<PAGE>
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
APPLIED POWER INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO OF APW]
P.O. BOX 325
MILWAUKEE, WISCONSIN 53201
(262) 523-7580
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of
APPLIED POWER INC.:
Notice is hereby given that the Annual Meeting of Shareholders of APPLIED
POWER INC., a Wisconsin corporation, will be held at the offices of the
Company, N22 W23685 Ridgeview Parkway West, Waukesha, Wisconsin, on Wednesday,
January 12, 2000, at 8:00 a.m., Central Time, for the following purposes:
1. To elect a Board of six directors; and
2. To transact such other business as may properly come before the
Meeting or any adjournment thereof;
all as set forth in the accompanying Proxy Statement.
The Board of Directors has fixed the close of business on November 11, 1999
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Meeting or any adjournment thereof.
Whether or not you expect to attend the Meeting, please mark, sign, date
and return the enclosed proxy promptly in the accompanying envelope, which
requires no postage if mailed in the United States. It is important that your
shares be represented at the Meeting, whether your holdings are large or
small. If for any reason you should desire to revoke your proxy, you may do so
at any time before it is voted.
By Order of the Board of Directors
Anthony W. Asmuth III
Secretary
Milwaukee, Wisconsin
December 10, 1999
<PAGE>
[LOGO OF APPLIED POWER]
P.O. BOX 325
MILWAUKEE, WISCONSIN 53201
(262) 523-7580
PROXY STATEMENT
----------------
This Proxy Statement was first mailed to
shareholders on or about December 10, 1999
----------------
Accompanying this Proxy Statement is a Notice of Annual Meeting of
Shareholders and a form of proxy for such Meeting solicited by the Board of
Directors of Applied Power Inc. (the "Company"). The Company's Annual Report
on Form 10-K for the year ended August 31, 1999, which constitutes the 1999
Annual Report to Shareholders and accompanies this Proxy Statement, contains
financial statements and certain other information concerning the Company. The
Annual Report and such financial statements are neither a part of this Proxy
Statement nor incorporated herein by reference.
The shares represented by all properly executed proxies received in time
for the Meeting will be voted as specified on such proxies. A proxy may be
revoked at any time before it is exercised. The cost of soliciting proxies,
including forwarding expense to beneficial owners of stock held in the name of
another, will be borne by the Company. The Company has retained Georgeson
Shareholder Communications Inc. to aid in the solicitation of proxies,
including the solicitation of proxies from brokerage firms, banks, nominees,
custodians and fiduciaries, for an approximate $7,500 fee plus disbursements.
In addition, officers and employees of the Company may solicit the return of
proxies from certain shareholders by telephone. Shares held for the accounts
of participants in the Company's APW 401(k) Plan ("Savings Plan") and ZERO
Corporation Retirement Savings Plan ("ZERO Plan") will be voted in accordance
with the instructions of the participants or otherwise in accordance with the
terms of such plans.
A majority of the votes entitled to be cast by shares entitled to vote,
represented in person or by proxy, constitutes a quorum for action on a matter
at the Meeting. Directors are elected by a plurality of the votes cast by the
holders of shares entitled to vote in the election at a meeting at which a
quorum is present. A "plurality" means that the individuals who receive the
largest number of votes are elected as directors up to the maximum number of
directors to be elected at the meeting. Shares for which authority is withheld
to vote for director nominees and broker non-votes (i.e., proxies from brokers
or nominees indicating that such persons have not received instructions from
the beneficial owners or other persons entitled to vote shares as to a matter
with respect to which the brokers or nominees do not have discretionary power
to vote) are considered present for purposes of establishing a quorum but will
have no effect on the election of directors except to the extent that the
failure to vote for a director nominee results in another nominee receiving a
larger number of votes. Votes attempted to be cast against a candidate are not
given legal effect and are not counted as votes cast in an election of
directors.
<PAGE>
On November 11, 1999, the record date for determining shareholders entitled
to receive notice of and to vote at the Annual Meeting of Shareholders, the
Company's outstanding capital stock consisted solely of 38,983,466 shares of
Class A Common Stock ("Common Stock"). Each share of Common Stock outstanding
on the record date is entitled to one vote on all matters submitted at the
Meeting.
CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of November 11, 1999 unless otherwise
indicated, certain information with respect to the beneficial ownership of
Common Stock by each executive officer of the Company named in the Summary
Compensation Table below and by the Company's executive officers and directors
as a group. Briefly stated, shares are deemed to be beneficially owned by any
person or group who has the power to vote or direct the vote or the power to
dispose or direct the disposition of such shares, or who has the right to
acquire beneficial ownership thereof within 60 days. To the knowledge of the
Company, no one is the beneficial owner of more than 5% of the Common Stock.
<TABLE>
<CAPTION>
Amount and Nature of Percent
Beneficial Owner Beneficial Ownership(1) of Class
---------------- ----------------------- --------
<S> <C> <C>
Richard G. Sim.......................... 1,567,044(2) 3.9
William J. Albrecht..................... 166,034(3) *
Robert C. Arzbaecher.................... 77,069(4) *
Gustav H.P. Boel........................ 42,727(5) *
Philip T. Burkart....................... 37,475(6) *
All Executive Officers and Directors as
a Group
(11 persons)........................... 1,929,229(7) 4.9%
</TABLE>
- --------
* Less than 1%.
(1) Unless otherwise noted, the specified persons have sole voting power and/or
dispositive power over the shares shown as beneficially owned.
(2) Includes options to purchase 875,342 shares exercisable currently or within
60 days of the record date, 5,030 shares allocated to Mr. Sim's Savings
Plan account and 18,300 shares held by a custodian for Mr. Sim's children
(with respect to which Mr. Sim disclaims beneficial ownership). Excludes
187,201 deferred shares received upon exercise of options in 1998 and 1999
pursuant to the Company's option deferral program which represent the right
to receive an equivalent number of shares of Common Stock at the end of the
deferral period.
(3) Includes options to purchase 154,034 shares exercisable currently or within
60 days of the record date and 7,320 shares allocated to Mr. Albrecht's
Savings Plan account. Excludes 8,036 deferred shares received upon exercise
of options in 1999 pursuant to the deferral program which represent the
right to receive an equivalent number of shares of Common Stock at the end
of the deferral period.
(4) Includes options to purchase 56,000 shares exercisable currently or within
60 days of the record date, 4,275 shares allocated to Mr. Arzbaecher's
Savings Plan account, 3,000 shares owned by Mr. Arzbaecher's spouse and
2,750 shares held by a custodian for Mr. Arzbaecher's minor children (with
respect to which Mr. Arzbaecher disclaims beneficial ownership).
(5) Includes options to purchase 34,500 shares exercisable currently or within
60 days of the record date and 1,947 shares allocated to Mr. Boel's Savings
Plan account.
(6) Includes options to purchase 28,150 shares exercisable currently or within
60 days of the record date and 7,148 shares allocated to Mr. Burkart's
Savings Plan account. Mr. Burkart resigned his position with the
2
<PAGE>
Company in August 1999 and, therefore, is not included in the totals for
the category of all executive officers and directors.
(7) Includes options to purchase 1,119,876 shares exercisable currently or
within 60 days of the record date, 25,710 shares allocated to executive
officers' Savings Plan accounts, 256,452 shares held by certain trusts
with respect to which certain officers have voting and dispositive power
and 24,050 shares owned by family members of the directors and executive
officers (beneficial ownership of which is, in certain instances,
disclaimed). Excludes 195,237 deferred shares received upon exercise of
options pursuant to the Company's deferral program which represent the
right to receive an equivalent number of shares of Common Stock at the end
of the deferral period and excludes shares and options held by Mr. Burkart
who resigned in August 1999, prior to the Company's fiscal year end.
The beneficial ownership information set forth above, and below under
"Election of Directors," is based on information furnished by the specified
persons or known to the Company and is determined in accordance with Rule 13d-
3 under the Securities Exchange Act of 1934, as required for purposes of this
Proxy Statement. It is not necessarily to be construed as an admission of
beneficial ownership for other purposes.
ELECTION OF DIRECTORS
At the Meeting, six directors are to be elected to serve until the next
annual meeting of shareholders and until their successors shall be elected. It
is the intention of the persons named in the accompanying form of proxy to
nominate as directors and, unless otherwise specified in a proxy by a
shareholder, to vote such proxy for the election of the persons named below.
In the event any of the nominees should become unable to serve as a director,
an eventuality which management has no reason to believe will occur, proxies
may be voted for another nominee. Each person named below is presently serving
as a director of the Company.
<TABLE>
<CAPTION>
Common Stock
Beneficially Owned
at
November 11, 1999
------------------
Director Number of Percent
Name and Principal Position Age Since Shares of Class
- --------------------------- --- -------- --------- --------
<S> <C> <C> <C> <C>
H. Richard Crowther (1)(2)(3)................. 67 1995 14,000(4) *
Retired Vice Chairman, Illinois Tool Works
Inc. (manufacturer of engineered components
and systems)
Jack L. Heckel (1)(3)......................... 68 1993 19,000(5) *
Retired President and Chief Operating
Officer, GenCorp. Inc. (manufacturer of
aerospace and defense, polymer and automotive
products)
Richard A. Kashnow (2)(3)..................... 57 1993 18,000(5) *
Retired Chairman of the Board, President and
Chief Executive Officer, Raychem Corporation
(global manufacturer of materials science-
based products for electronics,
telecommunications and industrial
applications)
L. Dennis Kozlowski (2)(3).................... 53 1994 15,000(6) *
Chairman of the Board, President and Chief
Executive Officer, Tyco International Ltd.
(manufacturer of disposable and specialty
products, fire and safety services, flow
control, and electrical and electronic
components)
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Common Stock
Beneficially Owned at
November 11, 1999
---------------------
Director Number of Percent
Name and Principal Position Age Since Shares of Class
- --------------------------- --- -------- ------------ --------
<S> <C> <C> <C> <C>
John J. McDonough(1)(3)..................... 63 1996 21,000(7) *
Vice Chairman and Chief Executive Officer,
Newell Rubbermaid Inc. (manufacturer of
consumer products); President and Chief
Executive Officer, McDonough Capital
Company LLC (venture capital investment
firm)
Richard G. Sim.............................. 55 1985 1,567,044(8) 3.9%
Chairman of the Board, President and Chief
Executive Officer, Applied Power Inc.
</TABLE>
- --------
*Less than 1%.
(1) Member of the Audit Committee of the Board of Directors.
(2) Member of the Nominating Committee of the Board of Directors.
(3) Member of the Compensation Committee of the Board of Directors.
(4) Includes options to purchase 11,000 shares exercisable currently or within
60 days of the record date.
(5) Includes options to purchase 15,000 shares exercisable currently or within
60 days of the record date.
(6) Includes options to purchase 13,000 shares exercisable currently or within
60 days of the record date.
(7) Includes options to purchase 9,000 shares exercisable currently or within
60 days of the record date.
(8) Includes options to purchase 875,342 shares exercisable currently or
within 60 days of the record date, 5,030 shares allocated to Mr. Sim's
Savings Plan account and 18,300 shares held by a custodian for Mr. Sim's
children (with respect to which Mr. Sim disclaims beneficial ownership).
Excludes 187,201 deferred shares received upon exercise of options in 1998
and 1999 pursuant to the Company's deferral program which represent the
right to receive an equivalent number of shares of Common Stock at the end
of the deferral period.
All of the directors have held the positions with the Company or other
organizations shown in the above table during the past five years, except that
(i) H. Richard Crowther was Vice Chairman of Illinois Tool Works Inc. from
January 1990 through March 1995; (ii) Jack L. Heckel was President and Chief
Operating Officer of GenCorp. Inc. from January 1987 through December 1993;
(iii) Richard A. Kashnow was President of Schuller International Group, Inc.
from May 1991 through September 1995; (iv) John J. McDonough was Chairman of
SoftNet Systems, Inc. from July 1995 through July 1997 and also served as its
Chief Executive Officer from September 1996 through July 1997, Vice Chairman
of DENTSPLY International Inc. from February 1995 through October 1995, and
Vice Chairman and Chief Executive Officer of DENTSPLY International Inc. from
June 1993 through February 1995; and (v) Richard A. Kashnow was Chairman of
the Board, President and Chief Executive Officer of Raychem Corporation until
August 1999.
H. Richard Crowther is a director of Illinois Tool Works Inc. Jack L.
Heckel is a director of WD-40 Co., Inc. and Advanced Tissue Sciences, Inc. L.
Dennis Kozlowski is a director of Tyco International Ltd. and RJR Nabisco
Holdings Corp. John J. McDonough is a director of Newell Rubbermaid Inc. and
CGW Southeast Fund. Richard G. Sim is a director of IPSCO Inc. and Oshkosh
Truck Corporation.
4
<PAGE>
BOARD MEETINGS, COMMITTEES AND DIRECTOR COMPENSATION
There were seven meetings of the Board of Directors, three meetings of the
Audit Committee, five meetings of the Compensation Committee and no meeting of
the Nominating Committee during the year ended August 31, 1999. During the
period in the last fiscal year in which they served, all members of the Board
of Directors attended at least 75% of the aggregate number of meetings of the
Board of Directors and all the committees on which they served.
The Audit Committee of the Board of Directors: (i) reviews the scope and
timing of the audit of the Company's financial statements by the Company's
independent auditors; (ii) reviews with the independent accountants, and with
the Company's management, policies and procedures with respect to internal
auditing and financial and accounting controls; and (iii) reviews with the
independent accountants their reports on the Company's financial statements and
recommendations they make for improvements in the Company's internal controls
and the implementation of such recommendations.
The Compensation Committee of the Board of Directors determines the
compensation of the Company's executive officers, awards bonuses to such key
management personnel as the Committee selects and administers the Company's
stock incentive plans.
The Nominating Committee of the Board of Directors seeks qualified persons
for the position of director to recommend to the entire Board of Directors. In
carrying out its responsibilities, the Nominating Committee will consider
candidates suggested by other directors, employees and shareholders.
Suggestions of candidates to be considered by the Nominating Committee,
accompanied by biographical material, may be sent to the Secretary of the
Company at its corporate offices.
For the 1999 fiscal year, directors who were not employees of the Company
were paid an annual retainer of $19,000 for serving on the Board of Directors
and an attendance fee of $1,000 for each Board of Directors meeting and
committee meeting attended. Directors who are employees of the Company do not
receive separate remuneration in connection with their service on the Board or
Board committees.
In 1995, the Board of Directors adopted the Outside Directors' Deferred
Compensation Plan (the "Deferred Compensation Plan"). Under the Deferred
Compensation Plan, each non-employee director may elect to defer all or a
specified portion of his annual retainer and attendance fees for future payment
on a date specified by the participant or upon termination of the participant's
service as a director. A participating non-employee director's deferred
compensation is credited to an account, the value of which is based upon
phantom investments in Common Stock. Distributions from the Deferred
Compensation Plan are only made in cash.
Each non-employee director also receives an option grant each year to
purchase shares of Common Stock under the 1989 Outside Directors' Stock Option
Plan (the "1989 Plan"). The 1989 Plan is intended to promote the growth and
development of the Company by providing incentives for non-employee directors
of the Company through the grant to such directors of nonqualified stock
options to acquire shares of Common Stock. There is no discretion as to the
amount or timing of options to be granted, which are fixed by the terms of the
1989 Plan. The exercise price at which shares may be purchased under each
option is equal to the fair market value of the shares on the date of grant.
Options are not exercisable until eleven months after the date of grant and
then become fully exercisable, in whole or in part, at any time prior to their
expiration or termination. Unless earlier exercised or terminated, the
expiration date of each option granted under the 1989 Plan is ten years and one
day after the date of grant. All of the non-employee directors were granted
options in fiscal 1999 for 3,000 shares of Common Stock each at an exercise
price of $37.0625 per share. At October 1, 1999, options for 40,000 shares had
been exercised, options for 63,000 shares were outstanding and 17,000 shares
were reserved for future grants under the 1989 Plan.
5
<PAGE>
EXECUTIVE COMPENSATION
Report of the Compensation Committee of the Board of Directors on Executive
Compensation
Development of Compensation Approach and Objectives. The Compensation
Committee of the Board of Directors is responsible for establishing all of the
policies under which compensation is paid or awarded to the Company's executive
officers, and also determines the amount of such compensation. No member of the
Committee is employed by the Company. The Committee's objective is to develop a
total compensation program that is competitive in the marketplace and provides
significant incentive to increase shareholder value. Each year the Committee
reviews its executive compensation policies relative to market competitiveness,
and then determines what changes in the compensation program, if any, are
appropriate for the following year. Compensation of the Company's executive
officers currently consists of three key components -- salary, bonus and stock
options.
To emphasize the Committee's belief that stock ownership by the Company's
executive officers directly focuses those executives on increasing shareholder
value, the Committee adopted officer stock ownership guidelines during fiscal
1998. In general, it is the Company's policy that executive officers should
hold stock or options equal to three times their base salary (recognizing that
newer officers may need some time to build their ownership up to that level).
At least one-third of such ownership should be otherwise than through unvested
employee stock options. To assist executives in acquiring Company stock, the
guidelines include a loan program to be made available by the Company to such
executives. To date, no such loans have been made.
As in past years, for fiscal 1999 the Committee retained an independent
outside consultant who provided data regarding the compensation practices of
U.S. manufacturing companies. Competitive pay standards were derived from the
results of several compensation surveys, including comparisons with several
hundred manufacturing companies. These data, along with management's
recommendations for particular executive officer compensation and information
regarding an executive's experience, expertise and demonstrated performance,
were reviewed by the Committee in connection with setting fiscal 1999 salaries.
The total value of each executive's pay package was intended to equal the
competitive median for like positions in companies of similar size and type,
but consistent with the Committee's prior practices, the mix of compensation
was somewhat atypical. For instance, cash compensation was set at a lower level
than the median; in general, salary standards were targeted at approximately
95% of the market median and target bonuses were set at approximately 70% of
the market median. Stock incentives, on the other hand, were generally set
above the median for other companies in order to bring the total compensation
opportunity to a level competitive with others in the marketplace. This general
approach to compensation mix, though varied in certain circumstances when the
Committee in its discretion concluded it was appropriate to do so, was designed
to encourage the executive's continued focus on building shareholder value.
As an added benefit to the Company's key management personnel, during fiscal
1997 the Compensation Committee implemented an Executive Deferred Compensation
Plan (the "Deferred Plan"). The Deferred Plan allows certain highly compensated
employees (including executive officers) to defer payment of a portion of their
salary and bonus each year, generally until a date specified by the participant
or termination of employment. Amounts deferred pursuant to the Deferred Plan
are deemed to accrue interest at an annual rate equal to (a) the simple average
of the annual rate paid by ten-year U.S. Treasury notes during each September
preceding each plan year with respect to which compensation has been deferred,
plus (b) 1.50%. Two named executive officers made salary and bonus deferrals
under the Deferred Plan in fiscal 1999.
6
<PAGE>
Stock Incentive Component. Stock options are granted annually to executive
officers. Options may also be granted to other key employees whose present and
future contributions are especially important to the Company. All option grants
are priced at 100% of market value as of the date of grant. Unless earlier
terminated, options expire ten years from the date of grant and generally
become exercisable as to half of the shares granted two years after the date of
grant and fully exercisable five years after the date of grant. In May 1999,
the Committee also awarded additional grants of stock options to Messrs.
Albrecht and Boel in connection with the officers becoming leaders of the
Electronics and Industrial segments.
In valuing grants, the Committee values stock option grants at 50% of the
exercise price. This valuation method is recommended by the Committee's
independent consultant because it reflects the average discounted value of the
actual gains produced by options granted by U.S. industrial firms over the past
several decades. The Committee favors the simplicity of this 50% estimate and
believes it to be as good a predictor of the actual gains and costs of an
option grant as other methods.
The Company's stock option plans permit optionees who earn more than
$100,000 per year to elect to defer receipt of option shares upon exercise of
an option and payment of the applicable exercise price, thereby allowing such
optionees an opportunity to defer the taxable income attributable to the option
exercise if they so choose. Throughout the deferral period, the deferred shares
are credited with "deemed dividends" at the same rate as dividends paid on
Company Common Stock. At the end of the deferral period, such accumulated cash
dividend equivalent amounts are converted into shares of Common Stock and
distributed to the optionee with the shares of Common Stock issued to settle
the optionee's deferred share account. During 1999, two executive officers
deferred receipt of option shares under this program, including Richard G. Sim,
the Company's Chief Executive Officer, who deferred receipt of 47,245 shares.
Key Measurement Criteria for Bonuses. Bonus payments are made to each
executive officer based upon the degree of achievement of the year's financial
objectives. An executive may receive more, or less, than the target bonus based
on actual business results.
Each executive responsible for a business unit (or multiple business units)
is measured principally by the performance of that unit (or those units). The
measuring index utilized is "Combined Management Measure" ("CMM"), which is
unit operating profit before amortization less a charge based upon the net
assets employed by the unit. In fiscal 1999, CMM constituted 80% of the bonus
measurement for such executives. Twenty percent of such executive's respective
bonuses paid for fiscal 1999 was based on the Company's "Shareholder Value
Generated" ("SVG"), which is operating profit before amortization less a charge
for assets employed, and on earnings per share ("EPS") for the period, each
weighted equally. For all business unit executives, bonuses for the fiscal year
ended August 31, 1999 ranged from 0 to 200% of their target bonuses.
Company executives not in charge of business units receive bonus payments
based upon the performance of the Company as a whole. For fiscal 1999, 50% of
each such executive's bonus was based on the Company's SVG and 50% on the
Company's EPS for the period. For the fiscal year ended August 31, 1999,
bonuses for this group equaled 20% of the executives' targeted bonuses.
Chief Executive Officer Compensation. Assisted by competitive data provided
by the Committee's independent consultant, the Committee established a total
compensation value of approximately $2,600,000 for the Chief Executive Officer
position. Based on this benchmark and the compensation philosophy described
above for executive officers generally, the Committee concluded that the total
compensation opportunity for Mr. Sim should consist of a salary of $700,000
(approximately 95% of the market median), a target bonus of $600,000 (70% of
the market median) and a stock option grant valued at approximately $1,385,950
(100,000 shares valued at 50% of the exercise price).
7
<PAGE>
Mr. Sim's fiscal 1999 bonus was based on Company performance, 50% of which
was measured by SVG and 50% by EPS. Mr. Sim's fiscal 1999 bonus of $120,000,
which represents 20% of his target bonus, reflects attainment of 81% of the
Company's SVG target and 93% of the Company's EPS target.
Tax Deductibility of Executive Compensation. Section 162(m) of the Internal
Revenue Code limits the Company's federal income tax deduction to $1,000,000
per year for compensation paid to its chief executive officer or any of the
other executive officers named in the summary compensation table of this Proxy
Statement. Performance-based compensation is not, however, subject to the
deduction limit, provided certain requirements of Section 162(m) are
satisfied. The Company believes that its stock plans comply with the final
Section 162(m) regulations adopted by the Internal Revenue Service. In order
to preserve the deductibility of performance-based compensation, the Company
will generally seek to comply with Section 162(m) of the Internal Revenue Code
to the extent such compliance is practicable and in the best interests of the
Company and its shareholders.
Richard A. Kashnow (Chairman)
H. Richard Crowther
Jack L. Heckel
L. Dennis Kozlowski
John J. McDonough
Summary Compensation Table
The following table sets forth compensation awarded to, earned by or paid
to the Company's Chief Executive Officer and each of the Company's other four
most highly compensated executive officers who were serving as executive
officers during fiscal 1999 for services rendered to the Company and its
subsidiaries ("named executive officers"). Also included in the table is
comparable compensation information for those individuals for fiscal years
1998 and 1997.
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
--------------------------------------- ------------
Securities
Underlying All Other
Name and Principal Other Annual Options/ Compensation
Position Year Salary Bonus Compensation(1) SARs (#)(2) ($)(3)
- ------------------ ---- ------- ------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Richard G. Sim
Chairman, President and
Chief Executive
Officer............... 1999 662,977 120,000 -0- 100,000 18,640
Chairman, President and
Chief Executive
Officer............... 1998 491,724 611,250 -0- 50,000 17,840
Chairman, President and
Chief Executive
Officer............... 1997 433,000 372,000 -0- 72,000 18,190
William J. Albrecht
Senior Vice President
-- Electronics (4).... 1999 290,964 75,600 5,796 90,000 17,720
Senior Vice President
of Engineered
Solutions............. 1998 227,692 229,200(5) -0- 14,800 16,920
Senior Vice President
of Engineered
Solutions............. 1997 218,330 219,120 -0- 25,600 17,271
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
-------------------------------------------- ------------
Securities
Underlying All Other
Name and Principal Other Annual Options/ Compensation
Position Year Salary Bonus Compensation(1) SARs (#)(2) ($)(3)
- ------------------ ---- ------- ------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Robert C. Arzbaecher
Senior Vice President
and Chief Financial
Officer(6)............ 1999 263,073(6) 30,000(7) 7,498 30,000 11,761
Vice President and
Chief Financial
Officer............... 1998 189,231(6) 163,000(7) 3,787 13,200 10,961
Vice President and
Chief Financial
Officer............... 1997 175,834(6) 120,000(7) 389 18,200 11,311
Gustav H.P. Boel
Senior Vice President--
Industrial(8)......... 1999 243,078 155,000 -0- 64,000 20,581
Vice President;
President of Enerpac.. 1998 191,442 180,000 -0- 13,200 19,781
Vice President;
President of Enerpac.. 1997 193,334 24,000 -0- 20,000 14,275
Philip T. Burkart(9)
Senior Vice President;
Co-President of
Enclosure Products and
Systems............... 1999 252,305(10) 144,073(10) 12,737 26,000 27,700
Senior Vice President;
President of Technical
Environments and
Enclosures............ 1998 228,462(10) 39,120(10) 8,095 24,800 13,224
Vice President;
President of Wright
Line Inc.............. 1997 173,000(10) 122,275(10) 814 20,000 13,574
</TABLE>
- --------
(1) Consists entirely of interest paid on the Deferred Plan.
(2) Consists entirely of stock options.
(3) The 1999 amounts represent: (a) the Company's Savings Plan matching
contributions as follows: Mr. Sim--$2,625, Mr. Albrecht--$2,625, Mr.
Arzbaecher--$2,625, Mr. Boel--$2,625 and Mr. Burkart--0; (b) Company
allocations under the Savings Plan as follows: Mr. Sim--$4,800, Mr.
Albrecht--$4,800, Mr. Arzbaecher--$4,800, Mr. Boel--$4,800 and Mr.
Burkart--0; and (c) premiums paid by the Company for split-dollar life
insurance as follows: Mr. Sim--$11,215, Mr. Albrecht--$10,295, Mr.
Arzbaecher--$4,336, Mr. Boel--$13,156 and Mr. Burkart--$6,599. In addition,
Mr. Burkart's 1999 amount includes $10,769 of severance payments related to
his resignation in August 1999, and $10,332 of moving expenses paid for by
the Company.
(4) Effective November 3, 1998, Mr. Albrecht's title was changed to Senior Vice
President and in May 1999, Mr. Albrecht became Senior Vice President--
Electronics.
(5) 1998 includes $114,708 of bonus, payment of which has been deferred
pursuant to the Applied Power Inc. Executive Deferred Compensation Plan
(the "Deferred Plan").
9
<PAGE>
(6) Effective November 3, 1998, Mr. Arzbaecher was promoted to the office of
Senior Vice President and Chief Financial Officer.
(7) 1999 includes $26,307 of salary and $7,500 of bonus, payment of which has
been deferred pursuant to the Deferred Plan.
1998 includes $18,923 of salary and $40,750 of bonus, payment of which has
been deferred pursuant to the Deferred Plan.
1997 includes $15,600 of salary and $30,000 of bonus, payment of which has
been deferred pursuant to the Deferred Plan.
(8) Effective November 3, 1998, Mr. Boel's title was changed to Vice President
and in May 1999, Mr. Boel became Senior Vice President--Industrial.
(9) Mr. Burkart resigned in August 1999.
(10) 1999 includes $54,461 of salary, payment of which has been deferred
pursuant to the Deferred Plan.
1998 includes $45,692 of salary and $19,580 of bonus, payment of which has
been deferred pursuant to the Deferred Plan.
1997 includes $32,954 of salary and $61,137 of bonus, payment of which has
been deferred pursuant to the Deferred Plan.
Option/SAR Grants in Last Fiscal Year
The following table sets forth information concerning stock option grants
during the last fiscal year to the named executive officers. No stock
appreciation rights ("SARs") were granted in fiscal 1999.
<TABLE>
<CAPTION>
Individual Grants
----------------------------------------
Percent
of Total
Options/ Potential Realizable
Number of SARs Value at Assumed
Securities Granted Annual Rates of Stock
Underlying to Exercise Price Appreciation
Options/ Employees or Base for Option Term(3)
SARs in Fiscal Price Expiration ------------------------
Name Granted(#) Year(1) ($/Sh) Date(2) 5%($) 10%($)
---- ---------- --------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Richard G. Sim.......... 100,000 15.5% 27.719 11/03/08 $1,743,200 $4,417,600
William J. Albrecht..... 30,000 4.6% 27.719 11/03/08 522,960 1,325,280
60,000 9.3% 24.6875 06/01/09 931,550 2,360,731
Robert C. Arzbaecher.... 30,000 4.6% 27.719 11/03/08 522,960 1,325,280
Gustav H.P. Boel........ 24,000 3.7% 27.719 11/03/08 418,376 1,060,247
40,000 6.2% 24.6875 06/01/09 621,033 1,573,821
Philip T. Burkart(4).... 26,000 4.0% 27.719 --(4) --(4) --(4)
</TABLE>
- -------
(1) Based on stock option grants for an aggregate of 646,230 shares made to
all employees during the fiscal year ended August 31, 1999.
(2) Unless earlier terminated, options expire ten years from the date of grant
and generally become exercisable as to half of the shares granted two
years after the date of grant and fully exercisable five years after the
date of grant. In the event of a change-in-control of the Company, the
Compensation Committee may either provide for equivalent substitute
options to be granted to the optionees or a cash-out of the options based
on the highest fair market value per share of Company Common Stock during
the 60-day period
10
<PAGE>
immediately preceding the change-in-control. Optionees who earn more than
$100,000 per year may elect to defer receipt of option shares upon exercise
of an option. Throughout the deferral period, the deferred shares are
credited with "deemed dividends" at the same rate as dividends paid on
Company Common Stock. At the end of the deferral period, such accumulated
cash dividend equivalent amounts are converted into shares of Common Stock
and distributed with the shares of Common Stock issued to settle the
optionee's deferred share account.
(3) The dollar amounts under these columns are the result of calculations at
the 5% and 10% appreciation rates set by the Securities and Exchange
Commission and are not intended to forecast possible future appreciation,
if any, of the Common Stock price.
(4) Mr. Burkart resigned in August 1999, and as a result, this unvested stock
option grant was canceled.
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
The following table sets forth information for each of the named executive
officers concerning options exercised during fiscal 1999 and the number and
value of stock options outstanding at the end of the fiscal year. No SARs are
outstanding.
<TABLE>
<CAPTION>
Number of
Securities
Underlying Value of Unexercised
Unexercised In-the-Money
Shares Options/SARs at Options/SARs at
Acquired Fiscal Year-End(#) Fiscal Year-End($)(2)
on Value ------------------ ----------------------
Exercise Realized Exer- Unexer- Exer- Unexer-
Name (#) ($) cisable cisable(1) cisable cisable(1)
---- -------- --------- ------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Richard G. Sim.......... 68,000(3) 1,498,122 875,342 239,100 $18,426,193 $1,603,700
William J. Albrecht..... 12,000(4) 256,124 166,750 132,400 $3,433,166 $845,030
Robert C. Arzbaecher.... 10,000(5) 188,427 49,400 71,600 $913,025 $538,768
Gustav H.P. Boel........ -- -- 34,500 97,700 $595,906 $593,213
Philip T. Burkart....... -- -- 28,150 0(6) $462,111 0(6)
</TABLE>
- --------
(1) Represents unvested options at the end of fiscal 1999.
(2) Based on the August 31, 1999, $30.625 closing price of the Common Stock on
the New York Stock Exchange at the end of the fiscal year.
(3) Options exercised for 68,000 shares under the Company's option deferral
program. In connection therewith, Mr. Sim attested to the ownership of
20,755 shares of Common Stock in lieu of delivering such shares in payment
of the option exercise price and has been allocated 47,245 deferred shares
of Common Stock.
(4) Options exercised for 12,000 shares under the Company's option deferral
program. In connection therewith, Mr. Albrecht attested to the ownership
of 3,964 shares of Common Stock in lieu of delivering such shares in
payment of the option exercise price and has been allocated 8,036 deferred
shares of Common Stock.
(5) In connection with the exercise of 10,000 option shares, Mr. Arzbaecher
attested to the ownership of 2,956 shares of Company Common Stock in lieu
of delivering such shares in payment of the option exercise price and
received 7,044 shares of Company Common Stock.
(6) Mr. Burkart resigned in August 1999 and 75,800 unvested options were
canceled.
11
<PAGE>
Performance Graph
The following graph shows the cumulative total shareholder return on the
Common Stock during the preceding five fiscal years as compared to the returns
on the Standard & Poor's 500 Stock Index and the Standard & Poor's Diversified
Manufacturing Index. The graph assumes that $100 was invested on August 31,
1994 in the Common Stock and each index and that all dividends were
reinvested.
[Performance Graph Appears Here]
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
APPLIED POWER..................................... $100 $150 $136 $289 $226 $279
S&P 500 INDEX..................................... 100 121 144 203 219 307
S&P DIV. MFG. INDEX............................... 100 131 162 230 203 337
</TABLE>
12
<PAGE>
Employment Agreement and Change-In-Control Arrangements
The Company entered into an agreement with Richard G. Sim in May 1994 which
superseded his employment agreement originally entered into in July 1985. The
agreement provides that if Mr. Sim's employment with the Company is terminated
as a result of his death or permanent disability, he or his beneficiary will
receive his then current salary for a period of one year following such
termination and a pro rata portion of any bonus award earned for the fiscal
year in which such termination occurs. During the term of the agreement, the
Company must maintain Mr. Sim's coverage under its present long-term
disability benefit plan or a substantially similar plan providing at least
comparable benefits. In the event that Mr. Sim qualifies for a long-term
disability benefit under such plan, the Company will supplement any plan
benefit payable to Mr. Sim to the extent necessary to provide a total long-
term disability benefit payment that is equal to 30% of his then base pay.
Such supplemental benefit will be provided at no cost to Mr. Sim.
The Deferred Plan and certain of the Company's stock option plans contain
provisions that would be triggered by a change-in-control of the Company.
Under the Deferred Plan, a change-in-control would result in immediate
distribution of all deferred amounts as soon as administratively practicable
after the date of the change-in-control. The 1996 Stock Option Plan permits
the Compensation Committee to either provide for equivalent substitute options
to be granted to the optionees upon a change-in-control or the cash-out of
options previously granted under such plan based on the highest fair market
value per share of Company Common Stock during the 60-day period immediately
preceding the change-in-control. The 1990 Stock Option Plan provides for
acceleration of vesting in the event of a change-in-control. Finally, the
stock option deferral programs which are part of each stock option plan
maintained by the Company require distribution of all deferred shares as soon
as administratively practicable after the date of a change-in-control.
In October 1999, the Company entered into a change in control agreement
with Mr. G. Boel and certain other employees of its Industrial segment
providing for a payment of up to 18 months salary and bonus after a triggering
event and a change in control of the Company.
OTHER INFORMATION
Section 16(a) Beneficial Ownership Reporting Compliance
Pursuant to Section 16(a) of the Securities Exchange Act of 1934, the
Company's directors, executive officers and persons who beneficially own 10%
or more of the Common Stock are required to report their initial ownership of
Common Stock and subsequent changes in that ownership to the Securities and
Exchange Commission and the New York Stock Exchange. Specific due dates for
those reports have been established and the Company is required to disclose in
this Proxy Statement any failure to file by those due dates during fiscal
1999. Based upon a review of such reports furnished to the Company, or written
representations that no reports were required, the Company believes that all
of those filing requirements were satisfied with respect to fiscal 1999 except
for an inadvertent late reporting of a grant of 1999 options to Messrs.
Albrecht and Boel and an inadvertent late reporting of a stock option exercise
by Mr. Albrecht in connection with which he deferred receipt of certain shares
received upon such exercise.
Independent Public Accountants
On November 3, 1997, the Audit Committee of the Board of Directors
recommended the replacement of Deloitte & Touche LLP with Coopers & Lybrand
LLP (now PricewaterhouseCoopers LLP) as the Company's independent public
accountants. On November 4, 1997, the Board of Directors of the Company
accepted and approved the Audit Committee's recommendation. On the same day,
Deloitte & Touche LLP was notified of its
13
<PAGE>
dismissal and PricewaterhouseCoopers LLP was notified of its engagement.
Through November 4, 1997, there were no disagreements with Deloitte & Touche
LLP on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not
resolved to the satisfaction of Deloitte & Touche LLP, would have caused that
firm to make reference to the subject matter of the disagreement in connection
with its report. Deloitte & Touche LLP's report on the Company's financial
statements for 1997 fiscal years contained no adverse opinion or disclaimer of
opinion and was not qualified or modified as to uncertainty, audit scope, or
accounting principles.
The Company expects that representatives of PricewaterhouseCoopers LLP will
be present at the Annual Meeting and available to respond to appropriate
questions and make a statement if desired.
Shareholder Proposals
Shareholder proposals must be received by the Company no later than August
12, 2000 in order to be considered for inclusion in the Company's annual
meeting proxy statement next year. Shareholder proposals not intended to be
included in the Company's annual meeting proxy statement next year must be
received by the Company no later than October 26, 2000 to be considered
timely.
Additional Matters
In the event that a shareholder who requested that the agenda for the
Annual Meeting and this Proxy Statement include a proposal requesting the
Board of Directors to take the steps necessary to adopt cumulative voting in
the election of directors, and who proposed that management present a report
on the advantages of confidential voting and shareholder voting on auditors,
properly presents the proposals at the Annual Meeting, it is intended that
proxies will be voted with discretionary authority against such proposals.
Otherwise, management is not aware of any matters which will be presented for
action at the Annual Meeting other than the election of directors. If other
matters do come before the Annual Meeting, including any matter as to which
the Company did not receive notice by October 26, 1999 and any shareholder
proposal omitted from this Proxy Statement pursuant to applicable rules of the
Securities and Exchange Commission, it is intended that proxies will be voted
in accordance with the judgment of the person or persons exercising the
authority conferred thereby.
By Order of the Board of Directors
Anthony W. Asmuth III
Secretary
Milwaukee, Wisconsin
December 10, 1999
It is important that proxies be returned promptly. Therefore, whether or
not you expect to attend the Annual Meeting in person, shareholders are
requested to complete, date, sign and return their proxies as soon as
possible.
A copy (without exhibits) of the Company's Annual Report on Form 10-K for
the fiscal year ended August 31, 1999, as filed with the Securities and
Exchange Commission, has been provided with this Proxy Statement. Additional
copies of the Form 10-K are available, free of charge, upon request directed
to Robert C. Arzbaecher, Senior Vice President and Chief Financial Officer,
Applied Power Inc., P.O. Box 325, Milwaukee, Wisconsin 53201.
14
<PAGE>
APPLIED POWER INC.
ANNUAL MEETING OF SHAREHOLDERS - JANUARY 12, 2000
P R O X Y
CLASS A COMMON STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
(Continued from Reverse Side)
APPLIED POWER INC. 2000 ANNUAL MEETING
<TABLE>
<S> <C> <C> <C> <C>
1. Election of Directors: 1 - H. RICHARD CROWTHER 4 - L. DENNIS KOZLOWSKI [ ] FOR all nominees [ ] WITHHOLD
2 - JACK L. HECKEL 5 - JOHN J. MCDONOUGH listed to the left AUTHORITY to
3 - RICHARD A. KASHNOW 6 - RICHARD G. SIM (except as specified vote for all
below). nominees listed to
the left.
</TABLE>
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
the number(s) of the nominee(s) in the box provided to the right). _____________
2. In their discretion, upon such other business as may properly come before
the Meeting or any adjournment thereof;
all as set out in the Notice and Proxy Statement relating to the Meeting,
receipt of which is hereby acknowledged.
Check appropriate box Date ______________ NO. OF SHARES
Indicate changes below:
Address Change? [ ] Name Change? [ ] [ ]
SIGNATURE(S) IN BOX
PLEASE SIGN PERSONALLY AS NAME APPEARS AT
LEFT. When signing as attorney, executor,
administrator, personal representative,
trustee or guardian, give full title as
such. If signer is a corporation, sign
full corporate name by duly authorized
officer. If stock is held in the name of
two or more persons, all should sign.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
APPLIED POWER INC.
ANNUAL MEETING OF SHAREHOLDERS - JANUARY 12, 2000
P R O X Y
CLASS A COMMON STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
RICHARD G. SIM and ROBERT C. ARZBAECHER, and each of them, are hereby authorized
as Proxies, with full power of substitution, to represent and vote the Class A
Common Stock of the undersigned at the Annual Meeting of Shareholders of Applied
Power Inc., a Wisconsin corporation, to be held on Friday, January 8, 1999, or
any adjournment thereof, with like effect as if the undersigned were personally
present and voting, upon the matters indicated on the reverse side of this card.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER SPECIFIED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSAL 1.
IMPORTANT - THIS PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE.
(Continued on Reverse Side)
