<PAGE> 1
CRSS INC.
1177 WEST LOOP SOUTH, SUITE 800
HOUSTON, TEXAS 77027
-------------
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1
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INTRODUCTION
This Information Statement is being mailed on or about June 9, 1995 to
the holders of record of shares of Common Stock, $1.00 par value (the "Shares"),
of CRSS Inc., a Delaware corporation (the "Company"). You are receiving this
Information Statement in connection with the possible election of persons
designated by the Purchaser (as defined below) to a majority of the seats on the
Board of Directors of the Company. You are not, however, required to take any
action.
As of May 16, 1995, the Company, ATC Acquisition Corp., a Delaware
corporation (the "Parent"), and American Tractebel Corporation, a Delaware
corporation (the "Purchaser"), entered into an Agreement of Merger (the "Merger
Agreement"), which provides, among other things, that (i) Parent will cause the
Purchaser to commence a tender offer (the "Offer") for all outstanding Shares,
at a price of $14.50 per Share, net to the seller in cash, and (ii) Purchaser
will be merged with and into the Company (the "Merger") as soon as practicable
after the expiration of the Offer and fulfillment or waiver of all remaining
conditions and the Company will continue as the surviving corporation. As a
result of the Offer and the Merger, the Company will become a wholly owned
subsidiary of Parent.
The Merger Agreement requires the Company to take such action as
Purchaser may reasonably request to cause Purchaser's designees to be elected to
the Board of Directors under the circumstances described therein. See "Board of
Directors and Executive Officers -- Right to Designate Directors; Purchaser
Designees."
You are urged to read this Information Statement carefully. You are
not, however, required to take any action. Capitalized terms used herein and not
otherwise defined herein shall have the meaning set forth in the Schedule 14D-9.
Pursuant to the Merger Agreement, Purchaser commenced the Offer on May
16, 1995. The Offer is scheduled to expire at 5:00 p.m., New York, New York
time, on June 16, 1995, unless the Offer is extended.
The information contained in this Information Statement concerning
Purchaser and Parent has been furnished to the Company by Purchaser and Parent,
and the Company assumes no responsibility for the accuracy or completeness of
such information.
VOTING SECURITIES
The Shares are the only class of voting securities outstanding of the
Company. As of June 6, 1995, the Company had 12,971,047 Shares outstanding.
Holders of Common Stock are entitled to one vote per share.
<PAGE> 2
BOARD OF DIRECTORS
The Board of Directors currently consists of seven (7) members. At
each annual meeting of stockholders, each director is elected to hold office for
a one year term, until the next annual meeting of stockholders.
RIGHT TO DESIGNATE DIRECTORS: PURCHASER DESIGNEES
The Merger Agreement provides that promptly upon the purchase by
Purchaser of at least a majority of the outstanding Shares, Purchaser and Parent
shall be entitled subject to compliance with applicable law to designate such
number of directors on the Board of Directors (the "Board") of the Company,
rounded up to the next whole number (the "Purchaser Designees") such that Parent
will have representation on the Board equal to the percentage that the number of
Shares held by Parent and any of its direct or indirect wholly owned
Subsidiaries (including Purchaser) purchased bears to the total number of Shares
outstanding.
Purchaser has informed the Company that it will choose the Purchaser
Designees listed below. No determination has yet been made as to which of the
current directors of the Company will continue as directors following the
purchase of Shares pursuant to the Offer. However, it is anticipated that four
current directors will resign their positions on the Board immediately prior to
the election of the four Purchaser Designees.
The Company has been advised by Purchaser that, to the best of
Purchaser's knowledge, none of the Purchaser Designees has been involved in any
transactions with the Company or any of its directors, executive officers or
affiliates which are required to be disclosed pursuant to the rules and
regulations of the Commission, except as may be disclosed herein or in the
Schedule 14D-9.
It is expected that the Purchaser Designees may assume office at any
time following the acceptance for payment of, and payment for, any Shares
pursuant to the Offer, and that, upon assuming office, the Purchaser Designees
will thereafter constitute at least a majority of the Board of Directors.
THE PURCHASER'S DESIGNEES
The following table sets forth the name and age of each Purchaser
Designee, his principal occupation or employment at the present time and during
the past five years. None of the Purchaser Designees holds any position or
office with the Company. Unless otherwise indicated, each person listed below
has been employed at his present principal occupation for the past five years or
prior thereto. There are no family relationships among directors, Purchaser
Designees or executive officers of the Company.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR EMPLOYMENT AND
NAME EMPLOYMENT HISTORY AGE
- ------------------------ -------------------------------------------------- ---
<S> <C> <C>
Daniel Deroux Mr. Deroux is the Chairman of the Board of ATC 58
Acquisition Corp. and has been the Managing
Director & Chief Executive Officer of American
Tractebel Corporation since 1993. Mr. Deroux is
also a director of Powerfin S.A., as well as a
member of the General Management Committee of
Tractebel S.A. Mr. Deroux is also Chief Executive
Officer of Electricity and Gas International, a
division of Tractebel S.A. Mr. Deroux joined the
Tractebel Group in 1963.
Pierre Michel Mr. Michel is the Executive Vice President of 57
Electricity and Gas International Tractebel S.A.
Mr. Michel joined the Tractebel Group in 1988.
</TABLE>
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<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR EMPLOYMENT AND
NAME EMPLOYMENT HISTORY AGE
- ------------------------ -------------------------------------------------- ---
<S> <C> <C>
Manfred Loeb Mr. Loeb has been Chairman of the Board of 68
American Tractebel Corporation since 1988. Mr.
Loeb is also Vice Chairman of Powerfin S.A., as
well as a director of Tractebel S.A. and a member
of its General Management Committee. Mr. Loeb
joined the Tractebel Group in 1952.
Philippe van Marcke Mr. van Marcke is the President and a director of 51
ATC Acquisition Corp. Mr. van Marcke is also a
director and has been the President of American
Tractebel Corporation since 1993. Mr. van Marcke
joined the Tractebel Group in 1984.
</TABLE>
The business address of Messrs. Deroux, Loeb and Michel is Place du
Trone 1, B-1000 Brussels, Belgium, and each is a citizen of Belgium. The
business address of Mr. Philippe van Marcke is 12 East 49th Street, #1704, New
York, NY 10017, and he is a citizen of the United States of America. The
Purchaser has advised the Company that each of the persons listed in the table
above has consented to act as a director.
BOARD OF DIRECTORS OF THE COMPANY
The following table sets forth the name and age of each director of
the Company, his principal occupation or employment at the present time and
during the past five years, his positions and offices with the Company, the year
he became a director of the Company and certain other directorships held by such
person. Unless otherwise indicated, each person listed below has been employed
at his present principal occupation for the past five years or prior thereto.
Each individual listed below is a citizen of the United States of America. There
are no family relationships among directors, Purchaser Designees or executive
officers of the Company.
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION OR EMPLOYMENT, DIRECTOR
EMPLOYMENT HISTORY AND OTHER DIRECTORSHIPS AGE SINCE
------------------------------------------ --- --------
<S> <C> <C>
BRUCE W. WILKINSON, Chairman of the Board of the Company since 1989; President of the 50 1981
Company from 1992 to 1994; Chairman of the Nominating Committee of the Company since
1994; Chief Executive Officer since 1982; President of the Company from 1982 until
1989; Senior Vice President/Finance and Treasurer of the Company from 1981 to 1982;
Vice President/Finance upon joining the Company in 1978. Member, Board of Directors,
of Triten Corporation since 1990.
THOMAS A. BULLOCK, Chairman of the Executive Committee of the Company since 1989; 71 1971
Chairman of the Nominating Committee of the Company from 1989 to 1994; Chairman of
the Board of the Company from 1971 until 1989; Company Founder; Officer of the
Company or its predecessors from 1950 until November 1, 1987; and Adjunct Professor
at Texas A&M University since December 1991.
C. HERBERT PASEUR, Chairman of the Executive Committee from 1981 until 1989; 68 1971
Consultant to the Company; Private Investor; Company Founder; Officer of the Company
or its predecessors from 1961 until 1971; President and Chief Executive Officer of
the Company from 1971 to 1981.
MIKE A. MYERS, Chairman of the Audit Committee of the Company since 1982; Chairman of 58 1983
Myers Development Corporation (a real estate development company) since its formation
in 1972; Chairman of Myers Bancshares, Inc. since 1981.
</TABLE>
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<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION OR EMPLOYMENT, DIRECTOR
EMPLOYMENT HISTORY AND OTHER DIRECTORSHIPS AGE SINCE
------------------------------------------ --- --------
<S> <C> <C>
JOHN M. SEIDL, Chairman of the Compensation Committee of the Company since August 55 1988
1993; Member of the Board of Directors, President and CEO of Cellnet Data Systems,
Inc. (a wireless communications company) since 1994; Former Chairman of the Board and
Chief Executive Officer of Kaiser Aluminum Corporation (a fully integrated
international aluminum company listed on the New York Stock Exchange) from January
1989 to January 1993; President of MAXXAM Inc. (a natural resources company listed on
the American Stock Exchange) from September 1990 to January 1993; President, Chief
Operating Officer and Director of Enron Corp. (a publicly-held integrated oil and gas
production and transmission company) from May 1986 until January 1989; Executive Vice
President of Enron Corp. from 1985 to 1986; Member of the Board of Directors of J. B.
Poindexter & Co. since 1994; Member of the Board of Directors of St. Mary Land and
Exploration Company since 1994.
BEN R. STUART, President and Chief Executive Officer of Dresser-Rand Company (a 60 1993
manufacturer of compressors, turbines and electric motors) since March 1992. Since
1988, Senior Vice President--Operations of Dresser Industries, Inc. (a manufacturer
of drilling, mining and energy processing equipment). Mr. Stuart joined Dresser
Industries in 1957 and has held several positions, including the President's position
of four (4) different operating divisions.
LARRY E. TEMPLE, Attorney in private practice since 1986; Member of the Board of 59 1994
Directors of Temple-Inland, Inc. (a publicly held forest products company); Member of
the Board of Directors of Guaranty Federal Bank, F.S.B; served as Chairman of the
Texas Select Committee on Higher Education; member of the Texas Guaranteed Student
Loan Corporation. Mr. Temple also serves on several boards of the University of
Texas, and as a member of the Board of the Lyndon B. Johnson Foundation. Mr. Temple
formerly served as Special Counsel to President Lyndon B. Johnson from 1967 to 1969,
and as an Executive Assistant to Texas Governor John Connally from 1963 to 1967.
</TABLE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held six (6) meetings during the fiscal year
ended June 30, 1994. The Board has appointed and there now exist the following
standing Board Committees: Executive, Audit, Compensation and Nominating.
Messrs. Bullock (Chairman), Wilkinson, Paseur and Seidl comprise the
Executive Committee. The Executive Committee held eight (8) meetings in fiscal
year 1994. The function of the Executive Committee is to exercise the authority
of the Board of Directors in the management of the business of the Company
between regular meetings of the Board.
The Audit Committee is comprised of Messrs. Myers (Chairman), Denman
and Stuart. The Audit Committee's principal responsibilities are to review the
scope and results of audits by the Company's independent auditors, the scope of
other services performed by the independent auditors and the cost of such
services. Additionally, the Audit Committee reviews reports prepared by the
internal audit department relating to specific audit programs and internal
accounting controls. The Audit Committee recommends to the Board, for its
appointment, independent certified public accountants to audit the Company's
books, records and accounts. During fiscal year 1994, the Audit Committee held
four (4) meetings.
The Compensation Committee is comprised of Messrs. Seidl (Chairman),
Bullock and Stuart. The Compensation Committee has as its function the review
and approval of compensation for senior management of
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the Company and the approval of various incentive plans developed by Management.
This Committee held four (4) meetings during fiscal year 1994.
The Nominating Committee is comprised of Messrs. Wilkinson (Chairman),
Bullock, Denman and Seidl. The Nominating Committee's principal function is to
select and propose individuals for nomination to the Company's Board of
Directors. This Committee held one (1) meeting during fiscal year 1994.
DIRECTOR COMPENSATION
All directors who are not employees of the Company were paid
directors' fees at an annual rate of $18,000 (in quarterly payments), plus
$1,000 for each Board meeting and $750 for each Committee meeting attended in
fiscal year 1994.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the Shares
(including Shares issuable upon the exercise of vested stock options) owned of
record and beneficially as of June 6, 1995, unless otherwise specified, by 1)
all persons who own of record or are known by the Company to own beneficially
more than five percent (5%) of the outstanding Shares, 2) each director, nominee
as director and named executive officer, and 3) all directors and executive
officers of the Company as a group. Except as otherwise indicated, the holder of
Shares has sole voting and investment power with respect to its Shares.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP OF THE COMPANY
-------------------------------------
NAMES AND ADDRESSES NO. OF PERCENT
OF BENEFICIAL OWNERS SHARES(1) OF CLASS
-------------------- ---------- --------
<S> <C> <C>
Alpine Capital, L.P. . . . . . . . . . . . . . . . . . 1,241,500 9.6%
201 Main Street
Fort Worth, TX 76102
State of Wisconsin Investment Board . . . . . . . . . . 1,123,500 8.67%
P.O. Box 7842
Madison, WI 53707
Brinson Partners, Inc. . . . . . . . . . . . . . . . . 978,282 7.54%
209 South LaSalle Street
Chicago, IL 60604
Capital Research and Management Company . . . . . . . . 720,000 5.55%
333 South Hope Street
Los Angeles, CA 90071
Bruce W. Wilkinson, Chairman of the Board, . . . . . . 377,772 2.84%
President and Chief Executive Officer
Thomas A. Bullock, Director . . . . . . . . . . . . . . 43,130 *
C. Herbert Paseur, Director . . . . . . . . . . . . . . 82,288 *
Mike A. Myers, Director . . . . . . . . . . . . . . . . 5,000 *
John M. Seidl, Director . . . . . . . . . . . . . . . . 1,500 *
Ben R. Stuart, Director . . . . . . . . . . . . . . . . 1,000 *
Larry E. Temple, Director . . . . . . . . . . . . . . . 5,000 *
</TABLE>
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<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP OF THE COMPANY
-------------------------------------
NAMES AND ADDRESSES NO. OF PERCENT
OF BENEFICIAL OWNERS SHARES(1) OF CLASS
-------------------- ---------- --------
<S> <C> <C>
James T. Stewart, President and Chief . . . . . . . . . 90,036 *
Executive Officer of CRSS Capital, Inc.
William P. Utt, Executive Vice President . . . . . . . 44,483 *
of CRSS Capital, Inc.
William J. Gardiner, Senior Vice President, . . . . . . 52,850 *
Chief Financial Officer and Treasurer
Timothy R. Dunne, Vice President, General . . . . . . . 22,704 *
Counsel and Corporate Secretary
All Directors and Executive Officers . . . . . . . . . 725,763 5.38%
(11 persons) as a Group (2) (3)
</TABLE>
- --------------------------------
* Owns less than 1.00% of outstanding shares.
(1) The above information as to the number of shares beneficially
owned as of June 6, 1995, has been furnished by the respective
directors and executive officers. It includes shares and/or options
held directly or in the names of spouses, children or trusts, as to
which beneficial ownership is disclaimed. Under the regulations of the
Securities and Exchange Commission, shares listed include those which
the individuals have the right to acquire through the exercise of
stock options within 60 days following June 6, 1995 (excluding the
254,400 shares which the individuals have the right to acquire through
the exercise of stock options within 60 days following June 6, 1995,
which stock options will vest upon the change of control resulting
from the consummation of the Offer and which would otherwise not be
exercisable).
(2) At June 6, 1995, Mr. Wilkinson have the right to acquire 323,964
shares and all other directors and executive officers of the Company
have the right to acquire 192,823 shares through the exercise of stock
options within 60 days following June 6, 1995 (excluding the 90,000
and 164,000 shares, respectively, which Mr. Wilkinson and all other
directors and executive officers of the Company have the right to
acquire through the exercise of stock options within 60 days following
June 6, 1995, which stock options will vest upon the change of control
resulting from the consummation of the Offer and which would otherwise
not be exercisable).
(3) Messrs. Stewart, Gardiner, Utt and Dunne had the right to acquire
upon exercise of stock options within 60 days following June 6, 1995,
85,436, 49,600, 35,083 and 22,704 shares, respectively, (excluding the
69,000, 45,000, 32,000 and 18,400 shares, respectively, which each
Messrs. Stewart, Gardiner, Utt and Dunne have the right to acquire
through the exercise of stock options within 60 days following June 6,
1995, which stock options will vest upon the change of control
resulting from the consummation of the Offer and which would otherwise
not be exercisable).
COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT
The Exchange Act requires the Company's executive officers and
directors, and any persons owning more than 10% of the Shares, to file certain
reports of ownership and changes in ownership with the Commission. Based solely
on its review of the copies of the Forms 3, 4 and 5 received by it, and written
representations from certain reporting persons that no Form 5 was required to be
filed by any such persons, the Company believes that during
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<PAGE> 7
the fiscal year ended June 30, 1994, its executive officers, directors and
beneficial owners of more than 10% of shares have complied with all Section 16
filing requirements.
1994 CHANGE OF CONTROL OF THE COMPANY
There has been no change of control of the Company since the beginning
of its last fiscal year.
EXECUTIVE OFFICERS
Other than as set forth below under the heading "SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT--Employment Agreements, Termination of
Employment and Change-in-Control Provisions", the executive officers of the
Company serve at the pleasure of the Board of Directors. Each officer will hold
office for a term of one year, or until his successor shall be elected and
qualified.
The following table sets forth the name and age of each executive
officer of the Company, other than Mr. Wilkinson, his or her business experience
during the past five years, his or her positions and offices with the Company
held by such persons. For such information with respect to Mr. Wilkinson, see
"BOARD OF DIRECTORS-Board of Directors of the Company" above. Unless otherwise
indicated, each person listed below has been employed at his or her present
principal occupation for the past five years or prior thereto. There are no
family relationships among any of the directors, Purchaser Designees and
executive officers of the Company.
<TABLE>
<CAPTION>
NAME AND OCCUPATION AGE POSITION AND OFFICES
--------------------------------------------------- --- ---------------------------
<S> <C> <C>
James T. Stewart, President since 1994. Mr. 46 President
Stewart joined CRSS Inc. in 1983 as Senior Vice
President, Manager of the Power Division. In 1988,
Mr. Stewart was appointed President and Chief
Executive Officer of CRSS Capital, Inc. He became
President of CRSS Inc. effective August 25, 1994.
William J. Gardiner, Senior Vice President/Chief 41 Senior Vice President/Chief
Financial Officer/Treasurer since 1992. Mr Gardiner Financial Officer/Treasurer
joined CRSS Inc. in 1976. In 1982, Mr. Gardiner
was named Assistant Corporate Controller for CRSS
and was promoted to Vice President/Controller--
Architecture Group in 1985. In 1990, Mr. Gardiner
was appointed Senior Vice President/Chief Financial
Officer of CRSS Capital Inc.
William P. Utt, Executive Vice President, CRSS 38 Executive Vice President CRSS
Capital, Inc. since 1991. Mr. Utt joined CRSS Inc. Capital, Inc.
in 1984 as the Assistant to the President of CRS
Sirrine Engineering Group. He was named Vice
President, Business Development of CRSS Capital,
Inc. in 1988 and was promoted to Senior Vice
President Marketing and Business Development in
1990. He was appointed Executive Vice President in
1991.
</TABLE>
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<TABLE>
<CAPTION>
NAME AND OCCUPATION AGE POSITION AND OFFICES
--------------------------------------------------- --- ---------------------------
<S> <C> <C>
Mary V. Gilbert, Vice President/Controller since 33 Vice President/Controller
1994. Ms. Gilbert joined CRSS Capital, Inc. in 1989
as Assistant Controller. She was appointed Vice
President/Controller of CRSS Capital, Inc. in 1992
and became Controller of CRSS Inc. in April 1994.
Ms. Gilbert was elected Vice President effective
August 25, 1994.
Timothy R. Dunne, Vice President/General 43 Vice President/General
Counsel/Secretary since 1994. Mr. Dunne joined Counsel/Secretary
CRSS Capital, Inc. in 1990 as Assistant General
Counsel, and was promoted to General Counsel of
CRSS Capital, Inc. in 1992 and was appointed Vice
President/ General Counsel/Secretary effective
August 25, 1994.
</TABLE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER INFORMATION
The following table shows, for the fiscal years ended June 30, 1994,
1993, and 1992, the cash compensation paid by the Company, as well as certain
other compensation awarded, paid or accrued for those years, to each of the
Chief Executive Officer and the four other most highly paid executive officers
of the Company who were serving as such as of the end of fiscal year 1994 and
who received compensation from the Company. In the event an individual did not
serve as an executive officer of the Company for the entire three (3) year
period, information is only provided for the year(s) in which the individual
served as an executive officer of the Company.
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<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
--------------------------
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
----------------------------------------- ----------------------------------
SECURITIES
RESTRICTED UNDERLYING ALL OTHER
NAME AND PRINCIPAL FISCAL OTHER ANNUAL STOCK SARS/ LTIP COMPENSA-
POSITION YEAR SALARY($) BONUS($) COMPENSATION($) AWARDS($)(D) OPTIONS(#) PAYOUTS TION($)(E)
- ------------------------------ ------ --------- --------- --------------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bruce W. Wilkinson . . . . . 1994 325,000 175,000 -- -- 10,000 --- 4,559
Chairman, President and 1993 300,000 150,000 -- -- -- --- 4,498
Chief Executive Officer(g) 1992 300,000 1,986 -- 134,875 50,000 --- 4,364
James T. Stewart . . . . . . 1994 195,000 124,800 -- -- 41,636 749,600(e) 4,559
President(g)
William J. Gardiner . . . . . 1994 150,000 75,000 -- -- 27,100 398,380(f) 4,500
Senior Vice President, 1993 140,000 101,000(e) -- -- 22,500 -- 3,790
Chief Financial Officer and
Treasurer(b)
Craig L. Martin . . . . . . . 1994 172,500 86,250 -- -- 6,139 121,972(f) 4,559
Senior Vice 1993 172,500 86,250 -- -- -- -- 3,733
President/Operations(a) 1992 143,500 65,590 -- 103,750 70,000 40,076 4,356
Frank A. Perrone . . . . . . 1994 115,000 32,200 -- -- -- -- 4,559
Vice President, General 1993 115,000 25,000 -- -- -- -- 3,450
Counsel and Corporate
Secretary (a) 1992 109,500 24,145 -- 15,563 5,000 -- 3,328
</TABLE>
- ---------------------
(a) Messrs. Martin and Perrone resigned from their positions shown
above on July 29, 1994.
(b) Mr. Gardiner became an executive officer of the Company on August
25, 1992. The amounts disclosed represent all of Mr. Gardiner's compensation
paid by the Company during fiscal year 1993.
(c) Includes a $45,000 project bonus for Mr. Gardiner related to
completion of project development activities and term financing for the
Appomattox Cogeneration facility in October 1992.
(d) Twenty percent (20%) of the restricted stock award vests on the
date of award (January 29, 1992) and twenty percent (20%) vests each year
thereafter. Dividends are paid on restricted stock awards. The aggregate values
of the restricted stock holdings at June 30, 1994 for Messrs. Wilkinson, Stewart
and Gardiner are $55,900, $0 and $0, respectively.
(e) In August, 1993, the Performance Grant Units issued pursuant to
the Company's 1990 Long Term Incentive Compensation Plan and related to the
performance of CRSS Capital, Inc. were redeemed. In conjunction with this
redemption, $333,139 and $176,993 was paid to Messrs. Stewart and Gardiner,
respectively. The remaining $416,461 and $221,387 due to Messrs. Stewart and
Gardiner, respectively, were paid by November, 1994.
(f) Other compensation amounts represent the Company match
contribution to the Company's 401(k) Savings and Investment Plan.
(g) Mr. Wilkinson resigned as President of the Company on August 25,
1994. On that same date, Mr. Stewart was named to that position.
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STOCK OPTIONS
The following table sets forth information concerning the grant of
stock options made during fiscal year 1994 under the Company's Long-Term
Incentive Compensation Program to the named executive officers of the Company.
The Company did not grant any SARs during fiscal year 1994.
<TABLE>
<CAPTION>
SAR/OPTION GRANTS IN FISCAL YEAR 1994
-------------------------------------
SECURITIES % OF TOTAL
UNDERLYING SARS/OPTIONS
SARS/ GRANTED TO EXERCISE OR GRANT DATE
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED(1)(#) FISCAL YEAR ($/SHARE) DATE VALUE
--------------------------- ------------- ------------ ----------- --------- ----------
<S> <C> <C> <C> <C> <C>
Bruce W. Wilkinson . . . . 10,000(a) 4 9.00 7/29/04 45,700(b)
James T. Stewart . . . . . 41,636(a) 18 9.00 7/29/04 190,277(b)
William J. Gardiner . . . . 27,100(a) 11 9.00 7/29/04 123,847(b)
Craig L. Martin . . . . . . 6,139(a) 3 9.00 7/29/04 28,055(b)
Frank A. Perrone . . . . . -- -- -- -- --
</TABLE>
- ---------------------------------
(a) All share options were granted July 29, 1993 and vest one year
from date of grant, or July 29, 1994, and expire ten years from vesting date.
(b) Grant date present value is based upon the Black-Scholes option
pricing model. The Black-Scholes option value was based upon the following
assumptions: (i) a dividend yield of 1.23%, (ii) a volatility factor of 0.3986,
(iii) a 6.10% risk free rate of return, (iv) options exercised 10 years from
vesting date, and (v) a discount rate of 3% per year during the 1-year vesting
period to reflect the risk of forfeiture on unvested stock options. These
assumptions were based upon 3 years of historical monthly trading data and
typical executive turnover rates in the market.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the named
executive officers, concerning the exercise of options during the fiscal year
1994 and unexercised options held as of June, 1994.
<TABLE>
<CAPTION>
AGGREGATED SAR/OPTION EXERCISES IN FISCAL YEAR 1994
AND SAR/OPTION VALUES AT END OF FISCAL YEAR 1994
---------------------------------------------------
VALUE OF
NO. OF SECURITIES UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SARS/OPTIONS AT SARS/OPTIONS
SHARES FY ($) AT FY ($)
ACQUIRED ON VALUE (EXERCISABLE/ (EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE) UNEXERCISABLE)
- ----------------------------------- ------------ ----------- ---------------------- --------------
<S> <C> <C> <C> <C>
Bruce W. Wilkinson . . . . . . . . 30,000 172,500 286,964/30,000 398,200/21,500
James T. Stewart . . . . . . . . . -- -- 23,800/55,636 20,800/104,063
William J. Gardiner . . . . . . . . -- -- 9,000/40,600 23,400/58,725
Craig L. Martin . . . . . . . . . . -- -- 60,000/34,139 164,025/65,343
Frank A. Perrone . . . . . . . . . -- -- 56,000/2,000 14,288/400
</TABLE>
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COMPENSATION COMMITTEE REPORT
The Company's policy concerning executive officer compensation is
based on the necessity of retaining officers displaying the following
attributes: (i) versatility in responding to the changing conditions of several
distinct markets, of which all but CRSS Capital's market are highly cyclical;
(ii) ability, experience and background to maintain a high level of credibility
with CRSS Services' and CRSS Capital's clients; and (iii) commitment and
discipline to perform a variety of executive functions due to the relatively
small number of Company executive officers.
The Company's operating and financial performance is the major
executive officer compensation criterion. In order to achieve an executive
officer compensation program that is performance based, overall executive
officer compensation is made up of three (3) major components: base salary,
annual bonus and long-term incentive compensation, with the latter two (2)
components tied, directly or indirectly, to the Company's operating and
financial performance. It is the Compensation Committee's intention to establish
executive officer base salaries at levels which are generally competitive (i.e.
at or near the median level of those of comparable companies). Although the
Company's chief executive officer and other executive officers base salaries are
believed to be competitive, the Compensation Committee believes the fiscal year
1994 base salaries fall somewhat below the median salaries for chief executive
officers and other executive officers of comparably sized companies in the
general industry, engineering and construction, and independent power
categories.
The second major component of executive officer compensation consists
of an annual bonus from the Senior Management Incentive Award Plan. The annual
Senior Management Incentive Award Plan bonus for each individual executive
officer is calculated as the product of the individual officer's target bonus
amount multiplied by the ratio of the Company's, or CRSS Capital, Inc.'s in the
case of Mr. Stewart, actual performance for the year end as compared to the
Operating and Financial Plan ("Plan") for the same fiscal year. The Compensation
Committee establishes the target bonuses at the beginning of each fiscal year.
The fiscal year 1994 bonus targets were 50%, 50%, 50%, 40% and 35% of base
salary for Messrs. Wilkinson, Stewart, Martin, Gardiner and Perrone,
respectively, and are redetermined each year by the Compensation Committee based
on the individual's ability to impact the financial results for the Company. The
Board of Directors approves the Company's Plan at the beginning of each fiscal
year. The actual bonus varies linearly with actual Company performance between
50% and 150% of Plan. For Company performance below 75% of Plan, bonus payments
are only made at the discretion of the Compensation Committee. For Company
performance below 50% of Plan, no bonus is paid. The annual bonus is capped at
the amount established when Company performance is 150% of the Plan.
Each year, the Compensation Committee also authorizes the Chief
Executive Officer to distribute certain amounts from the Leaders' Incentive
Compensation Plan. Bonuses from this plan reward employees for unusual effort
benefiting the Company when circumstances are such that normal compensation is
inadequate in the opinion of the Chief Executive Officer. All Company employees
are eligible for this Plan. No Leaders' Incentive Compensation Plan bonuses were
paid in fiscal year 1994 to executive officers.
Based on fiscal year 1994 results, the five most highly compensated
executive officers' overall cash compensation (base salary plus bonus) for
fiscal year 1994 was believed to be somewhat below the median amounts for
comparably sized general industry, engineering and construction, and independent
power companies.
The third major component of executive officer compensation consists
of long term incentive awards, which may include restricted stock, stock
options, and performance awards issued pursuant to the Company's 1990 Long Term
Incentive Compensation Plan. Awards, which generally vest over 4-5 years, are
issued at the discretion of the Compensation Committee and are typically issued
to executive officers at a frequency of every 2-4 years. Due to recent Company
stock prices, the annualized present value of executive officer long term
incentive compensation calculated pursuant to the Black Scholes Option Pricing
Model is also believed to be somewhat below the median amounts for comparably
sized general industry, engineering and construction, and independent power
companies.
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We believe the Company and its shareholders received significant value
for the services of its executive officers in fiscal year 1994. We also believe
that executive officer compensation for fiscal year 1994 was reasonable and in
accordance with the overall objective of retaining highly skilled and motivated
executive officers at reasonable compensation levels which reflect both the
individual's contribution to the Company's performance and actual Company
performance itself.
In July 1994, the Company sold substantially all of CRSS Services,
Inc., its design, engineering and construction management subsidiaries, leaving
the independent power subsidiary, CRSS Capital, Inc., as the sole operating unit
of the Company. Consistent with the Company's decision to focus exclusively on
the independent power industry in the future, the Company's compensation policy
focus will shift to that of a company operating solely in that industry.
Respectfully submitted by the Compensation Committee:
John M. Seidl, Chairman
Thomas A. Bullock
Ben R. Stuart
September 1, 1994
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Seidl, Bullock and Stuart are the only persons who have served
on the Compensation Committee of the Board of Directors at any time during the
1994 fiscal year. No member of the Compensation Committee was, during the 1994
fiscal year, an officer or employee of the Company or any of its subsidiaries,
or was formerly an officer of the Company or any of its subsidiaries, except
that Mr. Bullock served as an officer of the Company and its predecessors as set
forth under "Board of Directors -- Board of Directors of the Company", or had
any relationships with the Company requiring disclosure by the Company under
Item 404 of Regulation S-K.
During the Company's 1994 fiscal year, no executive officer of the
Company served as (i) a member of the Compensation Committee (or other board
committee performing equivalent functions or, in the absence of any such
committee, the entire board of directors) of another entity, one of whose
executive officers served on the Company's Compensation Committee, (ii) a
director of another entity, one of whose executive officers served on the
Company's Compensation Committee, or (iii) a member of the Compensation
Committee (or other board committee performing equivalent functions or, in the
absence of any such committee, the entire board of directors) of another entity,
one of whose executive officers served as a director of the Company.
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Mr. Bruce W. Wilkinson is a party to an employment agreement as
amended on July 27, 1989, with the Company for a term ending June 30, 1995,
which term is automatically extended an additional year on June 30 of each year
if the Company or the executive has not otherwise notified the other.
Under the terms of the above employment agreement, if the Company
terminates the executive's employment other than for cause, or the executive
terminates his employment for good reason (as hereinafter defined), then the
Company shall continue to pay the executive his salary for the duration of the
term of his Employment Agreement (but in no event for less than twelve months
following the date of such termination) and shall maintain the executive's
participation for such period in all employee benefit plans in which the
executive was entitled to participate at the time of his termination. If within
three years after a change in control, the Company terminates the executive's
employment (other than for cause) or the executive terminates employment with
the Company for good reason, the Company shall pay to the executive a cash
amount equal to 2.5 multiplied by the sum of the executive's annual base salary
and aggregate bonus for the 12-month period prior to the change in control or
prior to such termination (whichever is greater). If the payments and benefits
that the executive has a right to
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receive would result in "excess parachute payments" (as defined in the Internal
Revenue Code of 1986, as amended), and the executive would be required to pay an
excise tax pursuant to the Code in respect of such payments and benefits, the
Company shall also pay the executive an additional amount such that the
executive would retain the amount of such payments and benefits as if such
excise tax had not been payable thereon. Termination for good reason includes
termination or resignation after certain events, such as a demotion, the
assignment to the executive of any duties or responsibilities that are
inconsistent with the executive's position, layoff or involuntary termination
(except for cause or as a result of the executive's retirement, disability or
death), a reduction in compensation or benefits, the failure of any acquiror of
the Company to assume the employment contract and a breach of the Company's
obligations under the employment contract. If the executive terminates
employment with the Company for reasons other than good reason, as defined
above, the Company shall pay the executive compensation accrued through the date
of termination and the Company shall then have no further obligations to the
executive under the agreement.
If a change in control had occurred on June 6, 1995, and if Mr.
Wilkinson had been terminated without cause or terminated his employment for
good reason on such date, he would have been entitled to receive (assuming no
excise tax were payable) approximately $1,200,000.
Mr. James T. Stewart is a party to an employment agreement with CRSS
Capital, Inc. dated July 1, 1989. Under the terms of this employment agreement,
if the Company terminates the executive's employment other than for cause, or
the executive terminates his employment for good reason (as hereinafter
defined), then the Company shall continue to pay the executive his salary for
twelve months and shall maintain the executive's participation for such period
in all employee benefit plans in which the executive was entitled to participate
at the time of his termination. Termination for good reason includes termination
or resignation after certain events, such as a demotion, the assignment to the
executive of any duties or responsibilities that are inconsistent with the
executive's position, layoff or involuntary termination (except for cause or as
a result of the executive's retirement, disability or death), a reduction in
compensation or benefits, the failure of any acquiror of the Company to assume
the employment contract and a breach of the Company's obligations under the
employment contract. If the executive terminates his employment with the Company
for reasons other than good reason, as defined above, the Company shall pay the
executive for compensation accrued through the date of termination and the
Company shall then have no further obligations to the executive under the
agreement.
If Mr. Stewart had been terminated without cause or terminated his
employment for good reason on June 6, 1995, he would have been entitled to
receive approximately $225,000 plus the amount of aggregate annual bonus Mr.
Stewart would have earned had he been employed with CRSS Capital, Inc. through
June 30, 1995.
The Company also has entered into employment agreements with executive
officers Mr. William J. Gardiner, Mr. William P. Utt, and Mr. Timothy R. Dunne
(each such executive officer being referred to as an "executive"). Under the
terms of each of these employment agreements (an "Agreement"), if the Company
terminates the executive's employment other than for cause, or the executive
terminates his employment for good reason (as hereinafter defined) within six
months after such good reason arises, then the Company shall continue to pay the
executive his salary for twelve months and shall maintain the executive's
participation for such period in all employee benefit plans in which the
executive was entitled to participate at the time of his termination. The
executive shall be required to mitigate the amount of any payment or benefit
after such termination by seeking other employment or otherwise. Termination for
good reason includes termination or resignation after certain events, such as
demotion, layoff or involuntary termination (except for cause or as a result of
the executive's retirement, disability or death), a reduction in compensation or
benefits, a material increase in responsibilities or duties without increase in
total compensation, the Company's failure to provide the executive with the
number of entitled days of paid vacation and sick leave, the failure of the
Company to obtain express assumption of the Agreement by any successor to the
Company, and any material violation by the Company of the Agreement. If the
executive terminates his employment with the Company for reasons other than good
reason, as defined above, including death, disability or retirement, the Company
shall pay the executive for compensation accrued through the date of termination
and the Company shall then have no further obligations to the executive under
the Agreement.
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The initial term of each Agreement commenced on February 1, 1995 and
expires on July 1, 1997. Commencing on June 30, 1995 and each June 30
thereafter, the term will automatically be extended for one additional year,
unless the Company terminates the executive's employment for cause, or the
executive resigns for other than good reason, or, not later than the May 1
immediately preceding any such June 30, the Company delivers to the executive or
the executive delivers to the Company written notice that the term will not be
extended.
If the payments and benefits provided for an executive under an
Agreement would result in an "excess parachute payment" (as defined in the
Section 280G of the Internal Revenue Code of 1986, as amended from time to time
(the "Code")), and the executive would be required to pay an excise tax pursuant
to Section 4999 (or any successor section) of the Code in respect of such excess
parachute payments, the Company shall pay the executive an additional amount
such that the executive would retain the amount of such excess parachute
payments as if such excise tax had not been payable thereon.
CERTAIN TRANSACTIONS
Mr. Thomas A. Bullock and Mr. C. Herbert Paseur, both members of the
Company's Board of Directors, received $78,390 and $37,759, respectively, in
fiscal year 1994 from the Company's terminated defined benefit Retirement Plan.
Messrs. Bullock and Paseur were paid $38,409 and $88,545,
respectively, in fiscal year 1994 pursuant to the terms of the Senior Executive
Officer Early Retirement Plan.
There are certain indemnification agreements in effect between the
Company and its directors as approved by the Company's stockholders at the 1986
Annual Meeting. At the 1989 Annual Meeting, the Company's stockholders approved
amendments to the Company's Certificate of Incorporation and By-Laws further
expanding the indemnification of the Company's directors and officers as
permitted by Delaware law.
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PERFORMANCE GRAPH
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG CRSS INC., S&P 500 INDEX, S&P ENGINEERING (ENG) AND
CONSTRUCTION (CONSTR) INDEX AND INDEPENDENT POWER COMPANIES (IPC):
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
===========================================================================================
DESCRIPTION 1989 1990 1991 1992 1993 1994
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CRSS Inc. $100.00 $ 95.97 $ 64.37 $ 58.25 $ 47.94 $ 60.46
-------------------------------------------------------------------------------------------
S & P 500 $100.00 $116.49 $125.10 $141.88 $161.22 $162.84
-------------------------------------------------------------------------------------------
S & P Engineering & $100.00 $157.65 $162.70 $143.48 $160.36 $188.17
Construction
-------------------------------------------------------------------------------------------
IPC Peer Group $100.00 $151.27 $150.77 $118.31 $158.12 $135.69
===========================================================================================
</TABLE>
In July 1994, the Company sold its design, engineering and
construction management subsidiaries, leaving the independent power subsidiary,
CRSS Capital, Inc., as the sole operating subsidiary of the Company. Consistent
with the Company's decision to focus exclusively on the independent power
industry, beginning next year the Company will change its performance graph
comparison to include only the IPC peer group. The selected IPC peer group
consists of publicly-traded, non-utility companies in the independent power and
cogeneration industry: AES Corporation, California Energy, Destec Energy, Magma
Power and Sithe Energies. In this year of transition, the S&P ENG and CONSTR
index is provided for comparison purposes.
The comparison of total return on investment (change in year-end stock
price plus reinvested dividends) for each of the periods assumes that $100 was
invested June 30, 1989 in CRSS Inc., S&P 500, S&P ENG and CONSTR and the IPC
Peer Group with investment weighted on the basis of market capitalization.
15
