SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Kuhlman Corporation
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
(KUHLMAN CORPORATION LOGO)
KUHLMAN CORPORATION
3 Skidaway Village Square
Savannah, Georgia 31411
March 25, 1998
DEAR STOCKHOLDER:
You are cordially invited to attend the annual meeting of stockholders of
Kuhlman Corporation ("Kuhlman") to be held at the Hyatt Regency Savannah, 2
West Bay Street, Savannah, Georgia 31401, on April 23, 1998, at 9:30 a.m.,
Savannah time ("Annual Meeting").
The Annual Meeting will be held for the following purposes: (i) to elect
four directors; (ii) to vote on a proposed Kuhlman Corporation Employee Stock
Purchase Plan; (iii) to vote on a proposed amendment to the Certificate of
Incorporation of Kuhlman to increase the number of authorized shares of common
stock of Kuhlman from 20,000,000 to 40,000,000; and (iv) to ratify the
appointment of Arthur Andersen LLP as independent auditors to conduct the
annual examination of the financial statements of Kuhlman and its subsidiaries
for the current year.
Whether or not you plan to attend the Annual Meeting, please complete,
sign and date the accompanying proxy card and return it in the enclosed prepaid
envelope. You may revoke your proxy in the manner described in the accompanying
Proxy Statement at any time before it has been voted at the Annual Meeting. If
you attend the Annual Meeting, you may vote in person even if you have
previously returned your proxy card. Your prompt cooperation will be greatly
appreciated.
The 1997 Annual Report to stockholders of Kuhlman, including financial
statements, is furnished herewith.
Sincerely,
/s/ Robert S. Jepson, Jr.
ROBERT S. JEPSON, JR.
Chairman of the Board and
Chief Executive Officer
<PAGE>
<PAGE>
KUHLMAN CORPORATION
-------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
-------------------
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders ("Annual
Meeting") of Kuhlman Corporation ("Kuhlman") will be held at the Hyatt Regency
Savannah, 2 West Bay Street, Savannah, Georgia 31401, on April 23, 1998, at
9:30 a.m., Savannah time, for the following purposes:
1. To elect four directors;
2. To consider and vote on the Kuhlman Corporation Employee Stock Purchase
Plan;
3. To consider and vote on an amendment to the Certificate of Incorporation
of Kuhlman to increase the number of authorized shares of common stock,
par value $1.00 per share, from 20,000,000 to 40,000,000;
4. To ratify the appointment of Arthur Andersen LLP as the independent
auditors for Kuhlman and its subsidiaries for the current year; and
5. To transact such other business as may properly come before the meeting.
Only stockholders of record at the close of business on February 27, 1998,
will be entitled to notice of and to vote at the Annual Meeting.
By Order of the Board of Directors,
RICHARD A. WALKER
Secretary
Savannah, Georgia
March 25, 1998
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PLEASE DATE, SIGN AND RETURN YOUR KUHLMAN PROXY PROMPTLY IN THE ENCLOSED, SELF-
ADDRESSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
- ------------------------------------------------------------------------------
<PAGE>
<PAGE>
KUHLMAN CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
-------------------
INTRODUCTION
This Proxy Statement is being furnished to the stockholders of Kuhlman
Corporation, a Delaware corporation ("Kuhlman"), in connection with the
solicitation of proxies on behalf of the Board of Directors of Kuhlman ("Board
of Directors") for use at the annual meeting of Kuhlman stockholders to be held
on April 23, 1998, and at any adjournment thereof ("Annual Meeting"). The
address of the principal executive offices of Kuhlman is 3 Skidaway Village
Square, Savannah, Georgia 31411.
The Annual Meeting has been called by the Board of Directors for the
following purposes: (i) to elect four directors; (ii) to vote on a proposed
Kuhlman Corporation Employee Stock Purchase Plan; (iii) to vote on a proposed
amendment to the Certificate of Incorporation of Kuhlman to increase the number
of authorized shares of common stock of Kuhlman from 20,000,000 to 40,000,000
(the "Amendment"); and (iv) to ratify the appointment of Arthur Andersen LLP as
Kuhlman's independent auditors for the current year ending December 31, 1998.
The Annual Meeting will be held on April 23, 1998, at 9:30 a.m., Savannah time,
at the Hyatt Regency Savannah, 2 West Bay Street, Savannah, Georgia 31401. Only
stockholders of record of Kuhlman Common Stock at the close of business on
February 27, 1998, will be entitled to notice of and to vote at the Annual
Meeting. Kuhlman had outstanding 16,585,941 shares of Kuhlman Common Stock as
of the close of business on February 27, 1998. There are no other voting
securities outstanding. Each stockholder is entitled to one vote per share for
the election of directors, as well as on each other proposal contained in the
notice of the Annual Meeting. If the accompanying proxy form is signed and
returned, the shares represented thereby will be voted in accordance with any
direction on the proxy form, or in the absence of a direction as to any
proposal, they will be voted FOR the proposal; and it is intended that they
will be voted for the nominees named herein, except to the extent authority to
vote is withheld. Stockholders may revoke their proxies at any time prior to
the voting thereof by giving written notice of such revocation to Kuhlman, by
executing and delivering a proxy bearing a later date or by attending the
Annual Meeting and voting in person.
The expenses of the solicitation will be paid by Kuhlman. In addition to
the use of the mails, proxies may be solicited by directors, officers, or
regular employees of Kuhlman in person, by telegraph or by telephone.
Arrangements will also be made with brokerage firms and other custodians,
nominees and fiduciaries to forward solicitation material to the beneficial
owners of the shares of Kuhlman Common Stock held of record by such persons,
and Kuhlman will reimburse such brokerage firms, custodians, nominees and
fiduciaries for reasonable out-of-pocket expenses incurred by them in
connection therewith. Kuhlman has retained Georgeson & Company Inc. to assist
in the solicitation of proxies. The fee of such firm is estimated to be $7,000,
plus reimbursement for out-of-pocket costs and expenses.
The presence at the Annual Meeting, in person or by proxy, of the holders
of a majority of the outstanding shares of Kuhlman Common Stock is necessary to
constitute a quorum under Delaware law and the Bylaws of Kuhlman. Votes cast by
proxy or in person at the meeting will be tabulated by election inspectors
appointed for the meeting and will determine whether or not a quorum is
present. The election inspectors will treat abstentions and "broker non-votes"
(i.e., proxies of brokers who have limited authority to vote on specified
proposals) as shares that are present and entitled to vote for purposes of
determining the presence of a quorum at the meeting.
A plurality of the votes cast for the election of directors will be
required to elect Kuhlman directors at the meeting. In the absence of an
election contest, withholding authority to vote and broker non-votes with
respect to a nominee will have no effect on the election of such nominee.
Approval of the proposed Kuhlman Corporation Employee Stock Purchase Plan
requires the affirmative vote of the holders of a majority of the Kuhlman
Common Stock present or represented by proxy and entitled to vote at the Annual
Meeting.
The affirmative vote of the holders of a majority of the outstanding
shares of Kuhlman Common Stock is required to approve the Amendment.
Kuhlman stockholders may mark the accompanying Kuhlman proxy to vote their
shares FOR or AGAINST or to ABSTAIN with respect to each proposal, except that
with respect to the election of directors, Kuhlman stockholders may
1
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either vote FOR the nominees named herein or to WITHHOLD authority to vote for
one or more of such nominees. Abstentions (but not broker non-votes) will be
considered entitled to vote for purposes of the proposed Kuhlman Corporation
Employee Stock Purchase Plan. Abstentions and broker non-votes will be counted
in determining the presence of a quorum and will have the effect of a vote
against approval of the Amendment.
THE BOARD OF DIRECTORS RECOMMENDS THAT KUHLMAN STOCKHOLDERS VOTE "FOR"
APPROVAL OF EACH NOMINEE FOR ELECTION OF DIRECTORS AND "FOR" EACH PROPOSAL
CONTAINED IN THE ACCOMPANYING NOTICE OF ANNUAL MEETING OF STOCKHOLDERS OF
KUHLMAN.
The management of Kuhlman knows of no business other than that stated in
this Proxy Statement which will be presented for stockholder vote at the Annual
Meeting. If other business should properly come before such meeting, however,
the persons designated in the enclosed Kuhlman proxy will vote or refrain from
voting in respect thereof in accordance with the judgment of the persons voting
such proxies.
This Proxy Statement and the form of proxy for use at the Annual Meeting
are first being mailed to stockholders of Kuhlman on or about March 25, 1998.
The date of this Proxy Statement is March 25, 1998.
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ELECTION OF KUHLMAN DIRECTORS
The Kuhlman Bylaws provide that the number of directors, as determined by
the Kuhlman Board of Directors, shall not be less than six nor more than
eleven. The Kuhlman Bylaws further provide that directors shall be divided into
three classes serving staggered three-year terms, with each class to be as
nearly equal in number as possible.
The terms of Curtis G. Anderson, William E. Burch, Alexander W. Dreyfoos,
Jr., and General H. Norman Schwarzkopf will expire at the Annual Meeting. The
Board of Directors has nominated Mr. Burch for re-election as a director to
serve until the 1999 annual meeting of stockholders and Messrs. Anderson and
Dreyfoos, and General Schwarzkopf for re-election as directors to serve until
the 2001 annual meeting of stockholders.
The proposed nominees for election as directors have indicated that they
are willing to be elected and serve as such and it is intended that the persons
named in the accompanying form of proxy will vote for the election of such
nominees, assuming authority to vote is granted. If, as a result of
circumstances not now known or foreseen, any of such nominees shall be
unavailable or unwilling to serve as a director, the Board of Directors may
select a substitute nominee, and in that event, the proxies will vote for the
person so selected. If a substitute nominee is not so selected, the proxies
will vote for the election of the remaining nominees. Directors are elected by
a plurality of the votes cast at the meeting.
INFORMATION REGARDING KUHLMAN DIRECTORS, NOMINEES FOR
DIRECTORS OF KUHLMAN AND EXECUTIVE OFFICERS
The following information is furnished with respect to each person who is
currently a director of Kuhlman whose term of office will continue after the
Annual Meeting, as well as those persons who have been nominated for election
as a director, each of whom is currently a director of Kuhlman, and each person
who is an executive officer of Kuhlman:
<TABLE>
<CAPTION>
Director of
Kuhlman
Name Age Since Position
- -------------------------------- ----- ------------ ---------------------------------------------------
<S> <C> <C> <C>
Curtis G. Anderson 56 1993 President, Chief Operating Officer and Director of
Kuhlman (3)
William E. Burch 73 1993 Director of Kuhlman (1)(3)
Steve Cenko 72 1987 Director of Kuhlman (2)
Gary G. Dillon 63 1995 Chairman and Chief Executive Officer of
Schwitzer, Inc. and Director of Kuhlman
Alexander W. Dreyfoos, Jr. 66 1993 Director of Kuhlman (1)(3)
Robert S. Jepson, Jr. 55 1993 Chairman of the Board, Chief Executive Officer and
Director of Kuhlman
William M. Kearns, Jr. 62 1993 Director of Kuhlman (1)
George J. Michel, Jr. 66 1985 Director of Kuhlman (2)
General H. Norman Schwarzkopf 63 1994 Director of Kuhlman (2)(3)
</TABLE>
- ---------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Nominated for election as a director.
The current terms of Messrs. Anderson, Burch, Dreyfoos and General
Schwarzkopf will expire in 1998; of Messrs. Cenko and Jepson in 1999; and of
Messrs. Dillon, Kearns, and Michel in 2000.
<TABLE>
<CAPTION>
Executive
Officer of
Kuhlman
Name Age Since Position
- ----------------------- ----- ----------- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Robert S. Jepson, Jr. 55 1993 Chairman of the Board and Chief Executive Officer
Curtis G. Anderson 56 1994 President and Chief Operating Officer
Gary G. Dillon 63 1995 Chairman and Chief Executive Officer of Schwitzer, Inc.
Vernon J. Nagel 40 1993 Executive Vice President of Finance, Chief Financial Officer and Treasurer
Richard A. Walker 46 1984 Executive Vice President, Chief Administrative Officer, General Counsel and
Secretary
</TABLE>
3
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Mr. Anderson, who was elected President and Chief Operating Officer of
Kuhlman on April 26, 1994, and a director on September 8, 1993, founded and has
been, since 1986, Chairman of Anderson Capital Corporation, a private
investment company. Prior thereto, he spent 19 years in corporate and
investment banking, including 14 years first with Citibank and then five years
with The First National Bank of Chicago where he served as Executive Vice
President, Head of Financial Products Department.
Mr. Burch served as counsel to the law firm of Lukins & Annis in Spokane,
Washington, from 1984 to 1993. From 1981 to 1984, he served as Vice Chairman
and from 1975 to 1981, as President and Chief Executive Officer of Fred S.
James & Co. (insurance brokers). He has been a consultant from 1982 to the
present and currently serves as a director of Guy F. Atkinson Company of
California.
Mr. Cenko has been a consultant from 1985 to the present. From 1980 to
1985 he served as President of Lamb Systems Group (engineering, manufacturing,
and marketing of machine tools) and as a director and Executive Vice President
of Lamb Technicon Corporation (holding company).
Mr. Dillon has served as Chairman of Schwitzer, Inc. ("Schwitzer") since
June 1991 and Chief Executive Officer of Schwitzer since April 1989. From April
1989 to March 1997, he also served as President of Schwitzer. Prior to April
1989 he served as President and Chief Executive Officer of Household
Manufacturing, Inc. Mr. Dillon is also a director of Household International,
Inc.
Mr. Dreyfoos is currently serving as Chief Executive Officer of, and has
served continuously since 1963 as Chairman of the Board of, Photo Electronics
Corporation (investment management). He also serves as a director of FPL Group,
Inc.
Mr. Jepson, who was elected President and Chief Executive Officer of
Kuhlman on February 10, 1993, and Chairman of the Board on June 9, 1993,
founded and was Chairman and Chief Executive Officer of The Jepson Corporation
from 1983 until its sale in 1989. The Jepson Corporation was a diversified
manufacturing company listed on the New York Stock Exchange. Immediately
preceding his election as President and Chief Executive Officer of Kuhlman, Mr.
Jepson was, and is currently, Chairman and Chief Executive Officer of Jepson
Associates, Inc., a private investment company, and serves as Chairman of the
Board of Jepson Vineyards, Ltd. Mr. Jepson also serves as a director of Circuit
City Stores, Inc.
Mr. Kearns is currently President of W.M. Kearns & Co., Inc. (private
investment company) and is a Senior Consultant for Furman Selz LLC. He was
associated with Lehman Brothers (investment banking) and its predecessor firms
for more than 33 years. From 1992 to 1994 he was an Advisory Director of Lehman
Brothers and from 1969 through 1992 he was a Managing Director of that firm. He
also serves as a director of Selective Insurance Group, Inc., Malibu
Entertainment Worldwide, Inc., and as a trustee of EQ Advisors Trust (Equitable
Life Assurance Society of the United States).
Mr. Michel has been a private investor and consultant and Chairman of
Windstar International, Inc. (management consulting) from 1990 to the present.
Prior to 1990, he was Chairman of Stanadyne, Inc. (diversified manufacturer of
fabricated metal products) from 1985 to 1989, and Chief Executive Officer of
the same corporation from 1988 to 1989.
Mr. Nagel, who joined the Company on April 5, 1993, became Executive Vice
President of Finance, Chief Financial Officer and Treasurer of the Company in
February 1994 and was Vice President of Finance, Chief Financial Officer and
Treasurer prior thereto. He was the Vice President of Finance, Chief Financial
Officer and Secretary of Stericycle, Inc. (medical waste management), from 1990
until 1993. Prior thereto, Mr. Nagel served in various financial executive
capacities with The Jepson Corporation from 1985 until 1990.
General Schwarzkopf is currently active as an author, lecturer and TV
consultant. He retired in August 1991 as a Four-Star General in the U.S. Army
after having served as Commander in Chief, United States Central Command,
Department of Defense, and Commander of Operations Desert Shield and Desert
Storm. He currently serves as a director of Borg-Warner Security Corporation,
Remington Arms Company, Inc., and Home Shopping Network, Inc.
Mr. Walker has served as an Executive Vice President or similar position
with Kuhlman, as well as General Counsel and Secretary, since 1991. He has
served as Chief Administrative Officer since 1994. From 1984 until 1991, Mr.
Walker served as Vice President, General Counsel and Secretary of Kuhlman.
Prior thereto, Mr. Walker was a partner in the law firm of Harness, Dickey &
Pierce.
Board of Directors and Committees
Kuhlman currently has standing Audit and Compensation Committees of the
Board of Directors, and Steve Cenko continues to advise the Board of Directors
with respect to, and recommend individuals as, nominees for director of
Kuhlman.
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The members of the Audit Committee are William E. Burch, Chairman,
Alexander W. Dreyfoos, Jr., and William M. Kearns, Jr. The Audit Committee,
which met twice during 1997, recommends the appointment, subject to approval by
the Board of Directors and ratification by the stockholders, of Kuhlman's
independent auditors. The Committee meets with representatives of Kuhlman's
independent auditors to review the scope and effectiveness of the auditing
functions, makes appropriate reports and recommendations to the Board of
Directors, approves the fees to be paid to the independent auditors and
considers the effect of non-audit services on the independence of the
independent auditors.
The members of the Compensation Committee are George J. Michel, Jr.,
Chairman, Steve Cenko and General
H. Norman Schwarzkopf. The Committee, which met three times during 1997,
reviews and establishes all forms of compensation, including periodic
adjustments, for officers and certain other key employees of Kuhlman. This
Committee also administers the stock option, stock appreciation rights and
long-term incentive plans of Kuhlman and grants options, stock appreciation
rights and other awards thereunder.
Five meetings of the Board of Directors were held during 1997. Each
director attended at least seventy-five percent of the aggregate of the total
number of meetings of the Board of Directors of Kuhlman held in 1997 during the
time that the person served as a director and the total number of meetings held
by all committees of the Board on which they served during the periods that
they served in 1997.
A stockholder of Kuhlman may nominate persons for election to the Board of
Directors of Kuhlman if such stockholder submits such nomination, together with
certain related information required by Kuhlman's Bylaws, in writing to the
Secretary of Kuhlman not less than 60 days nor more than 90 days prior to the
first anniversary of the preceding year's annual meeting of stockholders;
provided, that in the event the date of the annual meeting is advanced by more
than 30 days or delayed by more than 60 days from such anniversary date, the
nomination must be submitted not earlier than the 90th day prior to such annual
meeting and not later than the 60th day prior to such annual meeting or the
10th day following the date on which public announcement of the date of such
meeting is first made.
Compensation of Directors
Non-employee directors receive an annual retainer of $24,000 which covers
all Board of Directors meetings, Committee meetings and consulting services
(however, additional payments for financial advisory services rendered to
Kuhlman by an affiliate of Mr. Kearns will also be made. See "Information
Regarding Kuhlman Directors, Nominees for Directors of Kuhlman and Executive
Officers -- Related Transactions"). In addition, under Kuhlman's Non-Employee
Directors Stock Plan which was approved by stockholders in 1993, non-employee
directors receive annually a number of shares of Kuhlman's Common Stock equal
to an aggregate Fair Market Value of $24,000 concurrent with the meeting of the
Board of Directors held each year after the Annual Meeting of Stockholders.
Fair Market Value is defined as the closing price of Kuhlman Common Stock on
the New York Stock Exchange on the date of such directors' meeting or if there
is no such price published on such date, then the most recent preceding date on
which such price is published. Pursuant to such Plan, Messrs. Burch, Cenko,
Dreyfoos, Kearns, Michel and General Schwarzkopf each received 941 shares of
Kuhlman Common Stock as of April 24, 1997.
All non-employee directors are reimbursed for travel and other expenses
related to attendance at meetings and receive term life insurance and
accidental death and disability coverage in the amount of $50,000. The cost to
the Corporation for this insurance coverage is $234 per year for each director.
During 1997, Kuhlman provided medical and dental insurance coverage to Messrs.
Burch, Dreyfoos, Kearns, Michel and General Schwarzkopf. The total
compensation, including insurance benefits, but excluding the stock referred to
above, paid to each non-employee director during 1997 was as follows: William
E. Burch -- $35,009; Steve Cenko -- $24,240; Alexander W. Dreyfoos, Jr. --
$35,009; William M. Kearns, Jr. -- $35,009; George J. Michel, Jr. -- $35,009;
and General H. Norman Schwarzkopf -- $35,009. Kuhlman will also match up to
$20,000 per calendar year, for each director and officer of Kuhlman, charitable
contributions made by such individuals to organizations qualified as tax-exempt
by the Internal Revenue Service. Pursuant to the Kuhlman Corporation Long-Term
Incentive Plan (the "Long-Term Incentive Plan") which was approved by
stockholders in 1997, an option to purchase 2,000 shares of Kuhlman Common
Stock is granted automatically to each non-employee director of Kuhlman
concurrent with the meeting of the Board of Directors held each year following
the Annual Meeting of Stockholders. The option price for such options is the
closing sale price on the New York Stock Exchange Composite Tape on the date of
grant, or if there is no such sale on such date, then on the last previous day
on which a sale was reported. During 1997, Messrs. Burch, Cenko, Dreyfoos,
Kearns, Michel, and General Schwarzkopf received options entitling each of them
to purchase 2,000 shares of Common Stock at a per share option price of $25.50.
5
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Report of the Compensation Committee of the Kuhlman Board of Directors on
Executive Compensation
Kuhlman's executive compensation program is administered by the
Compensation Committee of the Kuhlman Board of Directors. The Compensation
Committee is composed entirely of non-employee directors of Kuhlman.
Overall Policy. The Compensation Committee determines the compensation of
the officers of Kuhlman, including the individuals named in the Summary
Compensation Table. The compensation of the corporation's Chief Executive
Officer is ratified by the Board of Directors. Kuhlman's compensation program
for officers is designed to be linked to corporate performance and to returns
to stockholders. To this end, Kuhlman has developed an overall compensation
strategy and specific compensation plans that tie a very significant portion of
executive compensation to Kuhlman's and the individual's success in meeting
specified performance objectives and to appreciation in Kuhlman's stock price.
In 1997, the specific performance objectives included improving earnings,
achieving certain stock price levels, improving utilization of working capital,
reducing overhead costs by improving productivity and operating efficiencies,
and continuing the implementation of an acquisition strategy. These, as well as
subjective discretionary factors, were utilized in determining cash bonus
awards, as well as other elements of officer compensation. The overall
objectives of this strategy are to attract and retain the best possible
executive talent, to motivate these executives to achieve the objectives
inherent in Kuhlman's business strategy, to link executive and stockholder
interests through equity-based plans, and finally to provide a compensation
package that recognizes individual contributions as well as overall business
results.
The key elements of Kuhlman's officer compensation program in 1997
consisted of base salary, annual bonus, stock options, and awards under
Kuhlman's Long-Term Incentive Plan. The Compensation Committee's policies with
respect to each of these elements, including the bases for the compensation
awarded to Mr. Jepson, Kuhlman's Chairman and Chief Executive Officer, are
discussed below. In addition, while the elements of compensation described
below are considered separately, the Compensation Committee takes into account
the full compensation package afforded by Kuhlman to the individual, including
pension benefits, severance plans, insurance and other benefits, as well as the
programs described below. The Compensation Committee retains the discretion to
keep individual items of compensation constant so long as total compensation
fairly reflects overall corporate performance and individual achievement.
Base Salaries. Base salaries for new officers are initially determined by
evaluating the responsibilities of the position held and the experience of the
individual, and by reference to the competitive marketplace for executive
talent, including a comparison of average and median base salaries for similar
positions at other comparable companies. Companies believed to be comparable
include similarly-sized (based on expected annual revenues of Kuhlman) basic
manufacturing companies, other than so-called "high technology" manufacturing
companies, as well as holding companies with subsidiaries involved in
manufacturing.
Annual salary adjustments are determined by evaluating the performance of
Kuhlman and of each officer versus various performance objectives, and also
take into account new responsibilities and subjective discretionary factors. In
the case of officers with responsibility for a particular division or
subsidiary (a "Business Unit"), the financial results of that Business Unit are
also considered. The Compensation Committee, where appropriate, also considers
non-financial performance measures. These include increase in market share,
manufacturing efficiency gains, improvements in product quality and
improvements in relations with customers, suppliers and employees.
In arriving at Mr. Jepson's base salary amount for 1997, the Compensation
Committee took into account a comparison of average and median base salaries
and total cash compensation (base salary plus bonus) for chief executive
officers of comparable manufacturing companies, as referred to above, and the
assessment by the Compensation Committee of Mr. Jepson's individual performance
expected in 1997 and beyond. The base salaries of each of Messrs. Anderson,
Dillon, Nagel, and Walker for 1997 were determined utilizing the same factors
used in determining Mr. Jepson's base salary.
Annual Bonus. Kuhlman officers are eligible for an annual cash bonus. As
in the case of base salary, in addition to the performance objectives referred
to above, the Compensation Committee may consider individual non-financial
performance measures and subjective discretionary factors including significant
accomplishments and/or increased responsibilities, leadership, and, where
appropriate, Business Unit and line item performance measures (such as
earnings, cash flow, and working capital management) in determining bonuses.
The Compensation Committee believed that the bonus paid to Mr. Jepson for 1997
performance was justified in view of Mr. Jepson's leadership of Kuhlman in
1997, which included improving Kuhlman's operating earnings and balance sheet,
and completing two significant acquisitions. Mr. Jepson's bonus amount in 1997,
as well as the bonuses received in 1997 by Messrs. Anderson, Dillon, Nagel and
Walker, were determined in view of the performance objectives referred to
above, as well as subjective discretionary factors, keeping in mind average and
median total cash compensation levels at comparable manufacturing companies, as
referred to above. In the case of Mr. Dillon, reference was also made to
certain performance guidelines and plans used at Schwitzer (see "Executive
Compensation and
6
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Severance Agreements"). The Compensation Committee believed that the bonuses
paid to each of Messrs. Anderson, Dillon, Nagel and Walker were justified based
on each of said executive's individual performance in 1997.
Stock Options. Under Kuhlman's stock option plans including the stock
option portion of Kuhlman's Long-Term Incentive Plan, which were approved by
stockholders, stock options are granted to Kuhlman officers and other key
employees. Stock options are also designed to further align the interests of
officers with those of stockholders. The Compensation Committee sets guidelines
for the size of stock option awards based on factors similar to those used to
determine base salaries and annual bonuses, including corporate performance and
general competitive compensation practices regarding stock option awards. In
the event of poor corporate performance, the Compensation Committee can elect
not to award options. The Committee also considers grants in previous years.
The grants in 1997 took into account the desire on the part of the Compensation
Committee to further align the officer's interests with those of Kuhlman
stockholders. Stock options are granted with an exercise price equal to the
market price of Kuhlman Common Stock on the date of grant. In 1997, Mr. Jepson
and each of Messrs. Anderson, Dillon, Nagel and Walker received options to
purchase shares of Kuhlman Common Stock.
Long-Term Incentive Plan. Under Kuhlman's Long-Term Incentive Plan, which
was approved by stockholders, awards may be made of incentive and nonqualified
stock options, stock appreciation rights, and restricted stock to Kuhlman
officers and other eligible employees. In addition, awards may also be made to
Kuhlman officers and other eligible employees with a value tied to specific
performance goals and, after a specified period, the value of those awards may
be paid with Kuhlman Common Stock or cash, or a combination of the two. Awards
under the Long-Term Incentive Plan are also designed to further align the
interests of officers with those of stockholders. During 1996, awards were
approved pursuant to the Long-Term Incentive Plan whereby Kuhlman officers and
other key employees would receive a payout after the attainment of each of two
share price thresholds for stock of the Company within three years from the
program commencement date, subject to certain vesting requirements. The stock
price thresholds were $23 and $27 per share. Each award consisted of two-thirds
Kuhlman Common Stock and one-third cash and the level of awards varied by
participant. After achievement of each threshold, the payout to the eligible
participants would be made in four quarterly installments subject to certain
vesting requirements. As of April 10, 1997, the Company had achieved the $23
threshold with payouts to each of Messrs. Jepson, Anderson, Dillon, Nagel and
Walker and other participants commencing on May 1, 1997. As of May 27, 1997,
the Company had achieved the $27 threshold with payouts to each of Messrs.
Jepson, Anderson, Dillon, Nagel and Walker and other participants commencing on
June 1, 1997. A similar two-year program with stock thresholds of $36 and $42
per share was implemented on July 31, 1997. (See "Long-Term Incentive Plan --
Awards in Last Fiscal Year" table.)
Stock Appreciation Rights. Under the Kuhlman Corporation 1994 Stock
Appreciation Rights Plan (the "SAR Plan") adopted by the Board of Directors in
1994 and amended in 1997, SARs may be granted to Kuhlman officers and other key
employees. The SARs are automatically exercised on the earliest to occur of the
fifth anniversary of grant or other circumstances including a change in
control, as defined in the SAR Plan, of Kuhlman and pay in cash the difference
between the price of Kuhlman Common Stock on the date of exercise versus the
price of such stock on the date of grant of the SAR. The Compensation Committee
sets guidelines for the size of SAR grants based on factors similar to those
used for stock options. During 1997, no SAR grants were made to Kuhlman
officers.
Compliance with Internal Revenue Code Section 162(m). Section 162(m) of
the Code, enacted in 1993 and effective for fiscal years beginning on or after
January 1, 1994, generally disallows a tax deduction to public companies for
compensation over $1 million paid to a corporation's chief executive officer
and four other most highly compensated executive officers. Qualifying
performance-based compensation will not be subject to the deduction limit if
certain requirements are met. Kuhlman currently intends to continue to review
the performance-based portion of the compensation of its executive officers in
view of this statute and regulations relating thereto.
Conclusion. Through the programs described above, a very significant
portion of Kuhlman's executive compensation is linked directly to corporate and
individual performance and stock price appreciation. In 1997, as in previous
years, a significant portion of Kuhlman officers' compensation consisted of
these variable performance-based elements. The Compensation Committee intends
to continue the policy of linking executive compensation to corporate
performance and returns to stockholders, recognizing that the fluctuations of a
business cycle may from time to time result in an imbalance for a particular
period.
Compensation Committee
George J. Michel, Jr., Chairman
Steve Cenko
General H. Norman Schwarzkopf
7
<PAGE>
Executive Compensation
Summary Compensation Table. The following table sets forth certain
information regarding compensation paid during each of Kuhlman's last three
fiscal years to its Chief Executive Officer, and the four most highly
compensated persons serving as executive officers of Kuhlman ("Named
Executives") at December 31, 1997, whose salary and bonus for fiscal year 1997
exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual
Compensation (1)
Name and Principal ----------------------- Other Annual
Position Year Salary Bonus Compensation (3)
- ----------------------------- ------ ----------- ----------- ------------------
<S> <C> <C> <C> <C>
Robert S. Jepson, Jr. 1997 $500,000 $650,000 $ --
Chairman of the Board 1996 450,000 525,000 --
and Chief Executive 1995 300,000 300,000 --
Officer
Curtis G. Anderson 1997 425,000 500,000 --
President and Chief 1996 400,000 400,000 --
Operating Officer 1995 300,000 300,000 --
Gary G. Dillon (7) 1997 440,000 500,000 8,067
Chairman and Chief 1996 420,000 400,000 8,067
Executive Officer 1995 370,292 300,000 24,699
of Schwitzer, Inc.
Vernon J. Nagel 1997 240,000 200,000 --
Executive Vice President 1996 230,000 100,000 --
of Finance, Chief 1995 190,000 80,000 --
Financial Officer
and Treasurer
Richard A. Walker 1997 240,000 200,000 --
Executive Vice President, 1996 230,000 100,000 --
Chief Administrative 1995 190,000 80,000 --
Officer, General Counsel
and Secretary
<CAPTION>
Long-Term
Compensation
---------------------------------
Awards (2)
--------------
Number of
Securities
Underlying Payouts
Name and Principal Options/SARs ------------------ All Other
Position Granted (4) LTIP Payouts (5) Compensation (6)
- ----------------------------- -------------- ------------------ -----------------
<S> <C> <C> <C>
Robert S. Jepson, Jr. 100,000 $749,928 $ 2,700
Chairman of the Board 100,000 -- 2,700
and Chief Executive 100,000 -- 4,584
Officer
Curtis G. Anderson 60,000 749,928 3,975
President and Chief 50,000 -- 3,825
Operating Officer 50,000 -- 5,970
Gary G. Dillon (7) 10,000 562,445 327,840(8)
Chairman and Chief 5,000 -- 15,120
Executive Officer 9,615 -- 1,489,444(9)
of Schwitzer, Inc.
Vernon J. Nagel 40,000 299,939 2,805
Executive Vice President 20,000 -- 2,805
of Finance, Chief 20,000 -- 4,847
Financial Officer
and Treasurer
Richard A. Walker 40,000 299,939 2,805
Executive Vice President, 20,000 -- 2,805
Chief Administrative 20,000 -- 4,847
Officer, General Counsel
and Secretary
</TABLE>
- ---------
(1) The aggregate amount of perquisites and other personal benefits for any
named executive did not exceed $50,000 or 10% of the total of annual
salary and bonus for any such named executive, and is therefore not
reflected in the table.
(2) Excludes the performance awards to each of the Named Executives on July 31,
1997, pursuant to the Long-Term Incentive Plan. See "Long-Term Incentive
Plan -- Awards in Last Fiscal Year" table.
(3) Represents amounts reimbursed during the referenced years for the payment
of taxes as to club fees and automobile allowance for Mr. Dillon.
(4) Represents the number of option shares granted under Kuhlman's stock option
and long-term incentive plans.
(5) Represents the value of stock (two-thirds) and cash (one-third) paid in
1997 pursuant to performance awards granted under the Long-Term Incentive
Plan.
(6) The amounts shown in this column include the following:
(a) Company contributions to the Kuhlman Electric Corporation ("Kuhlman
Electric") Savings Maximizer Plan ("Savings Maximizer Plan"), and, in the
case of Mr. Dillon, to the Schwitzer U.S. Inc. Supplemental Tax Reduction
Investment Plan ("Supplemental TRIP") (See "Savings and Pension Plans"
below). The amount of the contribution to the Savings Maximizer Plan for
1997 was $0 for Mr. Jepson; $1,425 for Mr. Anderson; $1,425 for Mr.
Nagel; and $1,425 for Mr. Walker; and the amount of the contribution to
the Supplemental TRIP in 1997 for Mr. Dillon was $25,200.
(b) The dollar value of insurance premiums for group term life. The amount
of the payment for group term life insurance premiums for 1997 was $2,700
for Mr. Jepson; $2,550 for Mr. Anderson; $2,640 for Mr. Dillon; $1,380
for Mr. Nagel; and $1,380 for Mr. Walker.
(7) On May 31, 1995, Spinner Acquisition Corp. ("Spinner"), a Delaware
corporation and a wholly-owned subsidiary of Kuhlman, was merged (the
"Merger") with and into Schwitzer, Inc. ("Schwitzer") of which Mr. Dillon
was the Chairman, President and Chief Executive Officer, pursuant to an
Agreement and Plan of Merger dated as of February 25,
8
<PAGE>
1995, among Kuhlman, Spinner, and Schwitzer (the "Agreement"). The Merger
became effective upon the filing of a Certificate of Merger with the
Delaware Secretary of State on May 31, 1995 (the "Effective Time"). At the
Effective Time, and pursuant to the Agreement, each outstanding share of
common stock of Schwitzer, par value $.10 per share ("Schwitzer Common
Stock"), was converted into 0.9615 share of Kuhlman Common Stock (the
"Exchange Ratio"). The 1995 amounts for Mr. Dillon, who also serves as
Chairman and Chief Executive Officer of Schwitzer U.S. Inc. ("Schwitzer
U.S.") which is the principal direct subsidiary of Schwitzer, include
amounts earned before the Effective Time of the Merger (May 31, 1995). In
conjunction with the Merger, outstanding stock options under the Schwitzer
Long-Term Executive Incentive Compensation Plan (the "1989 Plan") were
converted into options to purchase Kuhlman Common Stock in accordance with
the Exchange Ratio. Options granted to Mr. Dillon reflect the number of
options granted to Mr. Dillon in the stated years after giving effect to the
terms of the Merger and application of the Exchange Ratio.
(8) Includes $300,000 earned pursuant to 1,500 performance units under
Schwitzer's Performance Unit Plan for the period from January 1, 1995
through December 31, 1997. Excludes amounts attributable to the right to
receive an amount of cash equal to the value of 75,000 shares of Kuhlman
Common Stock on the date Mr. Dillion's employment terminates with
Schwitzer U.S. Inc. ("Schwitzer U.S.") which right was subject to
forfeiture if Mr. Dillion's employment by Schwitzer U.S. had terminated
prior to October 18, 1997.
(9) Includes the payment of $1,462,500 to Mr. Dillon pursuant to the Dillon
Agreement as defined below (see "Executive Compensation and Severance
Benefits").
Savings and Pension Plans
Kuhlman Electric Corporation Savings Maximizer Plan. Under the Kuhlman
Electric Corporation Savings Maximizer Plan ("Savings Maximizer Plan"),
participants contribute through payroll deductions amounts that vary from 1% to
16% of their compensation. Kuhlman or a participant's employer, as the case may
be, contributes to the Savings Maximizer Plan on behalf of each participant a
minimum amount equal to 15% of the participant's before-tax contributions,
which do not exceed 6% of the participant's compensation. Kuhlman Electric may
also make a discretionary matching annual contribution to the Savings Maximizer
Plan, which is divided equally among qualifying participants based on the
number of calendar quarters during the plan year that the participant made
before-tax contributions. Each participant is immediately vested in all
contributions made on his or her behalf.
Kuhlman Electric Corporation Salaried Employees' Pension Plan. The
Salaried Employees' Pension Plan maintained by Kuhlman Electric Corporation
(the "Kuhlman Electric Pension Plan") covers certain hourly and all salaried
employees employed by Kuhlman Electric, certain salaried employees employed by
the TRANS-PAK Spring Assembly Division of Emtec Products Corporation, and the
salaried employees of Kuhlman.
The Kuhlman Electric Pension Plan provides for an individual account for
each participant and for a benefit based upon the value of such account,
subject to the minimum benefit and grandfathering provisions described below.
The accounts of participants are credited annually with an amount equal to 3%
of salary plus an additional 3% of salary in excess of one-quarter of the
maximum amount of wages subject to FICA taxes. Accounts also are credited with
a guaranteed rate of interest. The accumulated account may be converted to an
annuity at retirement. The account of each individual who was a participant
prior to January 1, 1987, was also credited with an amount equal to the value
of such participant's accrued benefit as of December 31, 1986, determined under
the defined benefit formula then in effect.
A minimum pension of 1.2% of average compensation multiplied by credited
service (limited to 20 years) is payable if it would provide a larger benefit.
In addition, certain "grandfathering" provisions apply to avoid a loss of
benefits as a result of the transition in 1987 to the revised benefit
structure.
As of December 31, 1997, the estimated annual pension benefits payable
upon retirement at age 65 for certain of the individuals named in the Summary
Compensation Table are as follows: $23,660 for Mr. Jepson; $18,815 for Mr.
Anderson; $70,404 for Mr. Nagel; and $86,643 for Mr. Walker. These estimates
are based on the assumptions that the officer will remain in Kuhlman's employ
until age 65 without an increase in pensionable compensation, there is no
increase in the FICA wage base or the limitations on benefits imposed by the
Internal Revenue Code, the annual guaranteed rate of interest credited by the
Kuhlman Electric Pension Plan to a participant's account is 5% for 1998 and 5%
thereafter, and a 7% interest rate will be used when converting the officer's
projected account to an annuity.
Schwitzer Group Tax Reduction Investment Plan for Salaried Employees
("TRIP") and Supplemental Tax Reduction Investment Plan ("Supplemental TRIP").
The TRIP is a deferred savings plan for eligible U.S. employees of Schwitzer
U.S. and Transpro Group, Inc. With certain exceptions, an employee of at least
21 years of age with three months of service (three
9
<PAGE>
years of service if under age 21) may contribute into the TRIP, on a pre-tax
and after-tax basis, up to 15% of the participant's cash compensation (subject
to a maximum annual pre-tax contribution by a participant of $9,500 for 1997 as
adjusted for cost of living increases) and invest such contributions in Kuhlman
Common Stock or in several other equity or income funds. Each participant's own
pre-tax contributions are matched by employer contributions at 50% up to a
total of 3% of a participant's compensation. Employer matching contributions
are invested in Kuhlman Common Stock. A participant is always vested in his
pre-tax and after-tax contributions. A graduated vesting schedule provides for
partial vesting in matching contributions on the basis of years of service,
with a participant becoming fully vested in such employer matching
contributions after five years of employment. A participant also becomes fully
vested in matching contributions upon attaining age 65, retirement upon age 55
with 10 years of service, disability or death. With certain exceptions, a
participant's after-tax contributions may be withdrawn, and employer matching
contributions may be withdrawn after five years of plan participation. A
participant's pre-tax contributions may not be withdrawn except for an
immediate financial hardship, or after attaining age 59 1/2. All contributions
may be withdrawn upon termination of employment. In addition, participants may
obtain loans from their TRIP accounts under certain circumstances.
Schwitzer U.S. has also established the Supplemental TRIP for those
participants in the TRIP who, as the result of certain restrictions imposed on
the TRIP under the Internal Revenue Code, are precluded from receiving from
Schwitzer U.S. the full amount of the employer matching contributions to which
such participants would otherwise be entitled. Schwitzer U.S. credits to an
account established for each participant under the Supplemental TRIP an amount
equal to the difference between 3% of the participant's annual compensation and
the amount of the matching contribution that Schwitzer U.S. was permitted to
make to the account of such participant under the TRIP. A participant in the
Supplemental TRIP becomes vested in the amounts credited to his or her account
in accordance with the vesting schedule applicable to the TRIP. Vested amounts
held in a participant's account under the Supplemental TRIP will be paid in a
lump sum to the participant or his or her spouse or designated beneficiary upon
termination of employment or at such time or in such other form or manner as
the Schwitzer U.S. Board of Directors in its sole discretion may determine.
The Schwitzer Group Pension Plan for Salaried Employees ("Schwitzer
Pension Plan") and Supplemental Schwitzer Salaried Pension Plan. The Schwitzer
Pension Plan is a non-contributory, defined benefit plan for certain salaried
employees of Schwitzer U.S. Inc. and Transpro Group, Inc. The amount of a
participant's pension benefits depends primarily on years of employment, age at
retirement, and average annual compensation (salary plus certain bonuses,
whether paid in cash or stock, and excluding matching contributions to the TRIP
or Supplemental TRIP, moving expense reimbursements and automobile allowance)
for the 60 successive highest-paid months of the employee's last 120 months of
employment. The plan is integrated with Social Security to the extent allowed
by law. Participants become vested in their accrued pension benefits after five
years of service. Payment of vested pension benefits normally begins at age 65,
but an early retirement benefit at reduced levels may be paid if a participant
is at least 55 years of age with 10 years of service. Benefits that cannot be
paid under the Schwitzer Pension Plan due to restrictions imposed under the
Internal Revenue Code will be paid under the Supplemental Schwitzer Salaried
Pension Plan ("Supplemental Pension Plan"). The following table illustrates the
amount of the plan's annual pension benefits on a straight-life annuity basis
(including amounts payable under the Supplemental Pension Plan, where
applicable) for eligible employees retiring at age 65. Offsets for Social
Security payments and other offsets provided for in the plan are not reflected
in this table. This table reflects the new benefit formula that is effective as
of January 1, 1998.
SCHWITZER PENSION PLAN TABLE
<TABLE>
<CAPTION>
Years of Service
------------------------------------------------------
Remuneration 15 20 25 30 35
- -------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$ 100,000 $ 20,370 $ 27,161 $ 33,951 $ 40,741 $ 43,014
$ 200,000 $ 44,009 $ 58,679 $ 73,349 $ 88,019 $ 92,565
$ 300,000 $ 67,648 $ 90,198 $112,747 $135,297 $142,116
$ 400,000 $ 91,287 $121,716 $152,146 $182,575 $191,667
$ 500,000 $114,926 $153,235 $191,544 $229,853 $241,217
$ 600,000 $138,565 $184,754 $230,942 $277,131 $290,768
$ 700,000 $162,204 $216,272 $270,340 $324,408 $340,319
$ 800,000 $185,843 $247,791 $309,739 $371,686 $389,870
$ 900,000 $209,482 $279,309 $349,137 $418,964 $439,421
</TABLE>
10
<PAGE>
For purposes of determining the benefit under the Schwitzer Pension Plan,
the amount of covered compensation for 1997 for Mr. Dillon is equal to the
salary reported for 1997 plus the bonus reported for 1997 in the Summary
Compensation Table. The years of service for purposes of the Schwitzer Pension
Plan is 19 years for Mr. Dillon. In calculating credited years of service under
the Schwitzer Pension Plan, years of service with Household prior to the
spin-off of Schwitzer by Household International, Inc. in 1989 have been taken
into account.
Executive Compensation and Severance Agreements. On February 22, 1994, the
Board of Directors of Kuhlman approved a severance policy applicable to certain
executive officers designated by the Compensation Committee of the Kuhlman
Board of Directors. The severance policy supersedes any existing severance
arrangements with individual officers of Kuhlman. The severance policy provides
that if an executive officer's employment with Kuhlman is terminated by Kuhlman
for any reason other than the conviction of a felony involving Kuhlman, the
executive's base salary will be continued for a period of up to twenty-four
(24) months after such termination. Such officer will also be entitled during
the same period to the continuation of certain benefits that such officer was
receiving at the time of termination, including, but not limited to, medical
and dental coverage, health and accident insurance, and disability and group
life insurance. No continuation of salary and benefits are payable under the
severance policy if an executive officer dies, retires, or voluntarily
terminates employment with Kuhlman. Furthermore, under the severance policy,
salary and benefits payable under such severance policy will terminate if an
executive officer performs services for a competitor of Kuhlman and will be
reduced or eliminated entirely if services are performed for a non-competitor.
The severance policy will be administered by the Compensation Committee of the
Board of Directors of Kuhlman. As of January 1, 1998, the highest monthly
salary for the purpose of determining the severance pay for the Chief Executive
Officer and the other three executives covered by the policy was as follows:
Mr. Jepson -- $41,667; Mr. Anderson -- $37,542; Mr. Nagel -- $21,208; and Mr.
Walker -- $21,208. As of February 20, 1996, the severance policy was modified
by change of control agreements ("Control Agreements") entered into as of
February 20, 1996, between Kuhlman and each of the executive officers referred
to in this paragraph (Messrs. Jepson, Anderson, Nagel and Walker). The Control
Agreements are for an initial three-year term and are automatically renewable
each year thereafter for an additional term of one year unless the Board of
Directors elects otherwise, and are designed to encourage the continuity of
management in view of the possibility of a change of control (as defined in the
Control Agreements). Under the Control Agreements, if a change of control
occurs, each executive would be entitled to receive, subject to the right of
the Board of Directors of Kuhlman to amend or waive any or all of Kuhlman's
payment obligations set forth in the Control Agreements at any time before a
change of control occurs, an aggregate amount equal to: (a) three times the
executive's current annual base salary, (b) three times the executive's highest
annual cash bonus of the past three years, (c) an adjustment of the amount paid
to the executive pursuant to the Control Agreements to cover any liability on
the part of the executive for excise and income taxes, and (d) continuation of
benefits for three years under all of the benefit plans of Kuhlman in effect on
the date of the change of control.
Mr. Dillon and Schwitzer U.S. have been parties to an employment agreement
since 1989 which was last amended on February 25, 1995 (as so amended the
"Dillon Agreement"). The Dillon Agreement sets forth Mr. Dillon's entitlement
to an established annual salary (currently $440,000) as may be increased from
time to time by the Board of Directors of Schwitzer U.S., with the oversight of
the Kuhlman Compensation Committee, and to benefits under the Schwitzer U.S.
benefit plans, and establishes an annual bonus awarded under Schwitzer's
Executive Incentive Compensation Program ranging from 0% to 80% of his annual
salary, with a par rate equal to 50% of his annual salary, also with the
oversight of the Kuhlman Compensation Committee. Pursuant to the Dillon
Agreement, Schwitzer U.S. paid Mr. Dillon a lump sum cash payment in the amount
of three times his then annual salary and three times his then annual bonus at
par level at the Effective Time of the Merger. Schwitzer U.S. may terminate Mr.
Dillon's employment at any time and Mr. Dillon may resign such employment at
any time. Under the Dillon Agreement, Mr. Dillon will receive all pension,
profit sharing, deferred compensation, medical and life insurance benefits
under Schwitzer U.S.'s benefit plans for a period ending on the earlier of (a)
18 months after Mr. Dillon's termination or resignation or (b) his 65th
birthday.
Stock Option Plans. Currently there are options outstanding under
Kuhlman's 1983 Stock Option Plan ("1983 Plan"), 1986 Stock Option Plan ("1986
Plan"), 1989 Stock Option Plan ("1989 Plan") (formerly a Schwitzer plan), 1994
Stock Option Plan ("1994 Plan") and the Long-Term Incentive Plan approved by
stockholders. The Plans provide for such options to be granted to officers and
other key executive employees of Kuhlman and its subsidiaries at not less than
100% of the market value of Kuhlman Common Stock (as defined in the Plans) at
date of grant and with an expiration no later than ten years from date of
grant. Options may be granted currently under the 1994 Plan and the Long-Term
Incentive Plan. No new options may be granted under the 1983 or 1986 Plans, but
the 1983 Plan and 1986 Plan continue as to outstanding stock options. In
conjunction with the Merger, the outstanding stock options under the 1989 Plan
were converted into options to
11
<PAGE>
purchase Kuhlman Common Stock in accordance with the Exchange Ratio, which were
granted to officers and key employees of Schwitzer at the market value of
shares of Schwitzer Common Stock at the date of grant. Subsequent to the
Merger, no additional options have been or will be granted under the 1989 Plan.
Option/SAR Grants During 1997
The following table sets forth information on stock options and stock
appreciation rights granted during 1997 to the Named Executives.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential Realizable Value
At Assumed Annual Rates
of Stock Price
Appreciation for Option/
SAR Term (2)
Individual Grants
---------------------------------------------------------
Percent of
Total
Number of Options/SARs
Securities Granted to Exercise
Underlying Employees or Base
Options/SARs During Price Expiration
Name Granted 1997 (1) Per Share Date 5% 10%
- -------------------------- ---------------- ------------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert S. Jepson, Jr. .. 100,000(3) 22.3% $ 21.25 2/16/07 $1,338,750 $3,378,750
Curtis G. Anderson ..... 60,000(3) 13.4% 21.25 2/16/07 803,250 2,027,250
Gary G. Dillon ......... 10,000(3) 2.2% 21.25 2/16/07 133,875 337,875
Vernon J. Nagel ........ 40,000(3) 8.9% 21.25 2/16/07 535,500 1,351,500
Richard A. Walker ...... 40,000(3) 8.9% 21.25 2/16/07 535,500 1,351,500
</TABLE>
- ---------
(1) Kuhlman granted options for an aggregate of 449,000 shares.
(2) As required by rules of the Securities and Exchange Commission, potential
values stated are based on the prescribed assumption that Kuhlman Common
Stock will appreciate in value from the date of grant to the end of the
option or SAR term at the annualized rates of 5% and 10% (total
appreciation of 63% and 159%), respectively, and therefore are not
intended to forecast possible future appreciation, if any, in the price of
Kuhlman Common Stock.
(3) These options were granted pursuant to the Long-Term Incentive Plan. The
exercise price may be paid by delivery of shares of Kuhlman Common Stock
already owned by the optionee. These options became exercisable on October
24, 1997.
Aggregated Option/SAR 1997 Year-End Option/SAR Values
The following table sets forth certain information on stock options
exercised during 1997 by the Named Executives along with the number and dollar
value of options/SARs remaining unexercised at December 31, 1997.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN 1997 AND FY-END OPTION/SAR VALUES
No. of Securities Underlying Value of Unexercised In-
Unexercised Options/SARs The-Money Options/SARs
at December 31, 1997 at December 31, 1997
Shares
Acquired on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------------ ------------- ---------- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Robert S. Jepson, Jr .. 0 $ 0 500,000 35,000 $11,586,500 $883,575
Curtis G. Anderson .... 0 0 260,000 35,000 5,897,144 883,575
Gary G. Dillon ........ 6,095 51,308 180,491 7,212 5,426,159 359,301
Vernon J. Nagel ....... 0 0 130,000 20,000 2,908,550 504,900
Richard A. Walker ..... 11,903 226,138 155,679 20,000 3,801,653 504,900
</TABLE>
12
<PAGE>
Long-Term Incentive Plan -- Awards in Last Fiscal Year
LONG-TERM INCENTIVE PLAN -- AWARDS IN LAST YEAR
<TABLE>
<CAPTION>
Number of Shares, Units or
Other Rights (1)
$36.00 Target (2) $42.00 Target (3)
Performance or Other
Period Until Maturation
Name Shares Cash Shares Cash or Payment
- --------------------------- -------- ----------- -------- ----------- ------------------------
<S> <C> <C> <C> <C> <C>
Robert S. Jepson, Jr. .. 11,092 $208,332 9,220 $208,332 7/31/97-7/30/99
Curtis G. Anderson ..... 11,092 208,332 9,220 208,332 7/31/97-7/30/99
Gary G. Dillon ......... 8,872 166,668 7,376 166,668 7/31/97-7/30/99
Vernon J. Nagel ........ 4,436 83,332 3,688 83,332 7/31/97-7/30/99
Richard A. Walker ...... 4,436 83,332 3,688 83,332 7/31/97-7/30/99
</TABLE>
- ---------
(1) These performance awards were granted on July 31, 1997, pursuant to the
Long-Term Incentive Plan. Under these awards, the five Named Executives,
along with certain other key employees, would receive, subject to certain
vesting requirements, quarterly payouts of stock and cash, if on any date
the average, over the 20 consecutive trading days during the performance
period shown ending on such date, of the mean between the highest and
lowest sales prices per share of Kuhlman Common Stock on the New York
Stock Exchange is at least $36.00 and $42.00, respectively.
(2) On October 21, 1997, the Company achieved the $36.00 threshold with
quarterly payouts (two-thirds stock and one-third cash) to 25 eligible
participants, including the five Named Executives, scheduled to commence
April 1, 1998, subject to certain vesting requirements.
(3) On March 6, 1998, the Company achieved the $42.00 threshold with quarterly
payouts (two-thirds stock and one-third cash) to 25 eligible participants,
including the five Named Executives, scheduled to commence April 1, 1998,
subject to certain vesting requirements.
13
<PAGE>
Five-Year Cumulative Total Stockholder Return
The following indexed graph indicates the total return to Kuhlman's
stockholders for the past five years as compared to total return for the
Standard & Poor's 500 Composite Index, the Standard & Poor's Electrical
Equipment Index, and the Standard & Poor's Manufacturing (Diversified) Index,
assuming a common starting point of $100. Kuhlman chose the two industry
indices for comparison based on the nature of its product segments: Electrical
Products and Industrial Products. Total stockholder return for Kuhlman as well
as for the Indexes are determined by adding (a) the cumulative amount of
dividends for a given year (assuming dividend reinvestment) and (b) the
difference between the share price at the beginning and at the end of the year,
the sum of which is then divided by the share price at the beginning of such
year. The stock price performance shown on the graph below is not necessarily
indicative of future price performance.
CUMULATIVE TOTAL RETURN
Based on reinvestment of $100 beginning December 31, 1992
(graph appears here with plot points)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Dec-92 Dec-93 Dec-94 Dec-95 Dec-96 Dec-97
Kuhlman Corp. $100 $125 $99 $108 $173 $357
S&P 500(R) $100 $110 $112 $153 $189 $252
S&P Electrical Equipment(R) Index $100 $121 $122 $171 $232 $325
S&P Manufacturing (Diversified)(R) Index $100 $121 $126 $177 $244 $290
</TABLE>
14
<PAGE>
Principal Stockholders and Beneficial Ownership of Management of Kuhlman
Management
The following table sets forth, as of March 1, 1998, the number of shares
of Kuhlman Common Stock beneficially owned by each director, each of the Named
Executives and all directors and executive officers as a group as well as the
percent of class owned by such persons.
<TABLE>
<CAPTION>
Number of Shares (1)(2)(3) Percent of Class (4)
---------------------------- ---------------------
<S> <C> <C>
Curtis G. Anderson .......................... 349,001 2.1%
William E. Burch ............................ 16,987(5) *
Steve Cenko ................................. 25,745 *
Gary G. Dillon .............................. 285,368 1.7%
Alexander W. Dreyfoos, Jr. .................. 30,768 *
Robert S. Jepson, Jr. ....................... 635,217(5) 3.7%
William M. Kearns, Jr. ...................... 30,000 *
George J. Michel, Jr. ....................... 35,805(5) *
Vernon J. Nagel ............................. 142,659 *
Gen. H. Norman Schwarzkopf .................. 15,085 *
Richard A. Walker ........................... 178,710 1.1%
All Directors and Executive Officers as a
Group (11 Persons) ........................ 1,745,345 9.8%
</TABLE>
- ---------
* Less than one percent
(1) Includes shares in Kuhlman's Dividend Reinvestment Plan, the Savings
Maximizer Plan, and the TRIP.
(2) Includes shares which the following persons have the right to acquire upon
the exercise of stock options as of March 1, 1998, or at any time within
60 days thereafter: Curtis G. Anderson -- 260,000 shares; William E. Burch
-- 4,000 shares; Steve Cenko -- 12,973 shares; Gary G. Dillon -- 175,953
shares; Alexander W. Dreyfoos, Jr. -- 4,000 shares; Robert S. Jepson, Jr.
-- 500,000 shares; William M. Kearns, Jr. -- 4,000 shares; George J.
Michel, Jr. -- 12,973 shares; Vernon J. Nagel -- 130,000 shares; Gen. H.
Norman Schwarzkopf -- 4,000 shares; and Richard A. Walker -- 147,642
shares.
(3) Excludes the following grants and awards under the Long-Term Incentive
Plan: performance awards granted on July 31, 1997, as set forth in the
"Long-Term Incentive Plan -- Awards in Last Fiscal Year" table; and stock
options granted on February 19, 1998, for 75,000 shares to Curtis G.
Anderson; 5,000 shares to Gary G. Dillon; 100,000 shares to Robert S.
Jepson, Jr.; 40,000 shares to Vernon J. Nagel; and 40,000 shares to
Richard A. Walker.
(4) Each respective individual's shares included in note (2) were deemed to be
outstanding as of March 1, 1998, for the purpose of computing the
percentage applicable to the person owning such shares but were not deemed
to be outstanding for the purpose of computing the percent of class owned
by any other person. The total number of shares included in note (2) were
deemed to be outstanding for the purpose of computing the percent of class
for all directors and executive officers as a group.
(5) Excludes an aggregate of 5,700 shares owned by spouses where beneficial
ownership is disclaimed.
Certain Beneficial Owners
The following table sets forth the only person known by Kuhlman to own of
record or beneficially, as of March 1, 1998, five percent or more of the
outstanding Common Stock of Kuhlman.
<TABLE>
<CAPTION>
Name of Person Number of Shares Percent of Class
- ----------------------------------------------------- ------------------ -----------------
<S> <C> <C>
The Prudential Insurance Company of America .. 1,279,800(1) 7.7%
751 Broad Street
Newark, New Jersey 07102-3777
</TABLE>
- ---------
(1) Based solely on information set forth in a Schedule 13G dated February 10,
1998, filed with the Securities and Exchange Commission.
15
<PAGE>
Related Transactions
Kuhlman entered into an agreement ("Kearns Agreement") dated as of August
1, 1994, with W.M. Kearns & Co., Inc., a corporation controlled by William M.
Kearns, Jr. ("Kearns & Co."), pursuant to which Kearns & Co. serves as a non-
exclusive financial advisor to Kuhlman on a part-time basis to assist Kuhlman
in developing corporate strategy and arranging acquisition, merger, joint
venture, investment or divestiture transactions for Kuhlman. Kearns & Co. will
give Kuhlman a "right of first refusal" on all such transactions of which
Kearns & Co. becomes aware which appear to fit Kuhlman's acquisition
guidelines. The Kearns Agreement had an original term of two years through July
31, 1996. The parties amended the Kearns Agreement to, among other things,
extend it for an additional year (until July 31, 1997) and reduce the cash
advisory fee from $20,000 each month to $10,416 each month. On July 24, 1997,
the parties further amended the Kearns Agreement to reduce the cash advisory
fee to $10,000 and also to provide for its automatic extension on a
month-to-month basis after July 31, 1997 (subject to termination by Kuhlman at
any time prior to the beginning of the next succeeding one-month period).
During the term of the Kearns Agreement, as amended, in addition to paying the
monthly cash advisory fee of $10,000, Kuhlman will reimburse Kearns & Co. for
reasonable out-of-pocket expenses directly related to its activities under the
Kearns Agreement in an amount not to exceed $1,000 per month. In 1997, Kearns &
Co. was paid $122,912 in cash advisory fees and reimbursed for out-of-pocket
expenses in the amount of $5,067. Mr. Kearns serves as a Senior Consultant to
Furman Selz LLC, one of the underwriters in Kuhlman's 1997 public offering of
2,500,000 shares of its Common Stock.
APPROVAL OF THE KUHLMAN CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors of Kuhlman has adopted, subject to stockholder
approval, the Kuhlman Corporation Employee Stock Purchase Plan (the "Stock
Purchase Plan" or the "Plan"). The Board of Directors is requesting stockholder
approval thereof. The Board of Directors believes that the Stock Purchase Plan
will advance the interests of Kuhlman and its stockholders by providing
employees of Kuhlman and its subsidiaries with an opportunity to acquire an
ownership interest in Kuhlman through the purchase of shares of Kuhlman Common
Stock on favorable terms through payroll deductions, thereby assisting in
attracting high caliber personnel to Kuhlman and in retaining and motivating
its employees. It is also believed that the Plan will further align the
interests of Kuhlman employees with those of Kuhlman stockholders.
Subject to the limitations imposed by Section 423 of the Internal Revenue
Code of 1986, as amended ("Section 423"), any employee of Kuhlman and certain
of its subsidiaries, as designated by the Committee administering the Plan, who
has attained age 18 is eligible to participate in the Plan. It is estimated
that there are currently about 4,200 employees who are or will be eligible to
participate in the Stock Purchase Plan.
The material features of the Stock Purchase Plan are as follows:
A total of 500,000 shares of Kuhlman Common Stock are reserved for sale
under the Plan subject to adjustment as provided in the Plan. The shares to be
sold to participants under the Plan may be, at the election of Kuhlman, either
treasury shares or shares authorized but unissued and may be derived from
shares of Kuhlman Common Stock purchased by Kuhlman.
Rights to purchase shares of Kuhlman Common Stock will be offered to each
eligible employee who participates in the Stock Purchase Plan (a "Participant")
through a continuous series of offerings (each, an "Offering"), each beginning
on the first business day of the calendar year quarter (the "Offering Date")
and terminating on the last business day of the calendar year quarter
corresponding to the Offering Date (the "Termination Date"). The initial
Offering Date under the Plan, however, may be after the first business day of a
calendar year quarter as determined by the Committee. On each Offering Date,
each Participant in the Plan is granted, by operation of the Plan, a right to
purchase (a "Purchase Right") through payroll deductions up to as many shares
of Kuhlman Common Stock (up to a maximum of 500 shares), as are credited to the
Participant's account during the Offering.
No eligible employee will be permitted to purchase shares of Kuhlman
Common Stock under the Stock Purchase Plan or any other Section 423 employee
stock purchase plans which Kuhlman or any of its subsidiaries may adopt in the
future having an aggregate "Fair Market Value" (determined for each share on
its Offering Date) in excess of $25,000 in any calendar year. The Fair Market
Value of the Kuhlman Common Stock on any date will be the closing price of
Kuhlman Common Stock for New York Stock Exchange composite transactions on such
date. Additionally, each Participant's payroll deduction may not exceed the
lesser of a percentage of his or her compensation as set by the Committee from
time to time or $21,250 per calendar year. The purchase price of the shares
offered in a given Offering is the lesser of (i) 85% of the Fair
16
<PAGE>
Market Value of one share of Kuhlman Common Stock on the Offering Date or (ii)
85% of the Fair Market Value of a share of Kuhlman Common Stock on the
Termination Date (the "Purchase Right Price").
A Participant may withdraw from the Plan prior to the end of the business
day on the Termination Date of any Offering. No Participant will have any
interest in any Kuhlman Common Stock subject to a Purchase Right until the
Purchase Right has been exercised and at such point the interest will be
strictly that of a purchaser of Kuhlman Common Stock. Upon termination or
notice of termination of a Participant's employment for any reason, any payroll
deductions authorized by the Participant will cease immediately. Thereafter,
any payroll deductions that were previously accumulated in the Participant's
account prior to termination or notice of termination will be applied toward
the exercise of the Purchase Right then outstanding unless the Participant
withdraws from the Plan as provided above.
Neither payroll deductions credited to a Participant's account nor any
rights in relation to the exercise of a Purchase Right or the receipt of shares
of Kuhlman Common Stock under the Plan may be assigned, transferred, pledged or
otherwise disposed of except that, in the event of the death of a Participant
while cash or Kuhlman Common Stock is held for his or her account under the
Plan, such shares of Kuhlman Common Stock and/or cash will be delivered to the
Participant's executor or administrator or if no such executor or administrator
has been appointed, Kuhlman, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
Participant, or if no spouse, dependent or relative is known to Kuhlman, then
to such other person as Kuhlman may designate.
The Stock Purchase Plan will be administered by the Employee Stock
Purchase Plan Committee (the "Committee"). Members of the Committee are
appointed from time to time by the Board of Directors, serve at the pleasure of
the Board, and may resign at any time upon written notice to the Board. The
Committee has full power to administer the Plan including the power to (i)
adopt and apply such rules and regulations as the Committee deems necessary or
proper for the administration of the Plan, (ii) limit the amount of payroll
deductions, and (iii) interpret the Plan and decide all questions concerning
the Plan. The Committee may at any time amend the Plan to the extent it deems
necessary or appropriate in light of, and consistent with, Section 423;
provided that any amendment that either changes the composition, function or
duties of the Committee or modifies the terms and conditions pursuant to which
Purchase Rights are granted under the Stock Purchase Plan must be approved by
the Board.
The Board of Directors may amend any and all provisions of the Stock
Purchase Plan except that no amendment adopted by either the Committee or the
Board shall be effective, without approval of the stockholders of the Company,
if stockholder approval of the amendment is then required pursuant to Rule
16b-3 under the Securities Exchange Act of 1934 or Section 423. The Board may
terminate the Plan or the granting of Purchase Rights under the Plan at any
time except that the Board cannot modify, cancel or amend any outstanding
Purchase Right granted before such termination unless the affected Participant
consents in writing. The Plan will be effective as soon as practicable
following adoption by the stockholders but no later than October 1, 1998.
The Stock Purchase Plan is intended to qualify as an "employee stock
purchase plan" under Section 423. If the Stock Purchase Plan so qualifies, a
Participant will generally not recognize any income for federal income tax
purposes either on the grant of a Purchase Right or upon the issuance of any
shares of Kuhlman Common Stock under the Stock Purchase Plan.
If a Participant disposes of shares acquired under the Stock Purchase Plan
(other than a transfer by reason of death) within a period of two years from
the Offering Date of the Offering in which the shares were acquired, an amount
(not less than zero) equal to the fair market value of each share on the
Termination Date minus the Purchase Right Price will be treated as ordinary
income for federal income tax purposes in the taxable year in which the
disposition takes place. The amount realized upon such disposition of a share
minus the fair market value of such share on the Termination Date will
constitute long-term capital gain or loss if the disposition occurs more than
one year after the Termination Date and short-term capital gain or loss if the
disposition occurs one year or less after the Termination Date.
If a Participant disposes of any shares acquired under the Stock Purchase
Plan more than two years after the Offering Date of the Offering in which such
shares were acquired (or if no disposition has occurred by the time of the
Participant's death) an amount (not less than zero) equal to the lesser of (a)
the fair market value of the shares at the time of disposition (or death) minus
the Purchase Right Price, or (b) the fair market value of the shares on the
Offering Date of the Offering in which the shares were acquired minus the
Purchase Right Price will be recognized as ordinary income and may be subject
to wage withholding. The amount realized upon such disposition of a share minus
the Purchase Right Price (adjusted to reflect any income recognized as
described in the preceding sentence) will constitute long-term capital gain or
loss. With respect to a transfer of such shares upon death, any remaining gain
or loss will not be recognized. However, a subsequent sale or exchange of such
shares by a Participant's estate or the person receiving such shares by reason
of the Participant's death may result in capital gain or loss.
17
<PAGE>
No income tax deduction ordinarily is allowed to Kuhlman with respect to
the grant of any Purchase Right, the issuance of any shares of Kuhlman Common
Stock under the Stock Purchase Plan or the disposition of any shares acquired
under the Stock Purchase Plan and held for two years. However, if a Participant
disposes of shares purchased under the Stock Purchase Plan within two years
after the Offering Date of the Offering in which the shares were acquired,
Kuhlman is entitled to receive an income tax deduction in the year of such
disposition in an amount equal to the amount constituting ordinary income to
the Participant.
On March 23, 1998, the closing sale price per share of Kuhlman Common
Stock on the New York Stock Exchange as reported in The Wall Street Journal was
$48 15/16.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
APPROVAL OF THE EMPLOYEE STOCK PURCHASE PLAN.
APPROVAL OF AMENDMENT TO KUHLMAN
CERTIFICATE OF INCORPORATION
The Certificate of Incorporation of Kuhlman (the "Certificate") currently
authorizes the issuance of 20,000,000 shares of Kuhlman Common Stock. As of
March 1, 1998, there were only 857,131 shares of Kuhlman Common Stock remaining
for issuance, with 16,605,991 shares issued and outstanding, and 2,536,878
shares reserved for issuance pursuant to Kuhlman's existing stock based plans.
The Board of Directors believes that the Amendment will provide long-term
advantages to Kuhlman and its stockholders. The passage of the Amendment might
enable Kuhlman to pursue acquisitions or enter into transactions which the
Board of Directors believes provide the potential for growth and profit.
Additional authorized shares could also be used to raise cash through sales of
stock to public and private investors with such cash being usable to reduce
debt. If additional shares are available, transactions dependent upon the
issuance of additional shares would be less likely to be undermined by delays
and uncertainties occasioned by the need to obtain stockholder authorization
prior to the consummation of such transactions. The ability to issue shares, as
deemed in Kuhlman's best interests by the Board of Directors, will also permit
Kuhlman to avoid the expenses which are incurred in holding certain special
stockholders' meetings which may be necessitated if additional shares are
unavailable. Accordingly, the Board of Directors believes it is advisable that
the Certificate be amended to increase the number of shares of Kuhlman Common
Stock that Kuhlman shall have the authority to issue to 40,000,000.
If the proposal is approved, additional authorized shares may be issued
without further action by stockholders of Kuhlman (subject to rules of the NYSE
that could require stockholder approval to issue such stock). The possible
issuance of the additional shares of Kuhlman Common Stock authorized by the
Amendment and the lack in the Certificate of a provision for cumulative voting
in the election of directors could impede efforts by a third party to obtain
control of Kuhlman. The issuance of additional shares would also dilute the
percentage ownership interests of present stockholders and could dilute the
ownership interests of a party seeking to obtain control of Kuhlman. The Board
of Directors has no present plans to adopt any additional amendments to
Kuhlman's Bylaws or to recommend that Kuhlman's stockholders approve any other
amendments to the Certificate that could reasonably be expected to dilute the
interests of the present stockholders. Furthermore, except for Kuhlman's
existing stock based plans, there are no agreements, arrangements, plans,
understandings or pending negotiations regarding the issuance of any such
additional authorized but unissued shares. The Amendment is not the result of
management's knowledge of any specific effort to accumulate Kuhlman's
securities or to obtain control of Kuhlman by means of a merger, tender offer,
proxy solicitation in opposition to management or otherwise. Kuhlman is not
submitting the Amendment to enable it to frustrate any efforts by another party
to acquire a controlling interest or to seek Board representation. Under the
Certificate the stockholders of Kuhlman have no pre-emptive rights with respect
to the issuance of authorized but unissued shares.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF
THE AMENDMENT.
RATIFICATION OF THE APPOINTMENT OF
ARTHUR ANDERSEN LLP BY KUHLMAN
Pursuant to a recommendation of the Audit Committee of the Board of
Directors, Arthur Andersen LLP has been re-appointed by the Board of Directors
to serve as the independent auditors for Kuhlman for the year ending December
31, 1998, subject to stockholder ratification at the Annual Meeting. A
representative of Arthur Andersen LLP will be present at the Annual Meeting,
will have the opportunity to make a statement if he desires to do so and will
be available to respond
18
<PAGE>
to appropriate questions by stockholders. If such appointment is not ratified,
the Board of Directors will appoint another firm as Kuhlman's independent
auditors for the year ending December 31, 1998.
STOCKHOLDER PROPOSALS
Any proposal which a stockholder of Kuhlman intends to present at the 1999
Annual Meeting of Stockholders of Kuhlman must be received by Kuhlman at its
principal executive offices on or before November 25, 1998, to be eligible for
inclusion in Kuhlman's proxy statement and proxy form relating to such meeting.
By Order of the Board of Directors,
RICHARD A. WALKER
Secretary
A stockholder may receive, without charge, a copy of the Corporation's
Annual Report on Form 10-K for the fiscal year ended December 31, 1997 required
to be filed with the Securities and Exchange Commission by written request to
Richard A. Walker, Executive Vice President, Chief Administrative Officer,
General Counsel and Secretary, Kuhlman Corporation, 3 Skidaway Village Square,
Savannah, Georgia 31411.
19
<PAGE>
APPENDIX A
**************************
P R O X Y KUHLMAN CORPORATION P R O X Y
PROXY FOR SHARES OF COMMON STOCK SOLICITED ON
BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD ON APRIL 23, 1998
The undersigned hereby appoints Robert S. Jepson, Jr., Curtis G. Anderson,
Vernon J. Nagel and Richard A. Walker, and each of them, proxies with power of
substitution and revocation, acting by majority of those present and voting, or
if only one is present and voting then that one, to vote, as designated on the
reverse side hereof, all of the shares of stock of KUHLMAN CORPORATION which
the undersigned is entitled to vote, at the annual meeting of stockholders to
be held at the Hyatt Regency Savannah, 2 West Bay Street, Savannah, Georgia on
April 23, 1998, at 9:30 a.m., Savannah time, and at any adjournment thereof,
with all the powers the undersigned would possess if present.
PLEASE VOTE, SIGN AND DATE ON REVERSE SIDE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE. NO POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED STATES.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH SPECIFICATIONS MADE. IF NO CHOICES
ARE INDICATED, THIS PROXY WILL BE VOTED FOR EACH OF THE NOMINEES LISTED UNDER
ITEM 1 AND FOR ITEMS 2, 3 AND 4.
(Continued and to be signed on reverse side)
<PAGE>
KUHLMAN CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" EACH OF THE
NOMINEES LISTED UNDER ITEM 1 AND "FOR" ITEMS 2, 3, AND 4.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
For All
For Withheld Except
1. Election of Directors: Curtis G. Anderson, William E. Burch,
Alexander W. Dreyfoos, Jr., and General H. Norman Schwarzkopf. [ ] [ ] [ ]
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below and mark the oval "For All
Except")______________________________________________________________________
For Against Abstain
2. Kuhlman Corporation Employee Stock Purchase Plan [ ] [ ] [ ]
3. Amendment to the Certificate of Incorporation of Kuhlman For Against Abstain
Corporation to increase the number of authorized shares [ ] [ ] [ ]
of Kuhlman Corporation common stock.
4. Ratification of the selection of Arthur Andersen LLP as
independent auditors for Kuhlman Corporation and its For Against Abstain
subsidiaries for the year ending December 31, 1998. [ ] [ ] [ ]
5. Upon any other matter that may properly come before the
meeting.
Dated:_______________________________________________________, 1998
Signature__________________________________________________________
Signature__________________________________________________________
NOTE: Please sign exactly as name appears hereon. For joint
accounts, both owners should sign. When signing as executor,
administrator, attorney, trustee or guardian, etc. please sign
your full title.
</TABLE>
<PAGE>
APPENDIX B
KUHLMAN CORPORATION EMPLOYEE STOCK PURCHASE PLAN
<PAGE>
KUHLMAN CORPORATION EMPLOYEE STOCK PURCHASE PLAN
Table of Contents
Section Page
1. Purpose............................................................. 1
2. Definitions......................................................... 1
3. Plan Administration................................................. 3
(a) Committee Members.......................................... 3
(b) Powers and Duties of the Committee......................... 3
(c) Committee Action........................................... 4
(d) Exoneration of Committee Members........................... 4
4. Eligibility to Participate in Offerings............................. 4
5. Offerings........................................................... 5
6. Participation in Offerings.......................................... 5
7. Payroll Deductions.................................................. 5
8. Grant of Purchase Rights............................................ 6
9. Exercise of Purchase Rights......................................... 6
10. Delivery............................................................ 7
11. Withdrawal; Termination of Employment............................... 7
12. Interest............................................................ 8
13. Stock Subject to the Plan........................................... 8
14. Disposition Upon Death.............................................. 9
15. Transferability..................................................... 9
16. Share Transfer Restrictions......................................... 9
17. Amendment or Termination............................................ 10
i
<PAGE>
18. Notices............................................................. 10
19. Effective Date of Plan.............................................. 10
20. Miscellaneous....................................................... 10
(a) Headings and Gender........................................ 10
(b) Governing Law.............................................. 10
(c) Plan Not A Contract of Employment.......................... 11
ii
<PAGE>
KUHLMAN CORPORATION EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The purpose of this Kuhlman Corporation Employee Stock Purchase Plan
(the "Plan") is to advance the interests of Kuhlman Corporation, a Delaware
corporation (the "Company"), and its shareholders by providing Eligible
Employees (as defined in section 2(g) below) of the Company and its Designated
Subsidiaries (as defined in section 2(f) below) with an opportunity to acquire
an ownership interest in the Company by purchasing Common Stock of the Company
on favorable terms through payroll deductions. It is the intention of the
Company that the Plan, as applied to Employees resident in the United States of
America, qualify as an "employee stock purchase plan" under section 423 of the
Internal Revenue Code of 1986, as amended (the "Code"). Accordingly, provisions
of the Plan shall be construed so as to extend and limit participation in a
manner consistent with the requirements of section 423 of the Code. If the Plan
is extended to an Employee resident in a country other than the United States of
America, the Plan shall not be subject to section 423 of the Code and the terms
of the Plan may be subject to an appendix to the Plan corresponding to the
Employee's resident country.
2. Definitions.
(a) "Board" means the Board of Directors of the Company.
(b) "Business Day" means a day when the New York Stock Exchange is
open for trading.
(c) "Common Stock" means the common stock, par value $1.00 per
share, of the Company, or the number and kind of shares of
stock or other securities into which such common stock may be
changed in accordance with section 13 of the Plan.
(d) "Committee" means the entity administering the Plan, as
provided in section 3 below.
(e) "Compensation" means the total cash compensation, including
salary, wages, overtime pay, and bonuses, paid to an Eligible
Employee by reason of his employment with the Employer
(determined prior to any reduction thereof by operation of a
salary reduction election under a plan described in section
401(k) of the Code or section 125 of the Code), as reported on
IRS Form W-2, but excluding any amounts not paid in cash which
are required to be accounted for as imputed income on IRS Form
W-2, any reimbursements of expenses and amounts under stock
incentives or stock options.
(f) "Designated Subsidiary" means a Subsidiary that has been
designated by the Committee from time to time, in its sole
discretion, as eligible to participate in the Plan.
<PAGE>
(g) "Eligible Employee" means, with respect to any Offering, an
individual who is an Employee at all times during the period
beginning three (3) months before the Offering Date and ending
on the Offering Date.
(h) "Employee" means any person, including an Insider, who has
attained age 18 and is employed by the Company or one of its
Designated Subsidiaries.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(j) "Fair Market Value" means, with respect to any share of Common
Stock, as of any date under the Plan, the closing price of the
Common Stock on the New York Stock Exchange composite
transactions on a particular date.
(k) "Insider" means any Participant who is subject to section 16
of the Exchange Act.
(l) "Offering" means any of the offerings to Participants of
Purchase Rights (as defined in Section 8) to purchase Common
Stock under the Plan, each beginning on the first Business Day
of a calendar year quarter and continuing until the last
Business Day of such quarter, as described in section 5 below.
(m) "Offering Date" means the first day of the period of an
Offering under the Plan, as described in section 5 below.
(n) "Participant" means an Eligible Employee who elects to
participate in Offerings under the Plan pursuant to section 6
below.
(o) "Purchase Right Price" means the lesser of: (i) 85% of the
Fair Market Value of one share of Common Stock on the Offering
Date, or (ii) 85% of the Fair Market Value of one share of
Common Stock on the Termination Date the definition of which,
for purposes of this subsection 2(o) only, shall be subject to
Treas. Reg. ss.1.421-7(f).
(p) "Securities Act" means the Securities Act of 1933, as amended.
(q) "Subsidiary" means any corporation, other than the Company, in
an unbroken chain of corporations, beginning with the Company,
if, at the time a Purchase Right is granted under the Plan,
each of the corporations, other than the last
2
<PAGE>
corporation in the unbroken chain, owns stock possessing 50
percent or more of the total combined voting power of all
classes of stock in one of the other corporations in such
chain.
(r) "Termination Date" means the last day of the period of an
Offering under the Plan, as described in section 5 below.
3. Plan Administration.
(a) Committee Members. The administration of the Plan shall be
under the supervision of the committee for the Plan (the
"Committee") appointed by the Board from time to time. Members
of the Committee shall serve at the pleasure of the Board and
may be removed by the Board at any time without prior written
notice. A Committee member may resign by giving written notice
to the Board.
(b) Powers and Duties of the Committee. The Committee will have
full power to administer the Plan in all of its details,
subject to the requirements of applicable law. For this
purpose, the Committee's powers will include, but will not be
limited to, the following authority, in addition to all other
powers provided by this Plan:
(i) To adopt and apply, in a uniform and
nondiscriminatory manner to all persons similarly
situated, such rules and regulations as it deems
necessary or proper for the efficient and proper
administration of the Plan, including the
establishment of any claims procedures that may
include a requirement that all disputes that cannot
be resolved between a Participant and the Committee
will be subject to binding arbitration;
(ii) To interpret the Plan and decide all questions
concerning the Plan, such as the eligibility of any
person to participate in the Plan, and the respective
benefits and rights of Participants and others
entitled thereto and the exclusive power to remedy
ambiguities, inconsistencies or omissions in the
terms of the Plan;
(iii) To appoint such agents, counsel, accountants,
consultants and other persons as may be required to
assist in administering the Plan;
(iv) To allocate and delegate its responsibilities under
the Plan and to designate other persons to carry out
any of its responsibilities under the Plan;
(v) To prescribe such forms as may be necessary or
appropriate for Employees to make elections under the
Plan or to otherwise administer
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the Plan; and
(vi) To do such other acts as it deems necessary or
appropriate to administer the Plan in accordance with
its terms, or as may be provided for or required by
law.
(c) Committee Action. The certificate of a Committee member
designated by the Committee that the Committee has taken or
authorized any action shall be conclusive in favor of any
person relying on, or subject to, the certificate. Any
interpretation of the Plan, and any decision on any matter
within the discretion of the Committee, made by the Committee
in good faith shall be final and binding on all persons. A
majority of the members of the Committee shall constitute a
quorum. The Committee shall act by majority approval of the
members and shall keep minutes of its meetings. Action of the
Committee may be taken without a meeting if unanimous written
consent is given. Copies of minutes of the Committee's
meetings and of its actions by written consent shall be kept
with the corporate records of the Company.
(d) Exoneration of Committee Members. No member of the Committee
shall be liable for any action or determination made in good
faith with respect to the Plan or any Purchase Right granted
under it. The Company hereby agrees to indemnify, defend and
hold harmless, to the fullest extent permitted by law, any
Committee member against any and all liabilities, damages,
costs and expenses (including attorneys' fees and amounts paid
in settlement of any claims approved by the Company)
occasioned by any act or omission to act in connection with
the Plan, if such act or omission was not due to the gross
negligence or willful misconduct of the Committee member.
4. Eligibility to Participate in Offerings.
(a) An Eligible Employee is entitled to participate in Offerings
in accordance with sections 5 and 6, beginning with the
Offering Date after an Employee first becomes an Eligible
Employee, subject to the limitations imposed by section 423 of
the Code.
(b) Notwithstanding any provisions of the Plan to the contrary:
(i) no Employee shall be granted a Purchase Right under the
Plan if immediately after the grant, such Employee (or any
other person whose stock ownership would be attributed to such
Employee pursuant to section 424(d) of the Code) would own
shares of Common Stock and/or hold outstanding options to
purchase shares of Common Stock possessing 5% or more of the
total combined voting power or value of all classes of shares
of the Company or of any Subsidiary; and (ii) the ability of
an Eligible Employee who is an Insider to participate in
Offerings under the Plan may be limited by the Committee to
the extent necessary to comply with Rule
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16b-3 of the Exchange Act (17 CFR ss.240.16b-3).
5. Offerings. Purchase Rights to purchase shares of Common Stock shall be
offered to Participants under the Plan through a continuous series of Offerings,
each beginning on the first Business Day of a calendar year quarter (the
"Offering Date"), and each Offering shall terminate on the last Business Day of
a calendar year quarter corresponding to the Offering Date (the "Termination
Date"). The Committee may designate that the first Offering under the Plan,
however, have an Offering Date after the beginning of a calendar year quarter.
Offerings under the Plan shall continue until either (a) the Committee decides,
in its sole discretion, that no further Offerings shall be made because the
Common Stock remaining available under the Plan is insufficient to make an
Offering to all Eligible Employees, or (b) the Plan is terminated in accordance
with section 17 below. Notwithstanding the foregoing, Offerings will be limited
under the Plan so that no Eligible Employee will be permitted to purchase shares
of Common Stock under all "employee stock purchase plans" (within the meaning of
section 423 of the Code) of the Company and its Subsidiaries in excess of
$25,000 of the Fair Market Value of such shares of Common Stock (determined at
the time of an Offering Date) for each calendar year in which an Offering is
outstanding at any time.
6. Participation in Offerings.
(a) An Eligible Employee may participate in Offerings under the
Plan by completing a subscription agreement authorizing
payroll deductions on the form provided by the Company (the
"Participation Form") and filing the Participation Form with
the Company (pursuant to such standards or procedures as are
established by the Committee) at least 15 days before the
Offering Date of the first Offering in which such Employee
wishes to participate.
(b) Except as provided in section 7(a) below, payroll deductions
for a Participant shall begin with the first payroll following
the applicable Offering Date, and shall continue until the
Plan is terminated, subject to earlier termination by the
Participant as provided in section 11 below or increases or
decreases by the Participant in the amount of payroll
deductions as provided in section 7(c) below.
7. Payroll Deductions.
(a) By completing and filing a Participation Form, an Eligible
Employee shall elect to have payroll deductions withheld from
his total Compensation on each paydate (including paydates
covering regular payroll, commissions and bonuses) during the
time he is a Participant in the Plan in such amount as he
shall designate on the Participation Form; provided, however,
that: (i) payroll deductions must be in such percentages or
whole dollar amounts, as determined by rules established by
the Committee which may change from time to time to provide
for the efficient administration of the Plan; (ii) the
Committee may
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establish rules limiting the amount of an Eligible Employee's
Payroll Deductions, except that any percentage or dollar
limitation must apply uniformly to all Eligible Employees;
(iii) and each Participant's payroll deductions must be equal
to at least the minimum percentage or dollar amount
established by the Committee from time to time, but no more
than $21,250 (U.S.) per calendar year.
(b) All payroll deductions authorized by a Participant shall be
credited to an account established under the Plan for the
Participant. The funds represented by such account shall be
held as part of the Company's general assets, usable for any
corporate purpose, and the Company shall not be obligated to
segregate such funds. A Participant may not make any separate
cash payment or contribution to such account.
(c) No increases or decreases of the amount of payroll deductions
for a Participant may be made during an Offering. A
Participant may increase or decrease the amount of his payroll
deductions under the Plan for subsequent Offerings by
completing an amended Participation Form and filing it with
the Company (pursuant to such standards and procedures
established by the Committee) not less than 15 days prior to
the Offering Date as of which such increase or decrease is to
be effective.
(d) A Participant may discontinue his participation in the Plan at
any time as provided in section 11 below, and subject to Rule
16b-3 of the Exchange Act.
8. Grant of Purchase Rights. On each Offering Date, each Participant shall be
granted (by operation of the Plan) a right to purchase (a "Purchase Right"), at
the Purchase Right Price, as many shares of Common Stock as he will be able to
purchase with the payroll deductions credited to his account during his
participation in the Offering beginning on such Offering Date. The maximum
number of shares of Common Stock that an Employee may purchase under an Offering
may not exceed 500 (as may be adjusted from time to time under section 13(b)),
but subject to the other terms and conditions of the Plan.
9. Exercise of Purchase Rights.
(a) Unless a Participant gives written notice to the Company as
provided in subsection 9(c) below or withdraws from the Plan
pursuant to section 11 below, his Purchase Rights for shares
of Common Stock granted under an Offering will be exercised
automatically at the Termination Date of such Offering for the
purchase of the number of shares of Common Stock that the
accumulated payroll deductions in his account on such
Termination Date will purchase at the applicable Purchase
Right Price.
(b) No Participant (or any person claiming through such
Participant) shall have any
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interest in any Common Stock subject to a Purchase Right under
the Plan until such Purchase Right has been exercised, at
which point such interest shall be limited to the interest of
a purchaser of the Common Stock purchased upon such exercise
pending the delivery of such Common Stock in accordance with
section 10 below. During his lifetime, a Participant's
Purchase Rights for shares of Common Stock under the Plan is
exercisable only by him.
(c) By written notice to the Company prior to the end of the
Business Day on a Termination Date corresponding to an
Offering, a Participant may elect, effective on such
Termination Date, to withdraw all of the accumulated payroll
deductions in his account as of the Termination Date (which
will also constitute a notice of termination and withdrawal
pursuant to section 11(a)). However, the preceding sentence
shall not apply to an Insider if the withdrawal would
constitute a "Discretionary Transaction" (within the meaning
of Rule 16b-3(b)(1)) that is not an exempt transaction under
Rule 16b-3(f).
10. Delivery. As promptly as practicable after the Termination Date of each
Offering, the Company will issue or cause to be issued the shares of Common
Stock purchased upon exercise of a Participant's Purchase Rights granted for
such offering, to a brokerage firm (designated by the Company) that has rights
to execute trades on the New York Stock Exchange.
11. Withdrawal; Termination of Employment.
(a) Except as provided in Section 9, a Participant may terminate
his participation in the Plan and withdraw all, but not less
than all, the payroll deductions credited to his account under
the Plan at any time prior to the end of the Business Day on a
Termination Date corresponding to an Offering, by giving
written notice to the Company. Such notice shall state that
the Participant wishes to terminate his involvement in the
Plan, specify a Termination Date and request the withdrawal of
all of the Participant's payroll deductions held under the
Plan. All of the Participant's payroll deductions credited to
his account will be paid to him as soon as practicable after
the Termination Date specified in the notice of termination
and withdrawal (or, if no such date is specified, as soon as
practical after receipt of his notice of termination and
withdrawal), and his Purchase Rights for such Offering will be
automatically canceled, and no further payroll deductions for
the purchase of shares of Common Stock will be made for such
Offering or for any subsequent offering, except in accordance
with a new Participation Form filed pursuant to section 6
above.
(b) Upon termination, or notice of termination, of a Participant's
employment for any reason, including retirement or death, any
payroll deductions authorized under section 7 shall be
cancelled immediately. Thereafter, any payroll
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<PAGE>
deductions that were previously accumulated in the
Participant's account prior to his termination or notice of
termination will be applied in accordance with the provisions
of Section 9. However, if a termination of employment
precludes an Employee from being classified as an Eligible
Employee with respect to an Offering, then the payroll
deductions accumulated in his account will be returned to him
as soon as practicable after such termination or, in the case
of his death, to the person or persons entitled thereto under
section 14 below, and his Purchase Rights will be
automatically canceled. For purposes of the Plan, the
termination date of employment shall be the Participant's last
date of actual employment and shall not include any period
during which such Participant receives any severance payments.
A transfer of employment between the Company and a Designated
Subsidiary or between one Designated Subsidiary and another
Designated Subsidiary, or absence or leave approved by the
Company, shall not be deemed a termination of employment under
this subsection 11(b).
(c) A Participant's termination and withdrawal pursuant to
subsection 11(a) above will not have any effect upon his
eligibility to participate in a subsequent Offering by
completing and filing a new Participation Form pursuant to
section 6 above or in any similar plan that may hereafter be
adopted by the Company; provided, however, that, unless
otherwise permitted by the Committee in its sole discretion,
an Insider may be precluded from reparticipating in the Plan
to the extent necessary to comply with Rule 16b-3.
12. Interest. No interest shall accrue on a Participant' s payroll deductions
under the Plan.
13. Stock Subject to the Plan.
(a) The maximum number of shares of Common Stock that shall be
reserved for sale under the Plan shall be 500,000 shares,
subject to adjustment upon changes in capitalization of the
Company as provided in subsection (b) below. The shares to be
sold to Participants under the Plan may be, at the election of
the Company, either treasury shares or shares authorized but
unissued and may be derived from shares of Common Stock
purchased by the Company. If the total number of shares of
Common Stock that would otherwise be subject to Purchase
Rights granted pursuant to section 8 above on any Termination
Date exceeds the number of shares then available under the
Plan (after deduction of all shares for which Purchase Rights
have been exercised or are then outstanding), the Company
shall make a pro rata allocation of the shares of Common Stock
remaining available for issuance in as uniform and equitable a
manner as is practicable. In such event, the Company shall
give written notice of such reduction of the number of shares
subject to Purchase Rights to each Participant affected
thereby and shall return any excess funds accumulated in each
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<PAGE>
Participant's account as soon as practicable after the
Termination Date of such Offering.
(b) If any Purchase Right under the Plan is exercised after any
Common Stock dividend, split-up, recapitalization, merger,
consolidation, combination or exchange of Common Stock or the
like, occurring after the shareholders of the Company approve
the Plan, the number of shares of Common Stock to which such
Purchase Right shall be applicable and the Purchase Right
Price for such Common Stock shall be appropriately adjusted by
the Company.
14. Disposition Upon Death.
(a) If a Participant dies, shares of Common Stock and/or cash, if
any, attributable to the Participant's account under the Plan
(when cash or shares of Common Stock are held for his account)
shall be delivered to the executor or administrator of the
estate of the Participant; or, if no such executor or
administrator has been appointed (to the knowledge of the
Company), the Company, in its discretion, may deliver such
shares of Common Stock and/or cash to the spouse or to any one
or more dependents or relatives of the Participant; or, if no
spouse, dependent or relative is known to the Company, then to
such other person as the Company may designate.
15. Transferability. Neither payroll deductions credited to a Participant's
account nor any rights relating to the exercise of a Purchase Right or to
receive shares of Common Stock under the Plan may be assigned, transferred,
pledged or otherwise disposed of in any way (other than by will, the laws of
descent and distribution, or as provided in section 14 above) by the
Participant. Any such attempt at assignment, transfer, pledge or other
disposition shall be without effect, except that the Company may treat such act
as an election to withdraw funds in accordance with section 11(a) above.
16. Share Transfer Restrictions.
(a) Shares of Common Stock shall not be issued under the Plan
unless such issuance is either registered under the Securities
Act and applicable state securities laws or is exempt from
such registrations.
(b) Shares of Common Stock issued under the Plan may not be sold,
assigned, transferred, pledged encumbered, or otherwise
disposed of (whether voluntarily or involuntarily) except
pursuant to registration under the Securities Act and
applicable state securities laws, or pursuant to exemptions
from such registrations.
(c) Notwithstanding any other provision of the Plan or any
documents entered into pursuant to the Plan and except as
permitted by the Committee in its sole
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discretion, any shares of Common Stock issued to a Participant
who is an Insider may not be sold, assigned, transferred,
pledged, encumbered or otherwise disposed of for a six-month
period until after the Purchase Right Price is determined on
or after the Termination Date corresponding to the Offering
with respect to which they were issued.
17. Amendment or Termination. The Plan may be amended by the Committee from time
to time to the extent that the Committee deems necessary or appropriate in light
of, and consistent with, section 423 of the Code; provided, however, that any
amendment that either changes the composition, function or duties of the
Committee or modifies the terms and conditions pursuant to which Purchase Rights
are granted hereunder must be approved by the Board. The Board also may
terminate the Plan or the granting of Purchase Rights pursuant to the Plan at
any time; provided, however, that the Board shall not have the right to modify,
cancel, or amend any outstanding Purchase Right granted pursuant to the Plan
before such termination unless each Participant consents in writing to such
modification, amendment or cancellation. The Plan shall terminate automatically
if it is not approved by the shareholders of the Company, in accordance with
Treas. Reg. ss.1.423-2(c), within 12 months of its adoption by the Company.
Notwithstanding the foregoing, no amendment adopted by either the Committee or
the Board shall be effective, without approval of the shareholders of the
Company, if shareholder approval of the amendment is then required pursuant to
Rule 16b-3 under the Exchange Act or any successor rule or section 423 of the
Code.
18. Notices. All notices or other communications by a Participant to the Company
in connection with the Plan shall be deemed to have been duly given when
received by the Secretary of the Company or by any other person designated by
the Company for the receipt of such notices or other communications, in the form
and at the location specified by the Company.
19. Effective Date of Plan. The Plan shall be effective as of a date determined
by the Committee, but subject to the shareholder approval requirement, no later
than October 1, 1998. The Plan has been adopted by the Board subject to
shareholder approval, and prior to shareholder approval shares of Common Stock
issued under the Plan are subject to such approval.
20. Miscellaneous.
(a) Headings and Gender. The headings to sections in the Plan have
been included for convenience of reference only. The masculine
pronoun shall include the feminine and the singular the
plural, whenever appropriate. Except as otherwise expressly
indicated, all references to sections in the Plan shall be to
sections of the Plan.
(b) Governing Law. The Plan shall be interpreted and construed in
accordance with the internal laws of the State of Delaware to
the extent that such laws are not
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superseded by the laws of the United States of America.
(c) Plan Not A Contract of Employment. The Plan does not
constitute a contract of employment and participation in the
Plan does not give any Employee or Participant the right to be
retained in the employ of the Company or a Designated
Subsidiary, nor give any person a right or claim to any
benefit under the Plan, unless such right or claim has
specifically accrued under the terms of the Plan.
11
