<PAGE>
AMERICAN PRECISION INDUSTRIES INC.
2777 Walden Avenue
Buffalo, New York 14225
Information Statement
Pursuant to Section 14(f) of
the Securities Exchange Act of 1934
and Rule 14f-1 Thereunder
This information statement is being mailed on or about February 24, 2000, as
part of a Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9"), to holders of record on February 18, 2000, of shares of
Common Stock, par value $.66 2/3 per share (the "Common Stock"), of American
Precision Industries Inc., a Delaware corporation (hereinafter referred to as
"API" or the "Company"), in connection with the election, other than at a
meeting of the stockholders of the Company, to the Board of Directors of the
Company (the "Board") of up to six persons (the "Designees") to be designated
by Alpha Acquisition I Corp., a Delaware corporation (the "Purchaser"). The
Purchaser is a wholly-owned subsidiary of Danaher Corporation, a Delaware
corporation ("Parent"). Such designation will be made pursuant to an Agreement
and Plan of Merger, dated as of February 15, 2000 (the "Merger Agreement"),
among the Parent, Purchaser and the Company, which provides for a tender offer
by the Purchaser for the Shares (the "Offer") followed by a merger of the
Purchaser into the Company (the "Merger"). Capitalized terms not otherwise
defined herein have the meanings ascribed to them in the Schedule 14D-9.
The Merger Agreement provides that promptly upon the payment by the
Purchaser for Shares pursuant to the Offer representing at least such number of
Shares as shall satisfy the Minimum Condition, and from time to time
thereafter, Parent shall be entitled to designate such number of directors,
rounded up to the next whole number, on the Company's Board of Directors (the
"Company Board") as is equal to the product of the total number of directors on
the Company Board (determined after giving effect to the directors elected
pursuant to this sentence) multiplied by the percentage that the aggregate
number of Shares beneficially owned by Parent or its affiliates bears to the
total number of Shares then outstanding, and the Company shall, upon request of
Parent, promptly take all actions necessary to cause Parent's designees to be
so elected, including, if necessary, seeking the resignations of one or more
existing directors. The Merger Agreement further provides that the Company
Board shall always have at least two members who are neither officers,
directors or designees of the Purchaser or any of its affiliates ("Purchaser
Insiders"). If the number of directors who are not Purchaser Insiders is
reduced below two prior to the merger of Purchaser into the Company, the
remaining director who is not a Purchaser Insider shall be entitled to
designate a person to fill such vacancy who is not a Purchaser Insider and who
shall be a director not deemed to be a Purchaser Insider for all purposes of
the Merger Agreement.
The information contained herein concerning the Parent, the Purchaser and
the Designees has been furnished to the Company by the Parent and the
Purchaser, and the Company assumes no responsibility for the accuracy or
completeness of such information. Section 14(f) of the Exchange Act and Rule
14f-1 promulgated thereunder require the information contained herein to be
filed with the Securities and Exchange Commission (the "Commission") and
transmitted to the Company's stockholders not less than ten days prior to the
date any of the Designees are elected or appointed to the Board in accordance
with the terms of the Merger Agreement.
As of February 18, 2000, 6,889,322 Shares were issued and outstanding. Each
Share is entitled to one vote on all matters submitted to stockholders of the
Company.
1
<PAGE>
THE DESIGNEES AND THE CURRENT MEMBERS OF THE BOARD OF
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The Designees
Set forth below is certain information about each of the Designees:
Patrick W. Allender, 53, has served as Chief Financial Officer of Parent
since March 1987.
Daniel L. Comas, 35, was appointed Vice President, Corporate Development of
Parent in 1996. He has served Parent in an executive capacity in the corporate
development area for more than the past five years.
Christopher C. McMahon, 37, was appointed Vice President and Controller of
Parent in 1999. From 1997 until 1999 he was a Group Vice President for Parent,
and prior to this, he served as Vice President, Finance and Administration.
Mitchell P. Rales, 43, has served as a director of Parent since January
1984. In addition, during the past five years he has been a principal in a
number of private business entities with interests in manufacturing companies,
media operations and publicly traded securities. He is also a director of Imo
Industries Inc.
Steven M. Rales, 48, has served as Chairman of the Board of Parent since
January 1984. In addition, during the past five years he has been a principal
in a number of private business entities with interests in manufacturing
companies, media operations and publicly traded securities. He is also a
director of Imo Industries Inc.
George M. Sherman, 58, has served as President and Chief Executive Officer
and a director of Parent since February 1990. He is also a director of Campbell
Soup Company.
Present Directors of the Company
The following table contains information with respect to the present
directors of the Company, some of whom may resign under the terms of the Merger
Agreement.
John M. Albertine, PhD, age 55, has been a director since 1985. In 1990 Dr.
Albertine became Chairman and Chief Executive Officer of Albertine Enterprises,
Inc., an economic forecasting, public policy, and full-service mergers and
acquisitions firm based in Washington, D.C. Dr. Albertine serves on the Board
of Directors of Thermo Electron Corporation*, Intermagnetics General
Corporation*, Semco Energy, Inc.*, and Thermo Information Solutions, Inc.*
Holger Hjelm, age 76, has been a director since July 8, 1997, at which time
he was elected to the Board by the directors as the nominee of InterScan
Holding Ltd. ("InterScan") in accordance with the agreement by which the
Company acquired Portescap, a Swiss motor company, from InterScan. Pursuant to
that agreement, the Company is required to nominate InterScan's nominee as a
director of the Company with a term expiring in 2000 and to appoint that
nominee, if elected by the shareholders, to the Nominating Committee. Mr. Hjelm
has been active for the past 17 years developing a group of companies known as
the InterScan Group ("ISG") based in Zurich, Switzerland. ISG is an
international conglomerate privately owned by Mr. Hjelm and his family. Through
its companies in several countries, ISG manufactures steel mill rolls, and
paper and packaging products, distributes fruits and vegetables, conducts oil
and commodity trading and real estate activities, and operates a pay phone
company.
Bernard J. Kennedy, age 68, has been a director since 1987. Mr. Kennedy has
been Chairman and Chief Executive Officer of National Fuel Gas Company* since
1989 and is Chairman of certain of its subsidiaries. National Fuel Gas Company
and its subsidiaries are engaged in production, purchase, storage,
transportation and sale of natural gas and in the exploration for and
development of oil and natural gas reserves.
2
<PAGE>
Douglas J. MacMaster, Jr., age 69, has been a director since 1990. He was
Senior Vice President of Merck & Co., Inc., a health products company, from
1988 until his retirement in 1992. Mr. MacMaster is a director of Martek
Biosciences Corp.*, Noese Technologies, Inc.*, and Stratton Mutual Funds*.
Klaus K. Oertel, age 66, has been a director since 1995. From January 1,
1990 until his retirement on December 31, 1994, Mr. Oertel was a member of the
Board of Management of AEG A.G., Frankfurt, Germany, a unit of Daimler-Benz AG,
in charge of the world-wide rail systems group. Since his retirement, Mr.
Oertel has acted as a consultant to various industries.
Victor A. Rice, age 59, has been a director since 1994. From 1996 to 1999,
Mr. Rice was the Chief Executive Officer and a director of LucasVarity plc*, an
international manufacturer and supplier of products, systems, and services to
the automotive, diesel engine, and aerospace industries. From 1980 until 1996,
Mr. Rice was Chairman and Chief Executive Officer of Varity Corporation.
Jerre L. Stead, age 57, has been a director since 1996. He has been Chairman
and Chief Executive Officer of Ingram Micro Inc.*, a distributor of technology
products and services, since August, 1996. On January 1, 1995, Mr. Stead became
Chairman and Chief Executive Officer of Legent Corporation, a computer
programming software services firm. He resigned from that position on August
15, 1995 after the merger of Legent Corporation with Computer Associates
International, Inc. During 1993 and 1994, Mr. Stead was Chairman and Chief
Executive Officer of AT&T Global Information Solutions (formerly NCR), a
provider of information technology services. He also served as an Executive
Vice President of AT&T and a member of AT&T's Management Executive and Global
Operations Committees. Mr. Stead is also a director of Armstrong World
Industries Inc.*, Conexant Systems, Inc.*, and Thomas & Betts Corp.*
Kurt Wiedenhaupt, age 62, has been a director since 1992. Mr. Wiedenhaupt
became President and Chief Executive Officer of the Company on July 1, 1992 and
Chairman on April 25, 1997. From 1986 to June 30, 1992, Mr. Wiedenhaupt was
President and Chief Executive Officer of AEG Corporation, a North American unit
of Daimler-Benz AG which is engaged in transportation, electronics, industrial
equipment and business systems.
Board Committees
There are five standing committees of the Board of Directors: Audit,
Compensation, Finance, Nominating, and Special.
The Audit Committee, which is currently comprised of Mr. Kennedy, Chairman,
Mr. MacMaster, and Mr. Oertel, had three meetings in 1999. It selects auditors
(subject to shareholder ratification), and reviews their proposed audit plan
and fees, their completed audit, and their recommendations and the replies of
management thereto. The auditors have direct access to the Audit Committee with
respect to the Company's accounting practices and procedures and management's
compliance with those practices and procedures. The Audit Committee also has
oversight responsibility for the Company's compliance efforts with respect to
Year 2000 technology issues.
The Compensation Committee, which is currently comprised of Mr. Stead,
Chairman, Dr. Albertine, and Mr. Rice, had three meetings in 1999. It submits
recommendations to the Board on all matters relating to the compensation of
officers and key employees and administers the Company's stock option plans for
employees.
The Finance Committee, which is currently comprised of Mr. Oertel, Chairman,
Dr. Albertine, and Mr. Kennedy, held four meetings during 1999. It reviews the
Company's financing plans for acquisitions and capital expenditures.
The Nominating Committee, which is currently comprised of Dr. Albertine,
Chairman, Mr. Hjelm, and Mr. Stead, did not meet in 1999. The functions of the
Nominating Committee are to review the size and
- --------
*Denotes publicly-held company.
3
<PAGE>
composition of the Board; to establish criteria for Board membership; to search
for and screen candidates to fill vacancies on the Board; and to recommend an
appropriate slate of candidates for election each year. Shareholders who wish
to present a candidate for nomination as a director may do so by writing to the
Committee at the Company's corporate office and providing the candidate's name,
biographical data and qualifications.
The Special Committee, which was appointed by the Board in 1998 to assist
management in evaluating strategic opportunities, is currently comprised of Mr.
Oertel, Chairman, Mr. Rice, and Mr. Stead. This Committee held three meetings
in 1999.
Director Attendance
The Board of Directors had six meetings in 1999. All directors attended at
least 75% of the relevant board and committee meetings held during 1999, except
for Mr. Hjelm who attended four of six meetings and Mr. Stead who attended five
of twelve meetings.
Director Compensation
Directors (except for Mr. Wiedenhaupt) are entitled to an attendance fee of
$1,000 for each board meeting attended in person and are also entitled to an
annual retainer of $16,000. Members of committees are entitled to $800 for
attendance in person at each meeting. Fees for participation in board or
committee meetings by telephone are $500 and $400, respectively. The Chairmen
of the Audit, Compensation, Finance, Nominating, and Special Committees are
entitled to $1,000 per annum. Except for group term life insurance coverage of
$100,000 ($50,000 after age 70), the Company does not provide pensions, medical
benefits or other benefit programs to non-employee directors.
Under the 1995 Directors Stock Option Plan, as amended and restated (the
"1995 Directors Plan"), a non-employee director of the Company may elect to
receive options instead of cash for either his annual director's retainer or
meeting and chairmanship fees for that year or for the total of such retainer
and fees ("Elected Options"). The Elected Options are granted on the first day
of each calendar quarter, which is the date on which the payment of retainer
and meeting fees would otherwise be made in cash. The number of shares of
common stock subject to an Elected Option is equal to the amount of director's
retainer and fees divided by the difference between the fair market value of a
share of the Company's Common Stock on the date of grant and the exercise price
of the Elected Option, which is 30% of the fair market value of a share on the
date of grant. Elected Options become exercisable in full six months after
grant and expire ten years after grant. However, Elected Options may expire
earlier as a result of the termination of a director's service on the board, as
follows: if an Elected Option has not expired earlier, it will expire on the
fifth anniversary of the director's retirement after age 70, or if the director
dies before that fifth anniversary, the first anniversary of the director's
death; on the first anniversary of the termination of the director's service on
the board by reason of death or disability; or three months after the
termination of the director's service on the board for any other reason. The
exercise price is payable in cash or by the delivery of shares of the Company's
Common Stock owned by the director.
All the directors eligible under the 1995 Directors Plan elected to
participate in the Plan with respect to meeting fees earned in 1999, and all
eligible directors except Dr. Albertine elected to participate in the Plan with
respect to the retainers earned. Dr. Albertine received $17,000 in cash
payments in 1999 for retainers. The Elected Options which have been granted to
directors under the 1995 Directors Plan since the inception of the program are
set forth in the table below.
On each date that Elected Options are granted, the combination of the
exercise price of the Elected Options granted and the cash fees the director is
entitled to receive but forgoes is equivalent to the market value of the shares
of Common Stock underlying the Elected Option on the date of grant.
4
<PAGE>
As of February 18, 2000, Elected Options for 8,687 shares of Common Stock
had been exercised. The Elected Options reflected in the table below were
granted in lieu of cash retainers and meeting fees aggregating $612,250.
On April 24, 1998, the Company's Board of Directors, on recommendation of
the Compensation Committee, adopted a Director Stock Option Award Program under
the 1995 Directors Plan. Under this program, each director will receive a grant
of stock options ("Discretionary Options") on the date of the annual meeting of
shareholders each year based upon a formula which uses the average compensation
earned by all directors during the prior fiscal year and a multiplier related
to the Company's EVA(R) performance for that fiscal year. This methodology is
similar to that used to award options to key employees. Ten-year Discretionary
Options for 1,500 shares of API stock, exercisable at $18.0625 per share, and
2,100 shares, exercisable at $10.3125 per share, were granted to each non-
employee director under this formula on April 24, 1998 and April 23, 1999,
respectively.
As of February 18, 2000, 8,966 shares remain available for the grant of
Elected and Discretionary Options under the 1995 Directors Plan.
Prior to 1998, eligible directors with five or more years of continuous
service were entitled to a benefit of $10,000 a year payable over ten years
upon retirement, death prior to retirement, or nonelection to or removal from
the Board following an unfriendly change in control of the Company. On April
24, 1998, the Company's Board of Directors, on recommendation of the
Compensation Committee, approved a plan to replace this retirement benefit with
a one-time grant of stock options. Messrs. Hjelm and Wiedenhaupt were not
eligible for this benefit. The present value as of May 1, 1998 of each
director's retirement benefit was determined and this value was replaced by the
grant of a stock option with a value equivalent to that present value utilizing
the Black-Scholes option pricing model. These options, granted at $18.0625 per
share, are exercisable immediately by those directors with five or more years
of service and on their fifth anniversary by directors having less than five
years of service. The options expire ten years from date of grant. The number
of shares covered by each option granted to replace retirement benefits are
shown in the table below. None of these options has been exercised.
OPTIONS GRANTED
<TABLE>
<CAPTION>
Average
Options Options Exercise
Elected Discretionary Retirement Total Exercised Outstanding Price
------- ------------- ---------- ------- --------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Albertine............... 9,269 3,600 2,800 15,669 7,688 7,981 $13.02
Hjelm................... 4,851 3,600 -- 8,451 -- 8,451 $ 7.81
Kennedy................. 12,433 3,600 6,200 22,233 -- 22,233 $ 9.37
MacMaster............... 11,008 3,600 6,600 21,208 -- 21,208 $ 9.94
Oertel.................. 10,643 3,600 5,400 19,643 -- 19,643 $ 9.54
Rice.................... 10,795 3,600 3,400 17,795 999 16,796 $ 8.81
Stead................... 7,654 3,600 3,000 14,254 -- 14,254 $ 9.43
Totals................ 66,653 25,200 27,400 119,253 8,687 110,566 $ 9.58
</TABLE>
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(R) EVA is a registered trademark of Stern Stewart & Co.
5
<PAGE>
SHARE OWNERSHIP OF MANAGEMENT
The following table shows the number of shares of Common Stock beneficially
owned as of February 18, 2000 by (1) each director and each executive officer
named in the Summary Compensation Table and (2) all directors and executive
officers of API as a group.
<TABLE>
<CAPTION>
Percent of
Amount and Nature Common Shares
Name of Individual of Beneficial Outstanding
or Description of Group Ownership (1)(2) (3)
----------------------- ----------------- -------------
<S> <C> <C>
John M. Albertine......................... 5,334 --
Holger Hjelm.............................. 265,060(4) 3.8%
Bernard J. Kennedy........................ 24,178 --
Douglas J. MacMaster, Jr.................. 21,899 --
Klaus K. Oertel........................... 11,907 --
Victor A. Rice............................ 13,922 --
Jerre L. Stead............................ 12,904 --
Kurt Wiedenhaupt.......................... 379,995 5.2%
James W. Bingel........................... 39,940 --
Bruce McH. Kirchner....................... 23,500 --
Craig J. VanTine.......................... 38,032 --
Richard S. Warzala........................ 89,300 1.3%
All directors and executive officers as a
group, including those named above....... 925,971(5) 12.4%
</TABLE>
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(1) Each individual has sole voting and investment power over the shares
indicated as owned by that individual unless otherwise noted.
(2) Includes the following shares that the named executive officers and
directors have the right to acquire pursuant to options that are currently
exercisable or become exercisable within the next 60 days:
<TABLE>
<S> <C>
J. M. Albertine.................................................. 4,834
H. Hjelm......................................................... 5,060
B. J. Kennedy.................................................... 18,397
D. J. MacMaster Jr............................................... 17,899
K. K. Oertel..................................................... 10,107
V. A. Rice....................................................... 12,923
J. L. Stead...................................................... 7,904
K. Wiedenhaupt................................................... 357,923
J. W. Bingel..................................................... 36,987
B. McH. Kirchner................................................. 20,500
C. J. VanTine.................................................... 35,900
R. S. Warzala.................................................... 66,000
</TABLE>
(3) Percentage calculations for each individual and group in the table are
based on 6,889,322 shares of Common Stock outstanding, plus any shares such
person or persons in such group have the right to acquire within 60 days of
February 18, 2000 pursuant to outstanding options. Unless otherwise
indicated in the table, each of the directors and executive officers named
in the table owns less than 1% of the Common Stock outstanding.
(4) Mr. Hjelm is an affiliate of InterScan which owns 1,236,337 shares of the
Company's Series B Preferred Stock, which are presently convertible into
1,538,603 shares of Common Stock at a current conversion price of $17.00
per share (see "Share Ownership of Certain Beneficial Owners"), which
represents approximately 22.3% of the Common Stock outstanding before the
conversion and approximately 18.3% of the Common Stock outstanding after
giving effect to the conversion, assuming that the number of shares
outstanding on the presumed date of conversion is equal to the number
outstanding on February 18, 2000. Mr. Hjelm may be deemed the beneficial
owner of those shares; however, those shares are not included in the table
above.
(5) Includes 596,334 shares that executive officers and directors as a group
have the right to acquire pursuant to options that are currently
exercisable or become exercisable within the next 60 days, including the
shares set forth in note 2 above.
6
<PAGE>
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table shows the number of shares of Common Stock owned by each
person or group (as that term is used in Section 13(d)(3) of the Securities
Exchange Act of 1934) known to API to be the beneficial owner of more than 5%
of its Common Stock as of February 18, 2000 unless otherwise indicated.
<TABLE>
<CAPTION>
Name and Amount and Percent of
Address Nature of Common
of Beneficial Beneficial Stock
Owner Ownership Outstanding
------------- ---------- -----------
<S> <C> <C>
InterScan Holding Ltd. .......................... 1,798,603(1) 21.3%(1)
Schifflande 5
CH-8001 Zurich Switzerland
David L. Babson and Company Incorporated......... 638,500(2) 9.3%
One Memorial Drive
Cambridge, MA 02141
Dimensional Fund Advisors Inc.................... 592,074(3) 8.6%
1299 Ocean Avenue
Santa Monica, CA 90401
Robert J. Fierle................................. 591,602(4) 8.6%
2419 Lapham Road
East Aurora, NY 14052
Paradigm Capital Management, Inc................. 357,800(5) 5.2%
9 Elk Street
Albany, NY 12207
</TABLE>
- --------
(1) InterScan owns 260,000 shares of Common Stock and 1,236,337 shares of
Series B Preferred Stock; the number in the table above includes the number
of shares of Common Stock into which the Series B Preferred Stock is
presently convertible at a conversion price of $17.00 per share and the
percentage of 21.3% is based on the Common Stock outstanding after giving
effect to the conversion, assuming the number of shares outstanding on the
presumed date of conversion is equal to the number outstanding on February
18, 2000. Mr. Hjelm may be deemed to be the beneficial owner of those
shares. See note 4 under the table in "Share Ownership of Management."
(2) Based on information set forth in a Schedule 13G dated January 25, 2000,
David L. Babson and Company Incorporated, in its capacity as investment
advisor, may be deemed the beneficial owner of 638,500 shares of Common
Stock as of December 31, 1999 which are owned by numerous investment
counseling clients.
(3) Based on information contained in a Schedule 13G dated February 4, 2000,
Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 592,074 shares of Common
Stock as of December 31, 1999, all of which shares are held in portfolios
of four investment companies and certain other investment vehicles,
including commingled group trusts, to whom Dimensional offers investment
advice or for which Dimensional serves as investment manager. Dimensional
disclaims beneficial ownership of all such shares.
(4) Includes 5,000 shares owned by Mr. Fierle's spouse. Mr. Fierle disclaims
beneficial ownership of all such shares.
(5) Based upon information contained in a Schedule 13G dated February 16, 2000,
Paradigm Capital Management, Inc., a registered investment adviser, is
deemed to have beneficial ownership of 357,800 shares of Common Stock.
7
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and officers, and persons who own more than 10% of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission ("SEC") and the New York
Stock Exchange. Directors, officers and greater-than-10% stockholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file. Based solely on review of information furnished to the
Company, reports filed through the Company, and written representations that no
Forms 5 were required, the Company believes that all Section 16(a) filing
requirements applicable to its directors, officers and greater-than-10%
beneficial owners were complied with during 1999 except for an option for 241
shares of stock granted to Dr. Albertine on January 1, 1999 and an option for
2,100 shares granted to Mr. Hjelm on April 23, 1999 which were inadvertently
reported late.
EXECUTIVE OFFICERS
The following is a list of the executive officers of the Company, each of
whom is appointed to serve at the pleasure of the Board.
<TABLE>
<CAPTION>
Has Been an
Executive
Name and Age Offices Held at API Officer Since
- ------------ ------------------- -------------
<S> <C> <C>
Kurt Wiedenhaupt, 62.... President 1992
James W. Bingel, 52..... Vice President and President of API Delevan Inc. 1991
Bradley J. Holcomb, 51.. Vice President, Supply Chain Management and Operational
Excellence 1998
Bruce McH. Kirchner,
51..................... Vice President and Chief Financial Officer 1997
Craig J. VanTine, 53.... Vice President and President of API Heat Transfer Inc. 1997
Richard S. Warzala, 46.. Vice President and President of API Motion Inc. 1986
</TABLE>
All of the executive officers have been employed by API for more than five
years except for Mr. Holcomb who was appointed on September 28, 1998, and Mr.
Kirchner who was appointed on February 3, 1997.
From 1996 to 1998, Mr. Holcomb was Vice President of Praxair, Inc. with
responsibility for global procurement and materials management. For 20 years
prior to that, Mr. Holcomb was employed by Eastman Kodak Company, serving as
Director, Supplier Relationship Management from 1994 to 1996 and as General
Manager, Product Development and Manufacture Partnerships from 1993 to 1994.
Mr. Kirchner was employed for 22 years in various financial positions with
The Carborundum Company and its successors. From 1989 to 1996, he was Vice
President and Chief Financial Officer of BP Chemicals-Advanced Materials and
Carborundum Division, a multinational manufacturer of polymer and ceramic based
products.
8
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table
The Summary Compensation Table sets forth individual compensation
information for the Chief Executive Officer and the four other most highly
compensated executive officers.
<TABLE>
<CAPTION>
Long-Term
Compensation
------------
Annual Compensation
(1)
---------------------- Securities
Name and Underlying
Principal Options/ All Other
Position Year Salary Bonus SARs(#) Compensation (2)
--------- ---- -------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Kurt Wiedenhaupt 1999 $350,000 $326,000 -- $310,711
President and CEO 1998 333,335 48,300 -- 82,731
1997 300,000 319,811 200,000 98,650
James W. Bingel 1999 136,668 104,816 10,000 13,206
Vice President 1998 128,333 70,124 12,000 12,979
1997 120,670 73,817 8,000 12,394
Bruce McH. Kirchner 1999 165,000 106,100 12,500 14,905
Vice President and CFO 1998 160,000 16,070 15,000 15,365
1997 137,500 104,700 20,000 15,092
Craig J. VanTine 1999 165,000 68,799 12,500 40,549
Vice President 1998 162,052 51,980 15,000 2,500
1997 137,951 27,098 8,000 2,250
Richard S. Warzala 1999 200,000 176,630 15,000 48,261
Vice President 1998 191,666 (2,865)(3) 25,000 24,328
1997 162,567 121,621 20,000 11,451
</TABLE>
(1) Other Annual Compensation does not exceed the lesser of $50,000 or 10% of
total salary and bonus for any of the executives named in the table.
(2) All Other Compensation for 1999 includes (i) amounts paid to or on behalf
of Mr. Wiedenhaupt, Mr. Kirchner, Mr. VanTine, and Mr. Warzala under the
Pension Benefit Restoration Plan adopted by the Company in 1994 and
described under API Pension Plan below, (ii) the actuarial value of premium
payments made by the Company allocable to the executive officer's death
benefit under a split-dollar life insurance program, combined with
compensation paid in connection with premium payments, if any, made by the
executive officer, (iii) Company contributions to the 401(k) Retirement
Savings Plan for Salaried Employees (which equal 25% of that portion of the
employee's contribution which does not exceed 6% of such employee's total
pay for the year), and (iv) payments to Messrs. Wiedenhaupt, VanTine, and
Warzala for unused vacation time. The amounts for each individual were as
follows:
<TABLE>
<CAPTION>
Pension
Benefit Split- 401(k) Paid
Restoration Dollar Company Unused
Plan Program Contribution Vacation Total
----------- -------- ------------ -------- --------
<S> <C> <C> <C> <C> <C>
Kurt Wiedenhaupt............ $8,434 $268,688 $2,500 $31,089 $310,711
James W. Bingel............. -- 10,706 2,500 -- 13,206
Bruce McH. Kirchner......... 6 12,399 2,500 -- 14,905
Craig J. VanTine............ 92 31,611 2,500 6,346 40,549
Richard S. Warzala.......... 217 22,468 2,500 23,076 48,261
</TABLE>
(3) Mr. Warzala's earned EVA bonus for 1998 is a negative amount which reduced
the amount of deferred prior year bonus held in Mr. Warzala's EVA Bank
Account. See the discussion of EVA Bank Accounts under "Board Compensation
Committee Report-Incentive Compensation."
9
<PAGE>
Option Grants in Last Fiscal Year
The following table provides information on grants of stock options made
during the 1999 fiscal year to the executive officers named in the Summary
Compensation Table.
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------
% of
Number of Total
Securities Options Grant
Underlying Granted to Exercise Date
Options Employees Base Present
Granted in Fiscal Price Expiration Value
Name (#) (1) Year ($/Sh) Date $(2)
- ---- ---------- ---------- -------- ---------- -------
<S> <C> <C> <C> <C> <C>
Kurt Wiedenhaupt.............. 0 -- -- -- --
James W. Bingel............... 10,000 5.1% $10.3125 4-22-09 $46,718
Bruce McH. Kirchner........... 12,500 6.4 10.3125 4-22-09 58,398
Craig J. VanTine.............. 12,500 6.4 10.3125 4-22-09 58,398
Richard S. Warzala............ 15,000 7.7 10.3125 4-22-09 70,077
</TABLE>
- --------
(1) All of the options reflected in the table are ten year options and become
exercisable at the rate of 20% per year beginning on the first anniversary
of the date of grant.
(2) In accordance with SEC rules, the Grant Date Present Values were
determined under the Black-Scholes option pricing model. The Company's use
of this model should not be construed as an endorsement of its accuracy at
valuing options. All stock option models require a prediction about the
future movement of the stock price. The following assumptions were made
for purposes of calculating Grant Date Present Values: expected volatility
factor of 33.3%, risk free rate of return of 4.875%, dividend yield of
zero, and the time of exercise of 7.0 years. The actual value of the
options in this table depends upon the actual performance of the Company's
stock during the applicable period and upon when they are exercised.
Fiscal Year-End Option/SAR Values
The following table summarizes information with respect to unexercised stock
options and stock appreciation rights ("SARs") held by the executive officers
named in the Summary Compensation Table at the end of the 1999 fiscal year. The
closing price of the Company's Common Stock on the New York Stock Exchange on
December 31, 1999 was $8.50. None of these executive officers exercised options
in 1999.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/SARs
Options/SARs at FY-End (#) at FY-End ($)
------------------------------ -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Kurt Wiedenhaupt.... 345,923 168,000 $198,750 $ 0
James W. Bingel..... 27,787 29,200 $ 12,921 $ 0
Bruce McH.
Kirchner........... 11,000 36,500 $ -- $ 0
Craig J. VanTine.... 24,800 36,500 $ 6,925 $ 0
Richard S. Warzala.. 48,600 55,400 $ 19,375 $ 0
</TABLE>
API Pension Plan
Executive officers of the Company are covered by the API Pension Plan (the
"Pension Plan"). Normal retirement age under the Pension Plan is 65. The normal
monthly retirement benefit is equal to 1% of average monthly base earnings
multiplied by the years of credited service. Average monthly base earnings are
determined from the highest continuous five years out of the last ten years
worked prior to retirement. The normal monthly retirement benefit is reduced by
1/2 of 1% for each month between the date benefits begin and the participant's
normal retirement date in the case of early retirement. Benefits are not
subject to any reduction for Social Security payments or other offset amounts.
10
<PAGE>
The table set forth below illustrates representative annual retirement
benefits for various levels of compensation and periods of service under the
Pension Plan.
<TABLE>
<CAPTION>
Average Annual
Earnings (highest Estimated Annual Retirement Benefits
continuous 5 of last Based on Credited Years of Service
10 years prior to Indicated
retirement) --10--------15--------20--------25--------30--------------
-------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$ 50,000 $ 5,000 $ 7,500 $10,000 $12,500 $15,000
100,000 10,000 15,000 20,000 25,000 30,000
160,000 or more 16,000 24,000 32,000 40,000 48,000
</TABLE>
Under the Omnibus Budget Reconciliation Act of 1993 ("OBRA"), the amount of
annual earnings which can be utilized in determining benefits under the Pension
Plan was reduced from $235,840 to $150,000 (subject to a cost of living
adjustment). The latter amount is indexed to inflation, and the limit
applicable to 1999 is $160,000. This change has reduced the retirement benefits
under the Pension Plan for certain executives of the Company. In 1994, the
Company adopted a Pension Benefit Restoration Plan pursuant to which the
Company makes annual payments under a flexible deposit annuity contract for Mr.
Wiedenhaupt and reimburses him for his income taxes on the annuity payments and
makes additional premium payments on split-dollar life insurance policies for
Messrs. Kirchner, VanTine, and Warzala. Upon retirement, the annuity contract
and split-dollar policies will provide benefits equal to the benefits lost due
to the enactment of OBRA.
By way of illustration, an employee covered by the Pension Benefit
Restoration Plan retiring with 30 years of credited service and average annual
earnings of $200,000 would be entitled to an annual retirement benefit of
$60,000, $48,000 of which would be provided by the Pension Plan and $12,000 of
which would be provided through the Pension Benefit Restoration Plan.
The credited years of service on December 31, 1999 for the persons named in
the Summary Compensation Table are as follows: Mr. Wiedenhaupt--8 years; Mr.
Bingel--8 years; Mr. Kirchner--3 years; Mr. VanTine--27 years; and Mr.
Warzala--23 years. The current compensation covered by the Pension Plan, which
excludes bonus earnings, is reflected in the "Salary" column of the Summary
Compensation Table, subject to the aforementioned limit under OBRA.
Employment Contract; Supplemental Benefit Programs;
and Change of Control Arrangements
Mr. Wiedenhaupt was first employed as the Company's President and Chief
Executive Officer effective July 1, 1992 and entered into an employment
agreement at that time for the five-year period ending June 30, 1997. Effective
July 1, 1997 he signed a new Executive Employment Agreement (the "Employment
Agreement") which extended his employment for the six-year period ending June
30, 2003 (the "Employment Period"). The Employment Agreement provides for an
annual salary of not less than $300,000 and entitles Mr. Wiedenhaupt to
participate in the Company's bonus and other benefit plans.
If the Employment Agreement is terminated by the Company (other than for
cause or by reason of Mr. Wiedenhaupt's death or disability), he will be
entitled to receive all unpaid salary for the balance of the Employment Period,
subject to a maximum amount equal to three times his annual salary and bonus
and a minimum of one times that amount, his supplemental retirement benefit,
and his vested benefits under other plans, subject to certain limitations.
These amounts will be paid on the dates they would have been paid if his
employment had not been terminated unless the Company elects for them to be
paid in a discounted lump sum.
Upon retirement at age 65, Mr. Wiedenhaupt will be entitled to a
supplemental retirement benefit of $3,000,000 payable over 15 years. His
benefits vest at the rate of 10% per year commencing in 1992 and will be offset
by benefits under a separate split-dollar life insurance policy. The present
value of these supplemental retirement benefits are payable to Mr. Wiedenhaupt
upon termination of his employment within 36 months following a change in
control of the Company, in which event there would be a transfer of cash
surrender value from the Company to Mr. Wiedenhaupt under the split-dollar life
insurance policy in an amount sufficient to make up this present value.
11
<PAGE>
Upon retirement at age 65, Mr. Warzala will be entitled to a supplemental
retirement benefit of $1,200,000 adjusted for changes in the Consumer Price
Index from May 1, 1998 and payable over 15 years. In the event of involuntary
termination of employment, Mr. Warzala is fully vested in this program. His
benefit is offset by benefits under separate split-dollar life insurance
policies. The present value of these supplemental retirement benefits are
payable to Mr. Warzala upon termination of his employment within 36 months
following a change in control of the Company.
Messrs. Bingel, Kirchner and VanTine will be entitled to a supplemental
retirement benefit equal to three times final annual base compensation, payable
monthly over a 15-year period upon retirement at age 65. These retirement
benefits are offset by benefits under separate split-dollar life insurance
policies which, prior to retirement, provide the executives with a death
benefit equivalent to three times current annual base compensation. The present
value of these supplemental retirement benefits are payable to these officers
upon termination of their employment within 36 months following a change in
control of the Company.
The Company entered into agreements with Mr. Wiedenhaupt, Mr. Bingel, Mr.
VanTine, and Mr. Warzala in 1996, and with Mr. Kirchner in 1997 which provide
severance payments to each of them if they are either terminated or resign for
"good reason," as defined in the agreements, within three years after there has
been a "change of control," as defined, of the Company. In that event, Mr.
Wiedenhaupt would receive a severance payment equal to three and a half times
his then annual base salary plus the highest bonus accrued for him in any of
the three preceding years ("Total Compensation") plus a benefit replacement
amount equal to 50% of his Total Compensation and an amount to offset 75% of
the income tax liability Mr. Wiedenhaupt would incur upon the transfer of cash
surrender value to him under his split-dollar life insurance policy. These
payments would be in lieu of any severance payments under Mr. Wiedenhaupt's
Employment Agreement. Mr. Warzala would receive a severance payment equal to
two times his then annual base salary plus the highest bonus accrued for him in
any of the three preceding years and a benefit replacement equal to 35% of his
total compensation; Messrs. Kirchner and VanTine would receive 120% of their
then annual base salary plus the highest bonus accrued for them in any of the
three preceding years and 35% benefit replacement; and Mr. Bingel would receive
one times his then annual base salary plus the highest bonus accrued for him in
any of the three preceding years and 35% benefit replacement. Each agreement
provides that if the executive receives payments that would subject him to any
federal excise tax under Section 280G of the Internal Revenue Code, he will
also receive a cash "gross-up" payment so that he will be in the same net
after-tax position that he would have been in had the excise tax not been
applicable.
12
<PAGE>
Performance Graph
The following performance line graph compares the cumulative total
shareholder return on an investment in the Company's Common Stock over the past
five years with the total return on the stocks comprising the Russell 2000
Index and the Media General Multi-Industry Index ("Multi-Industry Index"). The
data for the graph was furnished by Media General Financial Services. The line
graph assumes an investment of $100 in API stock on the last day of the 1994
fiscal year and the reinvestment of quarterly cash dividends at the closing
price of API stock on the ex-dividend date during those quarters when a
dividend was paid; the Company discontinued its quarterly cash dividend as of
the first quarter of 1997. Calculations for the Russell 2000 and Multi-Industry
Indexes are made in a similar fashion. The Russell 2000 is an index comprised
of small market capitalization companies, similar to API, and therefore is
considered the best broad index against which to compare the stock market
performance of the Company.
[LINE GRAPH]
- -----------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
- -----------------------------------------------------------------------
API 100.0 147.1 269.5 280.5 139.0 114.6
- -----------------------------------------------------------------------
RUSSELL 2000
INDEX 100.0 128.4 149.8 183.2 178.1 213.0
- -----------------------------------------------------------------------
MULTI-INDUSTRY
INDEX 100.0 141.5 183.8 245.0 320.2 447.9
- -----------------------------------------------------------------------
13
<PAGE>
Board Compensation Committee Report *
The Compensation Committee of the Board of Directors (the "Committee") is
composed entirely of independent outside directors. In 1999 the Committee
consisted of Messrs. Stead (Chairman), Albertine, and Rice. The Committee is
responsible for setting and administering the policies, which govern annual
compensation, bonus plans, and stock ownership programs.
Compensation Philosophy
The Committee annually evaluates API's corporate performance and
compensation and share ownership programs as compared with industrial companies
reasonably similar in size, product content, profitability, return on equity,
and sound financial condition. Such data are gathered from consultant surveys
and published statistics and surveys. The Company's annual compensation
programs are designed to strike a reasonable balance between competitive base
salaries and a performance-oriented incentive system which does not reward
employees unless targeted goals are reached. If such goals are reached,
incentive compensation increases based on the goals achieved.
Salaries
The Committee set salaries for the executive officers of the Company for the
year beginning May 1, 1999 based on the Committee's evaluation of each
officer's performance, the performance of the officer's operating divisions,
and the overall performance of the Company. All executive officers other than
the President and Chief Executive Officer received salary increases based on
that evaluation.
Stock Options
As indicated above in the table under the caption "Option Grants in Last
Fiscal Year," in April 1999 the Committee granted stock options to certain
executive officers and other selected key employees; however, no options were
granted in 1999 to the President and Chief Executive Officer. In determining
the size of the grants for the executive officers, the Committee assessed their
individual performance, contributions to the business and relative levels of
responsibility.
Report on Repricing of Options/SARs
The Company has never repriced any outstanding options or SARs or cancelled
and replaced any option or SAR with one that had a lower exercise price. The
Company's Board of Directors does not favor such repricing or replacement. In
order to eliminate the possibility for any such repricing or cancellation and
replacement, in July 1998 the Company amended all of its employee and director
stock option plans to specifically preclude any repricings or other changes
that would similarly reduce the exercise price of options after they have been
granted.
Incentive Compensation
Beginning with 1995, the Company adopted an incentive compensation plan
based on the concept of economic value added (the "EVA Plan") to replace bonus
plans which were previously in effect. One purpose of the EVA Plan is to
provide incentives for plan participants to strive for the enhancement of
shareholder value through the achievement of the Company's strategic plan
objectives. The EVA Plan is also a critical feature of the Company's program to
shift a portion of employee compensation from fixed to variable so that, over
time, the variable component (i.e., EVA incentive compensation) of employee
compensation will become more
- --------
* The Report of the Compensation Committee shall not be deemed incorporated by
reference by any general statement incorporating by reference this
information statement into any filing under either the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as amended
(together, the "Acts"), except to the extent that the Company specifically
incorporates such report by reference; and further, such report shall not
otherwise be deemed filed under the Acts.
14
<PAGE>
significant in relation to the fixed component (i.e., base salary or wages).
All employees are eligible to participate in the EVA Plan, except employees
subject to certain collective bargaining agreements and employees compensated
under separate sales incentive or commission programs.
EVA is the amount by which the net operating profit after tax of a business
unit exceeds the weighted average cost of capital relative to the average
capital employed by that business unit.
Each EVA Plan participant has a target bonus based on a percentage of the
participant's base compensation during the Plan Year. Percentages are
established in the EVA Plan for various levels of responsibility within the
business units.
Each operating unit and the Company as a whole ("Units") had an EVA target
for 1999 approved by the Committee. Actual 1999 EVA results compared to the EVA
target establishes the percentage of the target bonus earned by the EVA Plan
participants. If EVA for a Unit exceeds the EVA target for the Plan Year, the
target bonus for the participants in that Unit will be increased by the same
percentage that EVA exceeds the EVA target. If EVA for a Unit falls short of
the EVA target for the Plan Year, the target bonus will be reduced by 1.5% for
each percentage point that the EVA shortfall bears to the EVA target.
The bonuses earned by EVA Plan participants whose target bonus percentage is
15% or more of base compensation (hereinafter referred to as "Bank Employees")
are subject to discretionary adjustment not to exceed plus or minus 15% of the
formula bonus. Bonus awards for most Bank Employees in operating Units will be
determined by subjecting 75% of their target bonus to EVA performance of their
Unit, and 25% of their target bonus to EVA performance of their manufacturing
group.
The bonuses earned by EVA Plan participants who are not Bank Employees are
subject to discretionary adjustments determined by the Unit's general manager,
subject to review by the Committee. The bonus award allocations made to
participants who are not Bank Employees will be paid in full on or about March
15 following the end of the Plan Year.
Bonus awards to Bank Employees are added to the amount, if any, held in an
account maintained on the Company's books for each Bank Employee ("Bank
Account"). If the amount in the Bank Account after adding the current bonus
award is equal to or less than the employee's target bonus, then the entire
"Bank Account" balance will be paid to the employee on or about March 15 in the
year following the Plan Year. If the Bank Account balance exceeds the target
bonus, the employee will be paid the target bonus plus one-half such excess. An
employee can have a negative bonus which will reduce the employee's Bank
Account or create a negative balance in this Bank Account which must be offset
by positive bonuses in the future before any bonus payment will be made from
the bank. The Committee has the authority to modify treatment of negative
balances when deemed appropriate.
CEO Compensation
The determination of the Chief Executive Officer's salary, bonus and annual
grant of stock options followed all of the policies and calculations set forth
above for those components of all executives' compensation.
Mr. Wiedenhaupt's base annual salary is determined by his Employment
Agreement with the Company. The Committee, with the approval of the Board of
Directors, can determine, in its discretion, to increase Mr. Wiedenhaupt's
salary. At its meeting in April 1999, the Committee reviewed Mr. Wiedenhaupt's
performance for the prior year, with particular attention to the progress made
by the Company in the development and execution of its growth strategy, the
Company's earnings and return on equity, and the EVA generated by the Company.
No adjustment to Mr. Wiedenhaupt's salary was made at that time.
The bonus awarded to Mr. Wiedenhaupt in 1999 for 1998 performance was
determined in accordance with the EVA Plan.
15
<PAGE>
In connection with the extension of his Employment Agreement in July 1997,
the Company had granted Mr. Wiedenhaupt options to purchase 200,000 shares of
the Company's Common Stock as an incentive for his continued achievement of the
Company's growth strategy. In view of that grant, the Committee elected not to
grant any options to him in 1998 or in 1999.
In February 1999 the Committee recommended, and the Board approved, an
increase in Mr. Wiedenhaupt's supplemental retirement benefit from an estimated
$2,000,000 to $3,000,000 payable over 15 years; and in October 1999 the
Committee recommended, and the Board approved, compensating Mr. Wiedenhaupt for
75% of any tax owed as a result of the full funding of his supplemental
retirement benefit resulting from a change of control of the Company.
Policy on Deductibility of Compensation
The Committee intends that, whenever reasonably possible, compensation paid
to its managers, including its executive officers, should be deductible for
federal income tax purposes. All compensation paid to or earned by the
executive officers in fiscal 1999 was deductible for federal income tax
purposes.
Submitted by the Compensation Committee of the Company's Board of Directors:
Jerre L. Stead, Chairman
John M. Albertine
Victor A. Rice
Compensation Committee Interlocks and Insider Participation
There are no "Compensation Committee interlocks" or "insider participation"
which SEC regulations would require to be disclosed in this information
statement.
Dated: February 24, 2000
Buffalo, New York
16
