Board's
solicitation will be voted FOR approval of the Amendment if no
specific instructions are included for Item 2.
25
AUDIT COMMITTEE MATTERS
REPORT OF THE AUDIT AND FINANCE COMMITTEE
Management is responsible for the Company's internal controls
and the financial reporting process. Andersen LLP, the Company's
independent auditors, is responsible for performing an independent
audit of the Company's consolidated financial statements in
accordance with generally accepted auditing standards and issuing a
report thereon. The Audit and Finance Committee's responsibility is
to monitor and oversee these processes.
In this context, the Audit and Finance Committee has met and
held discussions with management and Andersen. Management
represented to the Audit and Finance Committee that the Company's
consolidated financial statements were prepared in accordance with
generally accepted accounting principles. The Audit and Finance
Committee has reviewed and discussed the consolidated financial
statements with management and Andersen. The Audit and Finance
Committee specifically addressed with Andersen matters required to
be discussed by Statement on Auditing Standards No. 61.
Andersen also provided to the Committee the written disclosures
and letter required by Independence Standards Board Standard No. 1,
as modified or supplemented. As part of its review of the financial
statements and the auditors' disclosures and report, the members of
the Audit and Finance Committee also discussed with Andersen its
independence. In this connection, the Audit and Finance Committee
considered whether the types of services for which Andersen billed
the Company fees during 2001 were compatible with maintaining such
independence. See, Audit Committee Matters--Accounting Fees.
The members of the Audit and Finance Committee are not
professionally engaged in the practice of auditing or accounting and
are not experts in the fields of accounting or auditing, including
with respect to auditor independence. Members of the Audit and
Finance Committee rely, without independent verification, on the
information provided to them and on the representations made by
management and the independent accountants. Accordingly, the Audit
and Finance Committee's oversight does not provide an independent
basis to determine that management has maintained appropriate
accounting and financial reporting principles or appropriate
internal control and procedures designed to assure compliance with
accounting standards and applicable laws and regulations.
Furthermore, the Audit and Finance Committee's considerations and
discussions referred to above do not assure that the audit of the
Company's financial statements has been carried out in accordance
with generally accepted auditing standards, that the financial
statements are presented in accordance with generally accepted
accounting principles or that the Company's auditors are in fact
"independent".
Based on its discussions with management and the Company's
independent auditors, and subject to the limitations on the role and
responsibilities of the Audit and Finance Committee referred to
above and in its charter, the Committee recommended to the Board
that the financial statements be included in the Annual Report on
Form 10-K for the period ended December 31, 2001 for filing with the
Securities and Exchange Commission.
March 22, 2002
Donald G. Barger, Jr., Chairman
Frank J. Hansen
Raymond R. Hipp
26
ACCOUNTING FEES
The following summarizes the aggregate fees Andersen billed the
Company for services relating to the year ended December 31, 2001.
Audit Fees. The aggregate fees Andersen billed or expected to
bill the Company for professional services rendered for the audit of
the Company's annual financial statements for the year ended
December 31, 2001 and the reviews of the financial statements
included in the Company's Forms 10-Q for 2001 was $340,200.
Financial Information Systems Design and Implementation Fees. No
fees were billed, or are expected to be billed, by Andersen to the
Company for financial information systems design and implementation
(the professional services described in Paragraph (c)(4)(ii) of
Rule 2-01 of Regulation S-X) for 2001.
All Other Fees. The aggregate fees Andersen billed or expected
to bill the Company for all other services for 2001 was $526,400,
comprised of $206,400 for tax related services, $262,400 for due
diligence review services and $57,600 for benefit plan audits.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Company employed Andersen LLP to perform the annual audit
and to render other services for 2001, and the Board of Directors
has reappointed Andersen to render these same services in 2002.
Representatives of Andersen will be present at the meeting. They
will be available to answer appropriate questions and will have the
opportunity to make a statement, if they desire to do so.
STOCKHOLDERS' PROPOSALS FOR 2003 ANNUAL MEETING
Stockholders' proposals intended to be presented at the 2003
Annual Meeting must be received by the Company at its principal
executive offices (Attention: Corporate Secretary) on or before
November 22, 2002 for inclusion in the Company's proxy materials for
that meeting. Upon receipt of any proposal, the Company will
determine whether or not to include such proposal in the proxy
statement in accordance with the regulations governing the
solicitation of proxies.
Any stockholder proposal or nomination for director submitted
other than for inclusion in the Company's proxy materials for that
meeting must ordinarily be received by the Company at its principal
executive offices (Attention: Corporate Secretary) no later than
ninety days or more than one hundred twenty days prior to the
meeting (i.e., which is currently anticipated to be January 7, 2003
and February 6, 2003, respectively, for the 2003 annual meeting), or
such proposal will be considered untimely. However, if the Company
changes the date of the meeting by more than thirty days from the
date of the previous year's meeting, then such notice must be
received within ten days after notice of the meeting is mailed or
other public disclosure of the meeting is made. The stockholder
filing the notice of proposal or nomination must describe various
matters regarding the proposal or nominee, including, but not
limited to, name, address, shares held, a description of the
proposal or information regarding the nominee and other specified
matters. These requirements are separate from and in addition to the
requirements a stockholder must meet to have a proposal included in
the Company's proxy statement. The foregoing time limits also apply
in determining whether notice is timely for purposes of rules
adopted by the Securities and Exchange Commission relating to the
exercise of discretionary voting authority.
Any stockholder desiring a copy of the Company's Bylaws will be
furnished one without charge upon written request to the Corporate
Secretary at 1800 Gardner Expressway, Quincy, Illinois, 62305.
GARDNER DENVER, INC.
Tracy D. Pagliara
Vice President, General
Counsel and Secretary
March 22, 2002
27
APPENDIX A
GARDNER DENVER, INC.
LONG-TERM INCENTIVE PLAN
(As amended May 7, 1996, May 4, 1998, November 2, 1998,
May 4, 1999, March 6, 2000 and January 1, 2001)(Adjusted to reflect
two-for-one stock split January 15, 1997 and
three-for-two stock split December 29, 1997)
1. PURPOSE
The purpose of the Gardner Denver, Inc. Long-Term Incentive Plan
(the "Plan") is to promote the long-term financial interests of
Gardner Denver, Inc. (the "Company"), including its growth and
performance, by encouraging employees of the Company and its
subsidiaries to acquire an ownership position in the Company,
enhancing the ability of the Company to attract and retain employees
of outstanding ability, and providing employees with an interest in
the Company parallel to that of the Company's stockholders.
2. DEFINITIONS
2.1 "Administrative Policies" means the administrative policies
and procedures adopted and amended from time to time by the
Committee to administer the Plan.
2.2 "Award" means any form of stock option, stock appreciation
right, restricted stock award, performance share or long-term cash
bonus granted under the Plan, whether singly, in combination, or in
tandem, to a Participant by the Committee pursuant to such terms,
conditions, restrictions and limitations, if any, as the Committee
may establish by the Award Agreement or otherwise.
2.3 "Award Agreement" means a written agreement with respect to
an Award between the Company and a Participant establishing the
terms, conditions, restrictions and limitations applicable to an
Award. To the extent an Award Agreement is inconsistent with the
terms of the Plan, the Plan shall govern the rights of the
Participant thereunder.
2.4 "Base Salary" means the base salary paid by the Company to
the Participant, exclusive of any bonuses, commissions or other
actual or imputed income from any Company-provided benefits or
perquisites, but prior to any reductions for salary deferred
pursuant to any deferred compensation plan or for contributions to a
plan qualifying under Section 401(k) of the Code or contributions
pursuant to a cafeteria plan under Section 125 of the Code.
2.5 "Base Salary Factor" means a multiplier expressed as a
percentage of the Executive Officer's Base Salary, as determined by
the Committee pursuant to Section 12.3 of the Plan for purposes of
calculating an Executive Officer's Long-Term Cash Bonus.
2.6 "Board" shall mean the Board of Directors of the Company.
2.7 "Business Criteria" means any one, or a combination, of the
following: (i) revenues of the Company; (ii) operating income of the
Company; (iii) net income of the Company; (iv) earnings per share of
the Company's Common Stock; (v) earnings before taxes of the
Company; (vi) the Company's return on equity; (vii) cash flow of the
Company; or (viii) Company stockholder total return.
2.8 "Change of Control" means a change in control of the Company
(other than the initial distribution of Common Stock by Cooper
Industries, Inc.) of a nature that would be required to be reported
(assuming such event has not been "previously reported") in response
to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Exchange Act; provided that, without limitation, a Change of Control
shall be deemed to have occurred at such time as (i) any "person"
within the meaning of Section 14(d) of the Exchange Act, is or
becomes the beneficial owner, directly or indirectly, of securities
of the Company representing 20% or more of the combined voting power
of the Company's then outstanding securities, or (ii) during any
period of two consecutive years, individuals who at the beginning of
such period constitute the Board cease for any reason to constitute
at least a majority thereof unless the election, or the nomination
for election by the Company's
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shareholders, of each new director was approved by a vote of at
least two-thirds of the directors then still in office who were
directors at the beginning of the period.
2.9 "Change of Control Price" means the higher of (i) the Fair
Market Value on the date of determination of the Change of Control
or (ii) the highest price per share actually paid for the Common
Stock in connection with the Change of Control of the Company.
2.10 "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
2.11 "Committee" means the Management Development and
Compensation Committee of the Board, or such other committee
designated by the Board to administer the Plan, provided that the
Committee shall be constituted so as to satisfy any applicable legal
requirements, including the requirements of Rule 16b-3 promulgated
under the Exchange Act and Section 162(m) of the Code, or any
respective successor rule or statute.
2.12 "Common Stock" means the Common Stock, par value $0.01 per
share, of the Company.
2.13 "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
2.14 "Executive Officer" means the Chairman, Chief Executive
Officer, President, any Executive Vice President, any Senior Vice
President, any senior officer reporting directly to the Chief
Executive Officer and any other Vice President or senior executive
or officer designated by the Chief Executive Officer.
2.15 "Fair Market Value" means the average of the high and low
price of a share of Common Stock as reported on the composite tape
for securities listed on the Stock Exchange for the applicable date,
provided that if no sales of Common Stock were made on the Stock
Exchange on that date, the average of the high and low prices as
reported on the composite tape for the preceding day on which sales
of Common Stock were made.
2.16 "Long-Term Cash Bonus" means a payment in cash of an
Executive Officer's Payment Opportunity.
2.17 "Payment Opportunity" means the amount determined pursuant
to any bonus formula established by the Committee for an Executive
Officer for a given Performance Period pursuant to Section 12.3 of
the Plan, taking into account the actual achievement of the relevant
Performance Targets and the Executive Officer's Base Salary Factor.
2.18 "Performance Period" means a stated period over which the
Company's performance is measured for purposes of Awards under the
Plan. The duration of Performance Periods may vary with respect to
different types of Awards under the Plan, as determined by the
Committee.
2.19 "Performance Shares" means Awards in the form of shares of
Common Stock that may be earned pursuant to the terms set forth in
Section 10 of the Plan.
2.20 "Performance Targets" means the predetermined goal or goals
established by the Committee in writing (which may be cumulative or
alternative) based upon one, or any combination, of the Business
Criteria.
2.21 "Participant" means an officer or employee of the Company
or its subsidiaries who is selected by the Committee to participate
in the Plan, and nonemployee directors of the Company to the extent
provided in Section 11 hereof.
2.22 "Stock Exchange" means the composite tape of the New York
Stock Exchange ("NYSE") or, if the Common Stock is no longer
included on the NYSE, then such other market price reporting system
on which the Common Stock is traded or quoted designated by the
Committee after it determines that such other exchange is both
reliable and reasonably accessible.
3. ADMINISTRATION
3.1 The Plan shall be administered by the Committee. A majority
of the Committee shall constitute a quorum, and the acts of a
majority of a quorum shall be the acts of the Committee.
3.2 Subject to the provisions of the Plan, the Committee
(i) shall select the Participants, determine the type of Awards to be
made to Participants, determine the shares or share units subject to
Awards, and (ii) shall have the authority to interpret the Plan, to
establish, amend, and rescind any Administrative Policies, to
determine
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the terms and provisions of any agreements entered into hereunder,
and to make all other determinations necessary or advisable for the
administration of the Plan. The Committee may correct any defect,
supply any omission or reconcile any inconsistency in the Plan or in
any Award in the manner and to the extent it shall deem desirable to
carry it into effect. The determinations of the Committee in the
administration of the Plan, as described herein, shall be final and
conclusive, provided, however, that no action shall be taken which
will prevent the options granted under Section 11 or any Award
granted under the Plan from meeting the requirements for exemption
from Section 16(b) of the Exchange Act, or subsequent comparable
statute, as set forth in Rule 16b-3 of the Exchange Act or any
subsequent comparable rule; and, provided further, that no action
shall be taken which will prevent Awards that are intended to
constitute "qualified performance-based compensation," within the
meaning of Section 162(m) of the Code, from doing so.
3.3 Notwithstanding the powers and authorities of the Committee
under the Plan, the Committee shall not permit the repricing of
stock options by any method, including by cancellation and
reissuance.
3.4 In order to enable Participants who are foreign nationals or
employed outside the United States, or both, to receive Awards under
the Plan, the Committee may adopt such amendments, Administrative
Policies, subplans and the like as are necessary or advisable, in
the opinion of the Committee, to effectuate the purposes of the
Plan.
4. ELIGIBILITY
All employees of the Company and its subsidiaries who have
demonstrated significant management potential or who have the
capacity for contributing in a substantial measure to the successful
performance of the Company, as determined by the Committee, are
eligible to be Participants in the Plan. Participants may receive
one or more Awards under the Plan. Directors of the Corporation
other than directors who are employees of the Corporation shall be
eligible only to receive stock options pursuant to Section 11
hereof.
5. SHARES SUBJECT TO THE PLAN
5.1 The aggregate number of shares of Common Stock available for
grant of Awards under the Plan shall be that number of shares
remaining available for grant under the Plan on the close of
business on the date immediately prior to the 2001 Annual Meeting of
Stockholders plus 750,000, subject to the adjustments provided for
in Section 16 hereof. Shares of Common Stock available for issuance
under the Plan may be authorized and unissued shares or treasury
shares, as the Company may from time to time determine.
5.2 Subject to adjustment as set forth in Section 16 hereof, the
maximum aggregate number of shares of Common Stock that may be
granted under the Plan in the form of restricted stock grants shall
not exceed 50% of the aggregate shares of Common Stock available
under the Plan.
5.3 Shares of Common Stock subject to an Award that expires
unexercised or that is forfeited, terminated or canceled, in whole
or in part, or is paid in cash in lieu of Common Stock, shall
thereafter again be available for grant under the Plan, except that
any such shares attributable to a Restricted Stock Award (as defined
in Section 9) shall be counted against the restricted stock limit
set forth in Section 5.2 hereof.
6. AWARDS
Awards under the Plan may consist of: stock options (either
incentive stock options within the meaning of Section 422 of the
Code or nonstatutory stock options), stock appreciation rights,
restricted stock grants, performance shares and long-term cash
bonuses; provided that no Participant may be granted Awards during
any calendar year with respect thereto in excess of 180,000 shares
of Common Stock, subject to the provisions of Section 16. Awards of
performance shares and restricted stock may provide the Participant
with dividends or dividend equivalents and voting rights prior to
vesting (whether based on a period of time or based on attainment of
specified performance conditions). The terms, conditions and
restrictions of each Award shall be set forth in an Award Agreement.
7. STOCK OPTIONS
7.1 Grants. Awards may be granted in the form of stock options.
Stock options may be incentive stock options within the meaning of
Section 422 of the Code or nonstatutory stock options (i.e., stock
options which
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are not incentive stock options), or a combination of both, or any
particular type of tax advantage option authorized by the Code from
time to time. Awards of stock options made to Participants subject
to Section 162(m) of the Code are intended to qualify as "qualified
performance-based compensation" under Section 162(m) and the
provisions of such Awards shall be interpreted in a manner
consistent with that intent, to the extent appropriate.
7.2 Terms and Conditions of Options. An option shall be
exercisable in whole or in such installments and at such times and
upon such terms as may be determined by the Committee; provided,
however, that no stock option shall be exercisable more than ten
years after the date of grant thereof. The option exercise price
shall be established by the Committee, but such price shall not be
less than the Fair Market Value on the date of the stock option's
grant, subject to adjustment as provided in Section 16 hereof.
7.3 Restrictions Relating to Incentive Stock Options. Stock
options issued in the form of incentive stock options shall, in
addition to being subject to all applicable terms, conditions,
restrictions and limitations established by the Committee, comply
with Section 422 of the Code. Incentive stock options shall be
granted only to full time employees of the Company and its
subsidiaries within the meaning of Section 424 of the Code. The
aggregate Fair Market Value (determined as of the date the option is
granted) of shares with respect to which incentive stock options are
exercisable for the first time by an individual during any calendar
year (under this Plan or any other plan of the Company which
provides for the granting of incentive stock options) may not exceed
$100,000 or such other number as may be applicable under the Code
from time to time.
7.4 Payment. Upon exercise, a Participant may pay the option
exercise price of a stock option in cash, shares of Common Stock,
stock appreciation rights or a combination of the foregoing, or such
other consideration as the Committee may deem appropriate. The
Committee shall establish appropriate methods for accepting Common
Stock and may impose such conditions as it deems appropriate on the
use of such Common Stock to exercise a stock option.
7.5 Additional Terms and Conditions. The Committee may, by way
of the Award Agreement or Administrative Policies, establish such
other terms, conditions or restrictions, if any, on any stock option
award, provided they are consistent with the Plan. The Committee may
condition the vesting of stock options on the achievement of
financial performance criteria established by the Committee at the
time of grant.
8. STOCK APPRECIATION RIGHTS
8.1 Grants. Awards may be granted in the form of stock
appreciation rights ("SARs"). Awards of SARs made to Participants
subject to 162(m) of the Code are intended to qualify as "qualified
performance-based compensation" under Section 162(m) and the
provisions of such Awards shall be interpreted in a manner
consistent with that intent, to the extent appropriate. SARs shall
entitle the recipient to receive a payment equal to the appreciation
in market value of a stated number of shares of Common Stock from
the price stated in the Award Agreement to the Fair Market Value on
the date of exercise or surrender. An SAR may be granted in tandem
with all or a portion of a related stock option under the Plan
("Tandem SARs"), or may be granted separately ("Freestanding SARs");
provided, however, that Freestanding SARs shall be granted only to
Participants who are foreign nationals or are employed outside of
the United States, or both, and as to whom the Committee determines
the interests of the Company could not as conveniently be served by
the grant of other forms of Awards under the Plan. A Tandem SAR may
be granted either at the time of the grant of the related stock
option or at any time thereafter during the term of the stock
option. In the case of SARs granted in tandem with stock options
granted prior to the grant of such SARs, the appreciation in value
shall be appreciation from the option exercise price of such related
stock option to the Fair Market Value on the date of exercise.
8.2 Terms and Conditions of Tandem SARs. A Tandem SAR shall be
exercisable to the extent, and only to the extent, that the related
stock option is exercisable. Upon exercise of a Tandem SAR as to
some or all of the shares covered in an Award, the related stock
option shall be canceled automatically to the extent of the number
of SARs exercised, and such shares shall not thereafter be eligible
for grant under Section 5 hereof.
8.3 Terms and Conditions of Freestanding SARs. Freestanding SARs
shall be exercisable in whole or in such installments and at such
times as may be determined by the Committee. The base price of a
Freestanding
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SAR shall be determined by the Committee; provided, however, that
such price shall not be less than the Fair Market Value on the date
of the award of the Freestanding SAR.
8.4 Deemed Exercise. The Committee may provide that an SAR shall
be deemed to be exercised at the close of business on the scheduled
expiration date of such SAR, if at such time the SAR by its terms is
otherwise exercisable and, if so exercised, would result in a
payment to the Participant.
8.5 Additional Terms and Conditions. The Committee may, by way
of the Award Agreement or Administrative Policies, determine such
other terms, conditions and restrictions, if any, on any SAR Award,
provided they are consistent with the Plan.
9. RESTRICTED STOCK AWARDS
9.1 Grants. Awards may be granted in the form of restricted
stock ("Restricted Stock Awards"). Restricted Stock Awards shall be
awarded in such numbers and at such times as the Committee shall
determine.
9.2 Award Restrictions. Restricted Stock Awards shall be subject
to such terms, conditions or restrictions as the Committee deems
appropriate including, but not limited to, restrictions on
transferability, requirements of continued employment, achievement
of individual performance goals or Performance Targets. The period
of vesting and the forfeiture restrictions shall be established by
the Committee at the time of grant, except that each restriction
period shall not be less than 12 months. To the extent Restricted
Awards are subject to Performance Targets, it is intended that all
such Restricted Stock Awards granted to Participants subject to
Section 162(m) of the Code will qualify as "qualified
performance-based compensation" under Section 162(m) and such Awards
shall be interpreted in a manner consistent with that intent, to the
extent appropriate.
9.3 Rights as Shareholders. During the period in which any
restricted shares of Common Stock are subject to forfeiture
restrictions imposed under the preceding paragraph, the Committee
may, in its discretion, grant to the Participant to whom such
restricted shares have been awarded, all or any of the rights of a
shareholder with respect to such shares, including, but not limited
to, the right to vote such shares and to receive dividends.
9.4 Evidence of Award. Any Restricted Stock Award granted under
the Plan may be evidenced in such manner as the Committee deems
appropriate, including, without limitation, book entry registration
or issuance of a stock certificate or certificates.
10. PERFORMANCE SHARES
10.1 Grants. Awards may be granted in the form of shares of
Common Stock that are earned only after the attainment of
predetermined performance targets during a performance period as
established by the Committee ("Performance Shares").
10.2 Performance Criteria. The Committee may grant an Award of
Performance Shares to Participants as of the first day of each
Performance Period established for Performance Shares. Performance
Targets will be established at the beginning of each Performance
Period. The Committee shall be permitted to make adjustments when
determining the attainment of the applicable Performance Targets to
reflect extraordinary or nonrecurring items or events, or unusual
nonrecurring gains or losses identified in the Company's financial
statements, as long as any such adjustments are made in a manner
consistent with Section 162(m) to the extent applicable. Awards of
Performance Shares made to Participants subject to Section 162(m) of
the Code are intended to qualify under Section 162(m) and provisions
of such Awards shall be interpreted in a manner consistent with that
intent, to the extent appropriate. At the end of the Performance
Period, Performance Shares shall be converted into Common Stock (or
cash or a combination of Common Stock and cash, as determined by the
Award Agreement) and distributed to Participants based upon such
entitlement. Award payments made in cash rather than the issuance of
Common Stock shall not, by reason of such payment in cash, result in
additional shares being available for reissuance pursuant to
Section 5 hereof.
10.3 Additional Terms and Conditions. The Committee may, by way
of the Award Agreement or Administrative Policies, determine the
manner of payment of Awards of Performance Shares and other terms,
conditions or restrictions, if any, on any Award of Performance
Shares, provided they are consistent with the Plan and to the extent
applicable, Section 162(m) of the Code.
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11. DIRECTORS' STOCK OPTIONS
11.1 Grants. Awards may be granted to nonemployee directors only
in the form of stock options satisfying the requirements of this
Section 11 ("Director Stock Options"). Subject to Section 16 hereof,
on the date following the commencement of the Company's annual
meeting of stockholders each year, there shall be granted to each
nonemployee director an option to purchase up to a maximum of 9,000
shares of Common Stock. The amount of shares subject to the option
shall be determined in the Committee's discretion. All such options
shall be nonstatutory stock options.
11.2 Option Exercise Price. The option exercise price of
Director Stock Options shall be 100 percent of the Fair Market Value
on the date such options are granted. The Committee shall be
authorized to compute the price per share on the date of grant.
Payment of the option exercise price may be made in cash or in
shares of Common Stock or a combination of cash and Common Stock.
11.3 Award Agreement. Director Stock Options shall be evidenced
by an Award Agreement in the form of a stock option agreement, dated
as of the date of the grant, which agreement shall be in such form,
consistent with the terms and requirements of this Section 11, as
shall be approved by the Committee from time to time and executed on
behalf of the Company by its Chief Executive Officer.
11.4 Terms and Conditions of Director Stock Options. Director
Stock Options shall become fully exercisable on the first
anniversary of the date of grant and shall terminate upon the
expiration of five years from the date of grant. To the extent an
option is not otherwise exercisable at the date of the nonemployee
director's retirement under a retirement plan or policy of the
Company or at the time a nonemployee director ceases to be a
director on account of disability, it shall become fully exercisable
upon such retirement or cessation of service as a director due to
disability. Upon such retirement or cessation of service due to
disability, such options shall be exercisable for a period of five
years, subject to the original term thereof. Options not otherwise
exercisable at the time of the death of a nonemployee director
during service with the Company shall become fully exercisable upon
his death. Upon the death of a nonemployee director while in service
as a director or within the five-year period during which the
options are exercisable following the retirement or disability of a
nonemployee director, such options shall remain exercisable (subject
to the original term of the option) for a period of one year after
the date of death. To the extent an option is exercisable on the
date a director ceases to be a director (other than by reason of
disability, death or retirement), the option shall continue to be
exercisable (subject to the original term of the option) for a
period of 90 days thereafter.
11.5 Transferability. No option shall be transferable by a
nonemployee director except by will or the laws of descent and
distribution, and during the director's lifetime options may be
exercised only by him or his legal representative.
11.6 Change of Control. Director Stock Options not otherwise
exercisable at the time of a Change of Control shall become fully
exercisable upon such Change of Control. In the case of a Change of
Control:
(i) The Company shall make payment to directors with respect to
Director Stock Options in cash in an amount equal to the
appreciation in the value of the Director Stock Option from the
option exercise price specified in the Award Agreement to the Change
of Control Price;
(ii) The cash payments to directors shall be due and payable,
and shall be paid by the Company, immediately upon the occurrence of
such Change of Control; and
(iii) After the payment provided for in (i) above, nonemployee
directors shall have no further rights under Director Stock Options
outstanding at the time of such Change in Control.
12. LONG-TERM CASH BONUS
12.1 Eligibility. Only Executive Officers shall be eligible to
receive a Long-Term Cash Bonus. Not later than ninety (90) days
after the commencement of a Performance Period, the Committee shall
select the Executive Officers eligible to receive a Long-Term Cash
Bonus for the Performance Period. Each Executive Officer
participating in a Performance Period shall be eligible to receive a
Long-Term Cash Bonus upon completion of a Performance Period only if
Executive Officer is still employed by the Company upon the last day
of such Performance Period, provided, however, that the Committee
shall have the discretion to grant
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eligibility to the Executive Officer in its discretion,
notwithstanding the fact that the Executive Officer is not still
employed by the Company at such point.
12.2 Performance Target(s); Business Criteria; Base Salary
Factors. The applicable Business Criteria and Performance Targets
for a given Performance Period shall be established by the Committee
in advance of the deadlines set forth in the regulations under
Section 162(m) of the Code and while the performance relating to the
Performance Targets remains substantially uncertain within the
meaning of Section 162(m) of the Code. The Committee shall be
permitted to make adjustments when determining the attainment of
Performance Targets to reflect extraordinary or nonrecurring items
or events, or unusual nonrecurring gains or losses identified in the
Company's financial statements, as long as any such adjustments are
made in a manner consistent with Section 162(m) of the Code, to the
extent applicable.
12.3 Calculation of Long-Term Cash Bonus. At the beginning of
each Performance Period, the Committee shall provide in terms of an
objective formula or standard for each Executive Officer: (a) the
method of computing the specific amount that will represent the
Executive Officer's Long-Term Cash Bonus; and (b) the Base Salary
Factor to be used in calculating any Executive Officer's Long-Term
Cash Bonus. Subject to Section 12.4, at the first meeting of the
Committee after the expiration of the Performance Period, the
Committee shall determine the extent to which the Performance
Targets have been achieved, and shall determine each Executive
Officer's Payment Opportunity based on his or her Base Salary
Factor. Notwithstanding the attainment of the Performance Targets,
Long-Term Cash Bonuses for individual Executive Officers may be
denied or adjusted by the Committee, in its sole judgment, based on
its assessment of the Executive Officer's performance. However, no
upward adjustment may be made to a Long-Term Cash Bonus for an
Executive Officer if Section 162(m) of the Code would limit the
deduction the Company may claim for that Executive Officer's
compensation.
12.4 Maximum Long-Term Cash Bonus. Notwithstanding any other
provision in the Plan, no Executive Officer shall receive for any
Performance Period any Long-Term Cash Bonus under the Plan in excess
of $3,000,000 or, if less, three times his or her Base Salary as of
the last day of the applicable Performance Cycle. Any Payment
Opportunity in excess of the foregoing limits shall be reduced
automatically to the extent of the excess.
12.5 Payment. Long-Term Cash Bonuses shall be paid in cash or
Restricted Stock Awards, as determined by the Committee and subject
to the remaining terms of this Plan. Payment of Long-Term Cash
Bonuses shall occur within a reasonable time after the Committee has
certified in writing the extent to which the Performance Targets
have been achieved and determined the amount of each Executive
Officer's Long-Term Cash Bonus for the given Performance Period
pursuant to Sections 12.3 and 12.4 hereof.
13. DIVIDENDS AND DIVIDEND EQUIVALENTS; DEFERRALS
13.1 If an Award is granted in the form of a Restricted Stock
Award or Performance Shares, the Committee may choose, at the time
of the grant of the Award, to include as part of such Award an
entitlement to receive dividends or dividend equivalents, subject to
such terms, conditions, restrictions or limitations, if any, as the
Committee may establish. Dividends and dividend equivalents shall be
paid in such form and manner and at such time as the Committee shall
determine.
13.2 The Committee may permit Participants to elect to defer the
issuance of shares or the settlement of Awards in cash under
Administrative Policies established by the Committee. It may also
provide that deferred settlements include the payment or crediting
of interest on the deferral amounts or the payment or crediting of
dividend equivalents on deferred settlements denominated in shares.
Notwithstanding the foregoing, to the extent the Award being
deferred is that of a Participant subject to Section 162(m) of the
Code, the Committee will ensure that any increase in the Award will
be based upon a reasonable rate of interest or on one or more
predetermined actual investments such that the amount payable at the
later date will be based upon actual returns, including any decrease
or increase in the value of the investment(s).
14. TERMINATION OF EMPLOYMENT
Consistent with the requirements of Section 162(m) regarding
"qualified performance-based compensation," the Committee shall
adopt Administrative Policies determining the entitlement of
Participants who cease
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to be employed by either the Company or its subsidiaries due to
death, disability, resignation, termination or retirement pursuant
to an established retirement plan or policy of the Company or its
subsidiaries.
15. ASSIGNMENT AND TRANSFER
The rights and interests of a Participant under the Plan may not
be assigned, encumbered or transferred except, in the event of the
death of a Participant, by will or the laws of descent and
distribution. Notwithstanding the foregoing, the Committee may, in
its discretion, grant stock options to one or more executive
officers of the Company on terms that permit the stock options to be
transferred by any such executive officer, for estate planning
purposes, to (a) the executive officer's spouse, children,
grandchildren, parents, siblings, stepchildren, stepgrandchildren or
in-laws ("Family Members"), (b) entities that are exclusively
family-related, including trusts for the exclusive benefit of Family
Members and limited partnerships or limited liability companies in
which Family Members are the only partners or members, or (c) such
other persons or entities specifically approved by the Committee.
The terms and conditions applicable to the transfer of any such
stock options shall be established by the Committee, in its
discretion but consistent with this Section 15, and shall be
contained in the applicable stock option agreement between the
Company and the executive officer.
16. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event of any change in the outstanding shares of Common
Stock by reason of a reorganization, recapitalization, stock split,
stock dividend, combination or exchange of shares, merger,
consolidation or any change in the corporate structure or shares of
the Company, the maximum aggregate number and class of shares as to
which Awards may be granted under the Plan, including any
limitations upon individual Participants or regarding Director Stock
Options, as well as the number and class of shares issuable, and the
related option exercise price, pursuant to then outstanding Awards,
shall be appropriately adjusted by the Committee, whose
determination shall be final.
17. WITHHOLDING TAXES
The Company shall have the right to deduct from any payment to
be made pursuant to the Plan the amount of any taxes required by law
to be withheld therefrom, or to require a Participant to pay to the
Company such amount required to be withheld prior to the issuance or
delivery of any shares of Stock or the payment of cash under the
Plan. The Committee may, in its discretion, permit a Participant to
elect to satisfy such withholding obligation by having the Company
retain the number of shares of Common Stock whose Fair Market Value
equals the amount required to be withheld. Any fraction of a share
of Common Stock required to satisfy such obligation shall be
disregarded and the amount due shall instead be paid in cash to the
Participant.
18. REGULATORY APPROVALS AND LISTINGS
Notwithstanding anything contained in this Plan to the contrary,
the Company shall have no obligation to issue or deliver
certificates of Common Stock evidencing Restricted Stock Awards or
any other Award payable in Common Stock prior to (i) the obtaining
of any approval from any governmental agency which the Company
shall, in its sole discretion, determine to be necessary or
advisable, (ii) the admission of such shares to listing on the Stock
Exchange and (iii) the completion of any registration or other
qualification of said shares under any state or federal law or
ruling of any governmental body which the Company shall, in its sole
discretion, determine to be necessary or advisable.
19. NO RIGHT TO CONTINUED EMPLOYMENT OR GRANTS
No person shall have any claim or right to be granted an Award,
and the grant of an Award shall not be construed as giving a
Participant the right to be retained in the employ of the Company or
its subsidiaries. Further, the Company and its subsidiaries
expressly reserve the right at any time to dismiss a Participant
free from any liability, or any claim under the Plan, except as
provided herein or in any Award Agreement entered into hereunder.
20. CHANGE OF CONTROL
In the event of a Change of Control, (i) all SARs which have not
been granted in tandem with stock options shall become exercisable
in full, (ii) the restrictions applicable to all shares of
restricted stock shall lapse and
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such shares shall be deemed fully vested and all restricted stock
granted in the form of share units shall be paid in cash, (iii) all
Performance Shares and Long-Term Cash Bonuses shall be deemed to be
earned in full and all Performance Shares granted in the form of
share units shall be paid in cash, and (iv) any Participant who has
been granted a stock option which is not exercisable in full shall
be entitled, in lieu of the exercise of the portion of the stock
option which is not exercisable, to obtain a cash payment in an
amount equal to the difference between the option price of such
stock option and (A) in the event the Change of Control is the
result of a tender offer or exchange offer for the Common Stock, the
final offer price per share paid for the Common Stock, or such lower
price as the Committee may determine with respect to any incentive
stock option to preserve its incentive stock option status,
multiplied by the number of shares of Common Stock covered by such
portion of the stock option, or (B) in the event the Change of
Control is the result of any other occurrence, the aggregate value
of the Common Stock covered by such portion of the stock option, as
determined by the Committee at such time. The Committee may, in its
discretion, include such further provisions and limitations in any
agreement documenting such Awards as it may deem equitable and in
the best interests of the Company.
21. AMENDMENT
The Board may amend, suspend or terminate the Plan or any
portion thereof at any time, provided that no amendment shall be
made that would impair the rights of a Participant under an
outstanding Award without the Participant's consent, and no
amendment shall be made without stockholder approval if such
approval is necessary in order to preserve the applicability of any
exemption under Rule 16b-3 under the Exchange Act or qualification
of any Award under Section 162(m), or is otherwise required as a
matter of law. Further, no amendment to the Plan shall be effective
that would: (a) increase the maximum amount that can be paid to a
Participant under the Plan; (b) change the Business Criteria for
payment of performance-based Awards; or (c) modify the eligibility
requirements for Participants in the Plan, unless first approved by
the Company's stockholders.
22. GOVERNING LAW
The validity, construction and effect of the Plan and any
actions taken or relating to the Plan shall be determined in
accordance with the laws of the State of Delaware and applicable
Federal law.
23. RIGHTS AS SHAREHOLDER
Except as otherwise provided in the Award Agreement, a
Participant shall have no rights as a shareholder until he or she
becomes the holder of record. To the extent any person acquires a
right to receive payments from the Company under this Plan, such
rights shall be no greater than the rights of an unsecured creditor
of the Company.
24. EFFECTIVE DATE
The Plan became effective on December 23, 1993. Subject to
earlier termination pursuant to Section 20, the Plan shall terminate
effective December 31, 2005. After termination of the Plan, no
future Awards may be granted but previously made Awards shall remain
outstanding in accordance with their applicable terms and conditions
and the terms and conditions of the Plan.
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GARDNER DENVER, INC.
COMMON STOCK
PROXY/VOTING INSTRUCTIONS SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 7, 2002
P THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
R
O
X
Y
The undersigned, having received the Notice and Proxy Statement for the
Annual Meeting of Stockholders, hereby appoints each of Ross J. Centanni,
Philip R. Roth and Tracy D. Pagliara as the true and lawful
attorneys-in-fact, agents and proxies (with full power of substitution) to
represent the undersigned and to vote at the Annual Meeting of Stockholders
of the Company, to be held at the Holiday Inn Quincy, 201 South Third
Street, Quincy, Illinois on Tuesday, May 7, 2002 at 1:30 p.m., local time,
and any and all adjournments of the Meeting, in the manner specified, with
respect to all shares of Common Stock of Gardner Denver, Inc. which the
undersigned is entitled to vote. The undersigned also hereby directs UMB
Bank, N.A., as trustee ("UMB Bank"), to represent the undersigned and to
vote at such Meeting, and any and all adjournments of the Meeting, in the
manner specified, with respect to all shares of Common Stock to which the
undersigned, as a participant in the Gardner Denver, Inc. Retirement Savings
Plan (and the Gardner Denver Supplemental Excess Defined Contribution Plan)
and/or the Gardner Denver, Inc. Savings Plan (the "Savings Plans"), is
entitled to direct the voting. Such representation and voting shall be
according to the number of votes which the undersigned would possess if
personally present, for the purposes of considering and taking action upon
the matters set forth below, as more fully described in the Notice and Proxy
Statement.
Should any other matter requiring a vote of the stockholders arise, the
proxies named above are authorized to vote in accordance with their
discretion. The Board of Directors is not aware of any matter which is to be
presented for action at the meeting, other than as set forth on this card.
THIS PROXY/VOTING INSTRUCTION CARD, WHEN PROPERLY EXECUTED, WILL BE VOTED
AND DEEMED AN INSTRUCTION TO UMB BANK TO VOTE IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED. IF NO INSTRUCTION IS MADE, THIS PROXY/VOTING INSTRUCTION
CARD WILL BE VOTED, IN THE SAME PROPORTION (FOR OR AGAINST) AS THE SHARES
FOR WHICH INSTRUCTIONS ARE RECEIVED.
Shares of Common Stock held in the Savings Plans will be voted by UMB Bank
as trustee of the Savings Plans. Participants in the Savings Plans should
indicate their voting instructions for each action to be taken under proxy.
All voting instructions from Savings Plans participants will be kept
confidential.
PLEASE SIGN AND DATE ON THE REVERSE SIDE AND MAIL PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE OR OTHERWISE TO P.O. BOX 8615, EDISON, NEW JERSEY
08818-9123.
SEE REVERSE
SIDE
DETACH PROXY CARD
STOCKHOLDER INFORMATION
CORPORATE OFFICES TRANSFER AGENT AND REGISTRAR
Gardner Denver, Inc. EquiServe
1800 Gardner Expressway P.O. Box 2500
Quincy, Illinois 62305-9364 Jersey City, New Jersey 07303-2500
(217) 222-5400 (800) 519-3111
E-mail address: mktg@gardnerdenver.com (201) 324-1225
(201) 222-4955 (for the hearing impaired)
E-mail address: equiserve@equiserve.com
INTERNET ACCESS
For Internet access to information on your
Gardner Denver investment, contact our
transfer agent at (877) 843-9327 for a
personal identification number and visit
their website at http://www.equiserve.com
NEWS RELEASES BY FAX
News releases, including the quarterly earnings release, are available by
fax, without charge, by calling (800) 758-5804, extension 303875, or by
visiting our website at http://www.gardnerdenver.com.
/ X / PLEASE MARK
YOUR VOTE AS IN
THIS EXAMPLE.
THIS PROXY WILL BE VOTED AS DIRECTED, OR, IF NO DIRECTION IS INDICATED, WILL
BE VOTED "FOR" ALL NOMINEES IN PROPOSAL 1 AND "FOR" PROPOSAL 2.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" ALL NOMINEES AND "FOR" PROPOSAL 2.
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For Withheld For Against Abstain
1. Election of Two Directors are to be elected at the meeting. 2. Approval of Amendment to
Directors. The nominees of the Board of Directors are: Long-Term Incentive Plan.
/ / / / 01. Donald G. Barger, Jr.
02. Raymond R. Hipp / / / / / /
To withhold your vote for any nominee(s), write the name(s) here:
----------------------------------------------------
I plan to attend the annual meeting. / /
Please sign exactly as name(s) appear on
this proxy/voting instruction card. When
shares are held by joint tenants, both
should sign. When signing as attorney-in-
fact, executor, administrator, personal
representative, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by President or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
Signature(s) of Stockholder(s) Date
FOLD AND DETACH HERE
[LOGO] GARDNER DENVER, INC.
ANNUAL MEETING OF STOCKHOLDERS
MAY 7, 2002, 1:30 P.M.
HOLIDAY INN QUINCY
201 SOUTH THIRD STREET
QUINCY, ILLINOIS 62301
VOTE BY TELEPHONE, INTERNET OR MAIL
QUICK - EASY - RELIABLE
GARDNER DENVER ENCOURAGES YOU TO TAKE ADVANTAGE
OF THREE CONVENIENT ALTERNATIVES TO VOTE YOUR SHARES.
1. VOTE BY PHONE: ON A TOUCH-TONE TELEPHONE DIAL 1-877-PRX-VOTE
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(1-877-779-8683) FROM THE U.S. AND CANADA. You will be asked to enter
the VOTER CONTROL NUMBER located in the box just below the perforation
on this proxy card. This series of numbers is necessary to access both
the telephone and Internet voting system.
2. VOTE BY INTERNET: POINT YOUR BROWSER TO THE WEB ADDRESS:
----------------
http://www.eproxyvote.com/gdi. You will be asked to enter the VOTER
CONTROL NUMBER located in the box just below the perforation on this
proxy card. Then follow the instructions.
3. VOTE BY MAIL: MARK, SIGN AND DATE YOUR PROXY CARD AND RETURN IT IN THE
------------
POSTAGE-PAID ENVELOPE. If you are voting by telephone or the Internet,
you do not need to return your proxy card.
You may vote by telephone or through the Internet 24 hours a day, 7 days a
week, by following the directions described above. Telephone or Internet
votes must be received by 12:00 midnight Eastern time on May 6, 2002 for all
shares of Common Stock, except shares held in the Gardner Denver, Inc.
Retirement Savings Plan (and the Gardner Denver Supplemental Excess Defined
Contribution Plan) and/or the Gardner Denver, Inc. Savings Plan (the
"Savings Plans").
Shares of Common Stock held in the Savings Plans will be voted by UMB Bank,
N.A. ("UMB Bank"), as trustee of the Savings Plans. Voting instructions to
UMB Bank regarding your Savings Plans shares must be received by 12:00
midnight Eastern time on May 3, 2002. Such voting instructions can be made
in the same manner as other shares of Common Stock are voted by proxy (i.e.,
by returning the proxy card by mail or voting by telephone or through the
Internet as described above). After May 3, 2002, all Savings Plans shares
for which voting instructions have not been received will be voted by UMB
Bank in the same proportion (for or against) as the shares for which
instructions are received.
YOUR VOTE BY TELEPHONE OR THROUGH THE INTERNET AUTHORIZES UMB BANK AND THE
PROXIES NAMED ON THE ABOVE PROXY CARD TO VOTE YOUR SHARES IN THE SAME MANNER
AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD. THEREFORE, IF YOU
VOTE BY TELEPHONE OR INTERNET, THERE IS NO NEED TO RETURN YOUR PROXY CARD.
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THIS IS YOUR PROXY. YOUR VOTE IS IMPORTANT. IT IS IMPORTANT THAT YOUR SHARES
ARE REPRESENTED AT THIS MEETING, WHETHER OR NOT YOU ATTEND THE MEETING IN
PERSON. TO MAKE SURE YOUR SHARES ARE REPRESENTED, WE URGE YOU TO COMPLETE
AND MAIL YOUR PROXY CARD, VOTE TELEPHONICALLY OR VIA THE INTERNET BY
FOLLOWING THE INSTRUCTIONS ABOVE. THANK YOU FOR VOTING.
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APPENDIX
Page 15 of the printed proxy contains a Stock Performance
Graph. The information contained in the graph is restated in
the table immediately following.