<PAGE> 1
EXIDE ELECTRONICS GROUP, INC.
8609 SIX FORKS ROAD
RALEIGH, NORTH CAROLINA 27615
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES EXCHANGE ACT
OF 1934 AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about November 4, 1997.
You are receiving this Information Statement in connection with the possible
election of persons designated by BTR plc ("BTR") to a majority of the seats on
the Board of Directors (the "Board of Directors") of Exide Electronics Group,
Inc. (the "Company"). On October 16, 1997, the Company entered into a merger
agreement (the "Merger Agreement") with BTR and a wholly owned subsidiary of BTR
(the "Purchaser") pursuant to which, among other things, BTR and the Purchaser
have commenced a tender offer (the "BTR Offer") to purchase all of the Company's
outstanding shares of common stock (the "Common Stock") and warrants to purchase
Common Stock (the "Warrants" and together with the Common Stock, the "Shares")
at a price of $29.00 per share of Common Stock and $15.525 per Warrant to
purchase one share of Common Stock. The Merger Agreement provides that promptly
upon payment by the Purchaser for shares pursuant to the BTR Offer, and from
time to time thereafter, BTR will be entitled to designate such number of
directors of the Company, rounded up to the next whole number, as is equal to
the product of the total number of directors (determined after giving effect to
the directors so designated by BTR) multiplied by the percentage that the
aggregate number of shares of Common Stock beneficially owned by BTR or its
affiliates bears to the total number of shares of Common Stock then outstanding.
See "Rights to Designate Directors; BTR Designees."
In connection with entering into the Merger Agreement, BTR and the
Purchaser entered into an agreement (the "Stockholder Agreement") with certain
stockholders of the Company, a trust for the benefit of Conrad A. Plimpton,
Chairman of the Board of Directors of the Company, a trust for the benefit of
Lance L. Knox, a director of the Company, James Risher, President and Chief
Executive Officer of the Company, and Fiskars Oy Ab (collectively, the "Four
Stockholders"). The Stockholder Agreement relates to, in the aggregate,
2,273,033 shares of Common Stock (including shares issuable upon conversion of
the Company's Series G Convertible Preferred Stock (the "Series G Preferred
Stock")) owned by the Four Stockholders representing approximately 19.9% of the
shares of Common Stock outstanding on October 16, 1997. Pursuant to the
Stockholder Agreement, each of the Four Stockholders has (1) agreed to tender
into the BTR Offer, (2) agreed to vote in favor of the merger (the "Merger")
contemplated by the Merger Agreement and (3) granted BTR and the Purchaser an
irrevocable option to purchase certain of such stockholder's shares of Common
Stock at the price to be paid in the BTR Offer. The option will become
exercisable following termination of the Merger Agreement pursuant to certain
provisions of the Merger Agreement. The Merger Agreement and Stockholder
Agreement are more fully described in the Solicitation/Recommendation Statement
on Schedule 14D-9 (the "Schedule 14D-9") dated October 20, 1997 related to the
BTR Offer which was mailed to shareholders of the Company with materials related
to the BTR Offer.
This Information Statement is being mailed to you in accordance with
Section 14(f) of the Securities Exchange Act of 1934, as amended, and Rule 14f-1
thereunder. The information set forth herein amends and supplements certain
information set forth in the Schedule 14D-9. Information set forth herein
related to BTR, the Purchaser or the BTR Designees (as defined below) has been
provided by BTR. You are urged to read this Information Statement carefully. You
are not, however, required to take any action.
Pursuant to the Merger Agreement, BTR and the Purchaser commenced the BTR
Offer on October 20, 1997. The BTR Offer is scheduled to expire at 12:00
midnight, New York City Time on Monday, November 17, 1997, unless the BTR Offer
is extended.
GENERAL
The shares of Common Stock and the Series G Preferred Stock are the only
classes of voting securities of the Company outstanding. As of the close of
business on October 15, 1997, there were (i) 10,745,802 shares
<PAGE> 2
of Common Stock issued, of which 322,462 were owned by the Company or a wholly
owned subsidiary of the Company, and (ii) 1,000,000 shares of Series G Preferred
Stock issued and outstanding. Each share of Common Stock has one vote. Shares of
Series G Preferred Stock have the same voting rights as shares of Common Stock,
with each holder of Series G Preferred Stock entitled to the number of votes
that the holder would have if the Series G Preferred Stock were converted into
Common Stock. The Board of Directors currently consists of nine directors with
no vacancies. The Board of Directors is classified into three classes of three
directors each, with each director serving a three-year term and until his
successor is duly elected and qualified.
RIGHTS TO DESIGNATE DIRECTORS; BTR DESIGNEES
The Merger Agreement provides that promptly upon payment by the Purchaser
for the shares of Common Stock and Warrants pursuant to the BTR Offer, and from
time to time thereafter, BTR will be entitled to designate such number of
directors of the Company (the "BTR Designees"), rounded up to the next whole
number, as is equal to the product of the total number of directors (determined
after giving effect to the directors so designated by BTR) multiplied by the
percentage that the aggregate number of shares of Common Stock beneficially
owned by BTR or its affiliates bears to the total number of shares of Common
Stock then outstanding.
The BTR Designees will be selected by BTR from among the individuals listed
below. Each of the following individuals has consented to serve as a director of
the Company if appointed or elected. None of the BTR Designees currently is a
director of, or holds any positions with, the Company. To the best of BTR's
knowledge, none of the BTR Designees or any of their affiliates beneficially
owns any equity securities or rights to acquire any securities of the Company,
nor has any such person been involved in any transaction with the Company or any
of its directors, executive officers or affiliates that are required to be
disclosed pursuant to the rules and regulations of the Securities and Exchange
Commission (the "Commission"). The name, age, present principal occupation or
employment and five-year employment history of each of the following individuals
are set forth below. Unless otherwise indicated, each such individual has held
his present position as set forth below for the past five years and each
occupation refers to employment with BTR, unless otherwise noted. Each person is
a citizen of the United Kingdom and the business address of each such person is
c/o BTR Incorporated, Stamford Harbor Park, 333 Ludlow Street, Stamford,
Connecticut 06902.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT AND MATERIAL POSITIONS
NAME AND AGE HELD DURING THE PAST FIVE YEARS
- ----------------------------------- ------------------------------------------------------
<S> <C>
</TABLE>
Dr. Christopher Robert
Burns -- 54................... Joined Hawker, Siddeley in 1990, which was
acquired by BTR in 1991. Appointed Chief
Executive of BTR Aerospace & Batteries Group in
1992. Appointed a Regional Chief Executive of
BTR plc in 1994 and in the same year appointed
to the Board of BTR plc.
Robert J. C. Easton -- 34..... Director of International Mergers and
Acquisitions at Wasserstein Perella & Company
Ltd, 1990-1995. Director of Corporate Finance &
Planning at Trafalgar House plc, 1995-1996.
Appointed Manager of BTR Corporate Development
in 1996.
William J. Richardson -- 57... Chief Executive of BTR Batteries Group from
1992-1993. Appointed Chief Executive of BTR
Batteries Group in 1993.
John B. Saunders -- 54........ Director of Corporate Planning and Development
of Smithkline Beecham plc from 1988-1995.
Appointed Director of BTR Corporate Strategy &
Development in 1996.
David J. Stevens -- 47........ Associate General Counsel & Assistant Secretary
of Smithkline Beecham plc from 1991-1995. Group
Legal Director and Company Secretary of Forte
plc from 1995-1996. Appointed General Counsel
of BTR plc in 1996.
2
<PAGE> 3
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The name, age, present principal occupation or employment, five-year
employment history and share ownership of the current directors and executive
officers of the Company as of October 15, 1997 are set forth below. Unless
otherwise noted, each person is a citizen of the United States, and the business
address of each such person is c/o Exide Electronics Group, Inc., 8609 Six Forks
Road, Raleigh, North Carolina 27615.
<TABLE>
<CAPTION>
SHARES OF OPTIONS AND WARRANTS PERCENT OF
COMMON STOCK EXERCISABLE WITHIN COMMON
NAME AND AGE POSITION (1)(2) 60 DAYS(1) STOCK(3)
- ----------------------------- ------------------------- ------------ -------------------- ------------
<S> <C> <C> <C> <C>
James A. Risher -- 55........ President and Chief 269,090 70,103(7) 3.0%
Executive Officer
Conrad A. Plimpton -- 54..... Chairman of the Board 259,836(4) 17,000(8) 2.4%
Mark A. Ascolese -- 46....... Group Vice President, 38,143 26,000(9) *
Worldwide Services
Nicholas J. Costanza -- 42... Vice President, Chief 35,828 19,005(10) *
Administrative Officer,
General Counsel and
Secretary
Marty R. Kittrell -- 41...... Vice President, Chief 38,314 38,353(11) *
Financial Officer,
Treasurer, and
Assistant Secretary
Hermann G. P.
Metzler -- 56.............. Vice President, Far East 29,733 13,000(12) *
Sales
William J. Raddi -- 58....... Senior Vice President, 115,000 32,000(13) 1.3%
Strategic Business
Development and Chief
Technology Officer;
Acting Vice President,
Communications Systems
Group
Alden R. Schnaidt -- 49...... Group Vice President, 30,000 22,500(14) *
Enterprise Systems and
Chief Manufacturing
Officer; Acting Vice
President, Network
Systems Group
Lance L. Knox -- 53.......... Director 139,870 17,000(8) 1.4%
Ron E. Doggett -- 62......... Director 8,000 12,000(8) *
Ralf R. Boer -- 48........... Director 2,500(5) 1,500(8) *
Wayne L. Clevenger -- 54..... Director 10,000 17,000(8) *
Stig G. Stendahl -- 58....... Director --(5) 1,500(8) *
James E. Fowler -- 65........ Director 1,250 5,750(8) *
David J. McLaughlin -- 61.... Director 4,300 14,500(8) *
All Executive Officers and
Directors as a Group....... 981,883(6) 307,212 11.0%
</TABLE>
- ---------------
* Less than 1%
(1) Except as indicated in the footnotes to this table, the persons named in
the table have sole voting and investment power with respect to the shares
of Common Stock of the Company shown as beneficially owned by them. Shares
of Common Stock beneficially owned by each of Mr. Plimpton and Mr. Knox are
owned by trusts for the benefit of Mr. Plimpton and Mr. Knox, respectively.
(2) Does not include options and warrants to purchase shares of Common Stock
which are listed separately under the next column "Options and Warrants
Exercisable Within 60 Days".
3
<PAGE> 4
(3) Represents the percent of shares of Common Stock held and options and
warrants exercisable within 60 days after October 15, 1997. The numerator
in this calculation includes the shares of Common Stock plus options and
warrants exercisable within 60 days held by the beneficial owner. The
denominator includes 10,423,340 shares of Common Stock outstanding as of
October 15, 1997 plus 1,000,000 shares of Series G Preferred Stock on an
as-converted basis.
(4) Includes 2,300 shares held by the custodian for the Conrad A. Plimpton SERP
Trust.
(5) Does not include 825,000 shares of Common Stock or the 1,000,000 shares of
Series G Preferred Stock held by Fiskars Oy Ab ("Fiskars"). As of October
15, 1997, Messrs. Boer and Stendahl have shared voting and investment power
over any such shares and disclaim beneficial ownership of such shares. On
October 16, 1997, Fiskars entered into the Stockholder Agreement described
on the first page of this Information Statement, pursuant to which it,
among other things, agreed to tender into the BTR Offer and vote in favor
of the Merger, and granted to Purchaser an option to purchase an aggregate
of 1,680,614 shares of Common Stock (including Common Stock issuable upon
conversion of all of such Series G Preferred Stock).
(6) Does not include 825,000 shares of Common Stock or the 1,000,000 shares of
Series G Preferred Stock held by Fiskars.
(7) Does not include an option to purchase 20,000 shares of Common Stock which
by its terms is not exercisable within 60 days after October 15, 1997. Such
option will vest and become exercisable upon consummation of the BTR Offer.
On October 16, 1997, Mr. Risher entered into the Stockholder Agreement
described on the first page of this Information Statement, pursuant to
which, among other things, he agreed to tender into the BTR Offer and vote
in favor of the Merger, and granted to Purchaser an option to purchase
239,068 shares of Common Stock.
(8) Does not include an option to purchase 4,500 shares of Common Stock which
by its terms is not exercisable within 60 days after October 15, 1997. Such
option will vest and become exercisable upon consummation of the BTR Offer.
On October 16, 1997, trusts for the benefit of each of Mr. Plimpton and Mr.
Knox entered into the Stockholder Agreement described on the first page of
this Information Statement, pursuant to which, among other things, Mr.
Plimpton and Mr. Knox agreed to tender into the BTR Offer and vote in favor
of the Merger, and granted to Purchaser an option to purchase, 229,069 (in
the case of Mr. Plimpton) and 124,282 (in the case of Mr. Knox) shares of
Common Stock.
(9) Does not include an option to purchase 22,000 shares of Common Stock which
by its terms is not exercisable within 60 days after October 15, 1997. Such
option will vest and become exercisable upon consummation of the BTR Offer.
(10) Does not include an option to purchase 10,874 shares of Common Stock which
by its terms is not exercisable within 60 days after October 15, 1997. Such
option will vest and become exercisable upon consummation of the BTR Offer.
(11) Does not include an option to purchase 21,750 shares of Common Stock which
by its terms is not exercisable within 60 days after October 15, 1997. Such
option will vest and become exercisable upon consummation of the BTR Offer.
(12) Does not include an option to purchase 7,000 shares of Common Stock which
by its terms is not exercisable within 60 days after October 15, 1997. Such
option will vest and become exercisable upon consummation of the BTR Offer.
(13) Does not include an option to purchase 17,500 shares of Common Stock which
by its terms is not exercisable within 60 days after October 15, 1997. Such
option will vest and become exercisable upon consummation of the BTR Offer.
(14) Does not include an option to purchase 16,500 shares of Common Stock which
by its terms is not exercisable within 60 days after October 15, 1997. Such
option will vest and become exercisable upon consummation of the BTR Offer.
4
<PAGE> 5
DIRECTORS AND EXECUTIVE OFFICERS
Mr. Boer become a director in May 1996. Mr. Boer has been an attorney with
Foley & Lardner, an international law firm, since 1974 and a managing partner of
the firm since 1992. He is a member of the board of directors of several
European corporations and their subsidiaries.
Mr. Clevenger has been a director since 1982. Mr. Clevenger has been
Managing Director of MidMark Management, Inc., a private investment firm, since
January 1990. He was President of Lexington Investment Company from 1985 to
1989. Mr. Clevenger is a director of Clearview Cinema Group, Inc., Lionheart
Industries, Inc., SPD Technologies Inc. and United Wholesale, Inc.
Mr. Doggett has been a director of the Company since 1991. Mr. Doggett has
been Chief Executive Officer since 1985 and Chairman of the Board since 1987 of
GoodMark Foods, Inc., a producer of snack foods.
Mr. Fowler has been a director since 1985. Mr. Fowler has been a financial
consultant since July 1994. He previously served as Assistant Comptroller of
Inco Limited and as President of Inco Battery Holdings Corporation from 1983
until his retirement in 1994.
Mr. Knox was Vice Chairman of the Board of Directors through February 1997
and has been and a director of the Company since 1982. Mr. Knox is a principal
of The Lethbridge Group, Inc., a private investment firm, which he founded in
1988.
Mr. McLaughlin has been a director since 1990. Mr. McLaughlin has been
President and Chief Executive Officer of Troy Biosciences Inc., a biotechnology
company in Phoenix, Arizona since July 1996. From 1984 to July 1996, he was
President of McLaughlin and Company Inc., a management consulting firm. He has
also been Executive Director of the Senior Personnel Executive Forum, a
non-profit association, since 1979. Mr. McLaughlin is a director of Scientific
Atlanta, Inc., Smart & Final, Inc., Troy Biosciences Inc., and Evolve Software,
Inc.
Mr. Plimpton has been Chairman of the Board of Directors and a director of
the Company since 1982 and was Secretary from 1982 until 1991. Mr. Plimpton has
been a Managing Director of the private investment firm of Plimpton & Company
since 1979.
Mr. Risher has been President, Chief Executive Office, and a director since
joining the Company in 1986. From 1984 through 1986, Mr. Risher was Senior Vice
President of Distribution Operations of the Computer System Division of
Motorola, Inc. From 1979 to 1984, Mr. Risher was employed by Wang Laboratories
with his last position being Vice President of Marketing for Domestic
Operations. Previously, Mr. Risher spent 12 years with IBM in various sales and
marketing positions.
Mr. Stendahl, a citizen of Finland, became a director in May 1996. Mr.
Stendahl has been the President and CEO of Fiskars Oy Ab, a Helsinki, Finland
based multinational company with industrial operations in Europe, North America
and Asia, since 1992 and is a member of the board of directors of several other
European companies.
Mr. Knox was an officer of FGH Corp., which was an inoperative shell
company, when that company filed for protection under Chapter 7 of the
Bankruptcy Code in 1992.
Mr. Ascolese joined the Company in 1985 and assumed his current position as
Group Vice President, Worldwide Services, in February 1997. Mr. Ascolese has
served in various customer service, sales management and General Manager
capacities since becoming a Vice President in 1987. He was Vice President and
General Manager, Worldwide Services Group from 1992 to January 1995, Senior Vice
President and General Manager, North American Field Operations from January to
October 1995, and Senior Vice President and General Manager, Americas Group,
from October 1995 to February 1997.
Mr. Costanza joined the Company in 1980 and assumed his current position as
Vice President, Chief Administrative Officer, General Counsel and Secretary in
February 1995. Mr. Costanza held various legal positions with the Company prior
to being promoted to Vice President and General Counsel in 1986.
5
<PAGE> 6
Mr. Kittrell joined the Company in 1989 as Vice President and Chief
Financial Officer and Treasurer. He was elected Assistant Secretary in 1991.
Mr. Metzler joined the Company in 1984 as Manager of International Sales
and Service. From 1985 until 1989, he served as Director of International
Marketing and Sales, and from 1989 to 1997 as Vice President, International
Group. In February 1997, he assumed his current position of Vice President, Far
East Sales.
Mr. Raddi has been with the Company and its predecessors since 1962 and has
served in various engineering, development, and manufacturing capacities. In
1990, he assumed the title of Senior Vice President and Chief Technology
Officer. In 1992, he assumed the additional position of Senior Vice President
and General Manager, Small Systems Group. He assumed his current position as
Senior Vice President, Strategic Business Development and Chief Technology
Officer in February 1997 and the position of Acting Vice President,
Communication Systems Group in September 1997.
Mr. Schnaidt joined the Company in 1986 as Director of Manufacturing. He
served as Vice President, Manufacturing Operations from 1988 to 1992, and as
Vice President and General Manager, Large Systems Group from 1992 to 1997. He
assumed his current position of Group Vice President, Enterprise Systems and
Chief Manufacturing Officer in February 1997 and the position of Acting Vice
President, Network Systems Group in May 1997.
BOARD OF DIRECTORS; BOARD COMMITTEES -- COMPOSITION AND FUNCTIONS
During fiscal 1997, the Board of Directors held nineteen meetings. During
that period, all of the directors attended more than 75% of the meetings of the
Board of Directors and meetings of the committees of the Board of Directors on
which they served, except for one former director.
The Board of Directors has established an Audit Committee, an Executive
Committee, a Human Resources Committee (the "HR Committee") and an Ad Hoc
Committee. The Executive Committee also functions as the nominating committee.
The Company has established a framework and governance procedures for the
operation of the Board of Directors and its committees, which have been approved
by the Board of Directors.
The corporate governance framework and governance procedures approved by
the Board of Directors define the responsibilities of the Chairman, the full
Board of Directors and the committees thereof. The corporate governance
procedures prescribe that there shall be a sufficient number of committees to
conform to regulatory requirements, common corporate practice and Company needs.
Governance procedures also define the expectations for performance by each
Committee and matters reserved for review by the entire Board of Directors.
Audit Committee. From September 1996 to March 1997, the Audit Committee
consisted of Messrs. Fowler (the Chairman), Clevenger and Doggett. From March
1997, Audit Committee members were Messrs. Fowler (the Chairman), Clevenger and
Boer. During fiscal 1997, the Audit Committee held four meetings. The Audit
Committee is the independent overseer of the Company's financial reporting
process and provides an independent assessment of the Company's internal
accounting controls. The Audit Committee is appointed annually by the Board of
Directors and is composed of not less than two directors. Members must be
independent and cannot be an employee of the Company. The Audit Committee is
primarily concerned with the appropriateness of the Company's accounting
policies, and the reliability and timeliness of information reported to all of
the Company's constituencies. When assessing the Company's internal accounting
controls, the Audit Committee is primarily concerned with the adequacy of the
controls and procedures in preventing errors and irregularities and in detecting
errors and irregularities on a timely basis if they do occur. The Audit
Committee is also responsible for monitoring compliance with the Company's
Policy Statement on Securities Trading By Officers and Directors.
In the performance of its functions, the Audit Committee meets at least two
times a year with members of the Company's management who have responsibility
for the financial reporting process and the development, implementation, and
maintenance of adequate internal controls. In addition, the Committee meets with
the Company's internal audit department, which has the responsibility to
evaluate and test internal control
6
<PAGE> 7
systems, and with the independent external auditors of the Company who have the
responsibility to independently assess the effectiveness of the Company's
financial reporting process for purposes of determining the nature, timing, and
extent of their audit procedures.
The Audit Committee reviews the annual financial statements of the Company
prior to their submission to the Board of Directors. The Committee also has
authority to consider such other matters in relation to the Company's accounting
principles and internal accounting controls as the Committee may determine to be
advisable, and has authority to review transactions between the Company and its
affiliates to determine if conflicts of interest exist. The Committee reviewed
and approved the nature, effectiveness and extent of the services provided by
Arthur Andersen LLP, the Company's independent external auditors, including
services rendered in fiscal 1996, the costs and fees for such services and the
effect of such fee arrangements on the independence of the auditors. The
Committee will conduct the same review for fiscal year 1997.
Executive Committee. From September 1996 to March 1997, the Executive
Committee consisted of Messrs. Knox (the Chairman), Plimpton, Doggett and
Risher. From March 1997, Committee members were Messrs. Knox (the Chairman),
Doggett, Risher and Stendahl. During fiscal 1997, the Committee held five
meetings. The Executive Committee reviews overall strategic plans and ensures
the existence of appropriate operating plans and budgets. The Executive
Committee also deals with overall strategic and tactical issues relating to
corporate development activities and makes recommendations of such matters to
the Board of Directors. In addition, the Executive Committee functions as a
nominating committee for the purposes of recruiting and selecting candidates for
election to the Board of Directors.
Human Resources Committee. From September 1996 to March 1997, the HR
Committee consisted of Messrs. McLaughlin (the Chairman), Knox and Doggett. From
March 1997, Committee members were Messrs. McLaughlin (the Chairman), Boer and
Clevenger. During fiscal 1997, the Committee held ten meetings. The HR Committee
provides counsel to the Board of Directors on matters within its area of
responsibility, including independent review of executive compensation,
management development plans and the overall organization and executive
resources of the Company. The HR Committee is charged with the broad
responsibility of assuring the Board of Directors that: (i) the Company has
attracted and retained outstanding executive talent, provided for their
development and planned for succession to senior management positions; (ii) the
compensation programs of the Company reinforce the Company's general strategy
and properly recognizes performance; and (iii) compensation levels are
internally equitable and externally competitive. The HR Committee's primary
focus is on corporate executives and other key general management positions.
Ad Hoc Committee. In June 1997, the Board of Directors established an Ad
Hoc Committee to consider developments related to a proposal by Danaher
Corporation ("Danaher") in June 1997 to acquire the Company and related matters.
The Ad Hoc Committee consists of Messrs. Risher, Plimpton, Knox, Boer, Doggett
and Fowler and has met six times since its formation.
COMPENSATION OF DIRECTORS
Mr. Risher is not compensated separately for his services as a director. In
fiscal 1997, each of the other directors was paid an annual retainer of $20,000,
the Chairman of the Executive Committee received an additional annual retainer
of $10,000 and the Audit and Human Resources Committee Chairman each received an
additional annual retainer of $5,000. In addition to the compensation described
above, in fiscal 1997, Mr. Plimpton, the Chairman of the Board of Directors,
received a flat retainer fee of $25,000, plus reimbursement of expenses, for
serving in that capacity and Mr. Knox received an annual consulting fee of
$25,000, plus reimbursement of expenses, for additional consulting services,
which include providing management and the Board of Directors counsel and
leadership on a variety of issues requiring dedicated time and effort on the
part of Mr. Knox. Each of the directors was also paid a fee of $1,000 for each
Board meeting and Board committee meeting attended and $500 for each telephone
Board and Board Committee meeting attended, plus expenses, except for members of
the Executive Committee who (except for Mr. Risher) received flat retainers of
$10,000 in lieu of meeting fees. Receipt of director compensation is subject to
minimum attendance standards.
7
<PAGE> 8
Option Plans for Directors. The Company believes that stock options
enhance its ability to attract the services of experienced, able and
knowledgeable persons to serve as directors. It also believes that stock options
are important to promote and encourage the continued service of directors by
facilitating their purchase of a stock interest in the Company. Accordingly, the
Company adopted non-employee director stock option plans in 1989 and 1995.
1989 Directors Plan and 1995 Directors Plan. In October 1989, the Board of
Directors authorized the grant of up to 87,500 shares of the Common Stock for
the Non-Employee Directors Stock Option Plan ("1989 Directors Plan"). At
December 31, 1994, there were no further options available for grant to
directors under the 1989 Directors Plan. Accordingly, in 1995, the 1995
Directors Stock Option Plan ("1995 Directors Plan") was adopted by the Company.
The 1989 Directors Plan had provided for the annual grant of an option to
purchase 2,500 shares. Other terms are substantially the same as in the 1995
Directors Plan as described below.
Under the terms of the 1995 Directors Plan, 150,000 shares of the Common
Stock are reserved for issuance. The 1995 Directors Plan provides that each
non-employee director of the Company is granted an option to purchase 3,000
shares of stock as of the date of the director's commencement of service as a
director. Thereafter, a non-employee director is granted an additional option to
purchase 3,000 shares of stock immediately following the annual election of
directors if he or she continues to be a non-employee director on the board. The
per-share option exercise price of each of these options is the fair market
value of a share of Common Stock on the grant date as determined in accordance
with the 1995 Directors Plan.
Each option granted to a non-employee director of the Company is
exercisable for 1,500 shares of Common Stock one year following the date of
grant and exercisable for the remaining 1,500 shares two years following the
date of grant. Unexercised options granted to non-employee directors of the
Company terminate upon the expiration of one year following the date on which
the non-employee director dies or on the date on which the non-employee director
ceases to be a member of the Board for any other reason, unless such termination
of service is due to (i) retirement from the Board of Directors; (ii) failure to
stand for election with the Board of Directors' consent, or (iii) resignation
from the Board of Directors with the Board of Directors' consent. Unexercised
options expire ten years after the date of grant.
Fiscal 1997 Option Grants. During fiscal 1997, options to purchase 24,000
shares of Common Stock at a price of $12.50 per share were granted under the
1995 Directors Plan to continuing directors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of October 15, 1997(1), all persons
known by the Company to be the beneficial owners of more than 5% of any class of
the voting securities of the Company. The information set forth below is based
on beneficial ownership information contained in the most recent Schedule 13D,
13F or 13G filed on behalf of such holder or on information furnished by the
holder to the Company.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT OF
NAME AND ADDRESS BENEFICIAL COMMON STOCK
OF BENEFICIAL OWNER OWNERSHIP(2) (3)(4)
- --------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Fiskars........................................................ 1,825,000(5) 16.0%
Mannerheimintie 14 A
FIN-00100
Helsinki, Finland
Duquesne Enterprises, Inc. .................................... 1,058,750 9.3%
Grant Building, Suite 240
Pittsburgh, PA 15219
</TABLE>
- ---------------
(1) On October 16, 1997, the Stockholder Agreement was entered into pursuant to
which BTR may be deemed to be the beneficial owner of approximately 19.9% of
the outstanding Common Stock.
8
<PAGE> 9
(2) Except as indicated in the footnotes to this table, the persons named in the
table have sole voting and investment power with respect to all shares of
Common Stock of the Company shown as beneficially owned by them.
(3) Assumes conversion of 1,000,000 shares of the Series G Preferred Stock
issued to Fiskars.
(4) The denominator in this calculation includes 10,423,340 shares of Common
Stock outstanding as of October 15, 1997, plus 1,000,000 shares of Series G
Preferred Stock on an as-converted basis.
(5) Includes 825,000 shares of Common Stock and 1,000,000 shares of Series G
Preferred Stock. On October 16, 1997, Fiskars entered into the Stockholder
Agreement described on the first page of the Information Statement, pursuant
to which it, among other things, agreed to tender into the BTR Offer and
vote in favor of the Merger, and granted to Purchaser an option to purchase
an aggregate of 1,680,614 shares of Common Stock (including Common Stock
issuable upon conversion of all of such Series G Preferred Stock).
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors to file reports of ownership and changes in ownership
with the Commission. The regulations of the Commission require officers and
directors to furnish the Company with copies of all Section 16(a) forms they
file. Based on such forms, the Company believes that all its officers and
directors have complied with the Section 16(a) filing requirements.
EXECUTIVE COMPENSATION
The following table sets forth current and long-term compensation
information for each of the last three fiscal years of the Chief Executive
Officer and each of the other executive officers whose salary and bonus for the
fiscal year 1997 exceeded the disclosure threshold established by the Commission
(collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM
-------------------------------------- COMPENSATION
BONUS($) OTHER ANNUAL ---------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) (1)(2) COMPENSATION($) OPTION AWARDS(5) COMPENSATION(6)($)
- ---------------------------------- ---- --------- -------- --------------- ---------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
James A. Risher................... 1997 450,000 (1) 153,815(3) -- 51,935
President and Chief 1996 425,000 100,000 128,140(3) -- 66,974
Executive Officer 1995 375,000 160,000 149,492(3) 40,000 86,675
Alden R. Schnaidt................. 1997 190,096 50,000 (1) (4) 4,000 22,288
Group Vice President, 1996 175,000 40,000 24,740(3) 15,000 27,584
Enterprise Systems and 1995 175,000 104,000 (4) 10,000 23,733
Chief Manufacturing Officer;
Acting
Vice President, Network Systems
Group
Marty R. Kittrell................. 1997 225,000 (1) (4) 3,000 10,580
Vice President, CFO, 1996 200,000 70,000 36,972(3) 15,000 40,841
Treasurer, and Assistant 1995 200,000 (4) 15,000 13,884
Secretary 55,000
William J. Raddi.................. 1997 200,000 -- (4) 2,500 46,258
Senior Vice President, 1996 200,000 40,000 (4) 10,000 50,041
Strategic Business 1995 200,000 45,000 (4) 20,000 55,763
Development and Chief Technology
Officer; Acting Vice President,
Communications Systems Group
Mark A. Ascolese.................. 1997 192,000 (1) (4) 2,000 18,246
Group Vice President, 1996 192,000 32,000 (4) 10,000 11,729
Worldwide Services 1995 189,000 68,000 (4) 30,000 26,204
</TABLE>
- ---------------
(1) Upon consummation of the BTR Offer and satisfaction of certain other
conditions, Messrs. Risher, Schnaidt, Kittrell, Raddi and Ascolese will be
entitled to receive change of control bonuses under the Amended MIP (as
hereinafter defined) of $767,840, $152,000, $338,920, $160,000 and $153,600.
Mr. Schnaidt's special $50,000 bonus, to which he will be entitled in
addition to any award under the Amended MIP, is associated with his
performance of an extraordinary assignment during fiscal 1997.
9
<PAGE> 10
(2) Upon consummation of the BTR Offer and satisfaction of certain other
conditions, the change of control bonuses will change the Named Executive
Officers to include Messrs. Risher, Kittrell, Costanza, Schnaidt and Raddi.
Mr. Costanza will receive a change of control bonus under the Amended MIP of
$320,920. His three year compensation history is as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Nicholas J. Costanza.............. 1997 180,000 -- (4) 2,000 11,267
Vice President, Chief 1996 168,333 47,000 (4) 12,750 27,456
Administrative Officer, 1995 150,000 34,000 (4) 5,000 22,242
General Counsel and Secretary
</TABLE>
See also footnote (6) to this table, footnote (1) to the Option
Grants in Last Fiscal Year table, and footnote (1) to the Fiscal
Year-End Option Values table.
(3) Includes the following reported amounts for particular perquisites which
exceed 25% of the total amount of perquisites for the Named Executive
Officers. Includes for fiscal 1997: reimbursement for payment of taxes: Mr.
Risher -- $70,254. Includes for fiscal 1996: (a) reimbursement for payment
of taxes: Mr. Risher -- $48,035; Mr. Schnaidt -- $9,500; Mr.
Kittrell -- $20,000; (b) automobile allowance: Mr. Schnaidt -- $9,000; (c)
club dues: Mr. Schnaidt -- $6,240. Includes for fiscal 1995: reimbursement
of payment of taxes: Mr. Risher -- $64,957.
(4) Total perquisites were less than 10% of total fiscal year salary and bonus.
(5) The Company has made neither Restricted Stock Awards nor Long Term Incentive
Plan Payouts in the last three years to the Named Executive Officers.
(6) The total in this column reflects the aggregate value of the Company
contributions under the 401(k) Retirement Benefit Plan, the portion of the
premiums paid by the Company in the covered fiscal year under a "split
dollar" insurance arrangement and the Company's contributions to the
Supplementary MIP (as hereinafter defined), as described below under the
caption "Supplementary MIP". As of October 15, 1997, no Company
contributions have been made to the Supplementary MIP for fiscal 1997.
Company contributions for each of the Named Executive Officers for fiscal
1997 are as follows:
<TABLE>
<CAPTION>
SPLIT-DOLLAR SUPPLEMENTARY
401(k) INSURANCE MIP
--------- ------------ -------------
<S> <C> <C> <C>
James A. Risher............................. $ 5,450 $ 46,485 $0
Alden R. Schnaidt........................... 6,221 16,067 0
Marty R. Kittrell........................... 6,013 4,567 0
William J. Raddi............................ 7,600 38,658 0
Mark A. Ascolese............................ 6,000 12,246 0
Company contributions on behalf of Mr.
Costanza are:
Nicholas J. Costanza:....................... $ 5,992 $ 5,275 0
</TABLE>
10
<PAGE> 11
STOCK OPTIONS AND SARS
For fiscal year 1997, options to purchase 150,750 shares were granted to 57
employees as a group.
The following table sets forth all material terms with regard to grants of
stock options to each of the Named Executive Officers for the fiscal year ended
September 30, 1997. All such grants were made under the 1995 Option Plan. No
SARs have been granted under the 1989 Option Plan and SARs are not provided for
in the 1995 Option Plan.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ---------------------------------------------------------------------------------------------------
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE
UNDERLYING GRANTED TO APPRECIATION FOR
OPTIONS EMPLOYEES EXERCISE OPTION TERM
GRANTED IN FISCAL PRICE EXPIRATION -------------------
NAME(1) (#) YEAR(2) ($/SH) DATE 5%($)(3) 10%($)(4)
- -------------------------------------- ----------- ------ ----------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Alden R. Schnaidt............ 4,000 2.7 $11.75 11/6/06 $29,558 $74,906
Marty R. Kittrell............ 3,000 2.0 $11.75 11/6/06 $22,169 $56,179
William J. Raddi............. 2,500 1.7 $11.75 11/6/06 $18,474 $46,816
Mark A. Ascolese............. 2,000 1.3 $11.75 11/6/06 $14,779 $37,453
</TABLE>
- ---------------
(1) The material terms of Mr. Costanza's option grant are as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Nicholas J. Costanza......... 2,000 1.3 $11.75 11/6/06 $14,779 $37,453
</TABLE>
(2) In fiscal 1997, options to purchase 150,750 shares were granted to 57
employees as a group.
(3) Represents the gain before income taxes, equal to the appreciated value of
the options less the exercise price, at an assumed 5% appreciation rate,
compounded annually, over the ten-year life of the option. Assumes an
appreciated stock price of $19.14 at November 6, 2006.
(4) Represents the gain before income taxes, equal to the appreciated value of
the options less the exercise price, at an assumed 10% appreciation rate,
compounded annually, over the ten-year life of the option. Assumes an
appreciated stock price of $30.48 at November 6, 2006.
The next table sets forth information with regard to exercises of stock
options during the fiscal year ended September 30, 1997, by each of the Named
Executive Officers and the fiscal year-end value of all unexercised options held
by such individuals.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF
UNEXERCISED UNEXERCISED
NO. OF OPTIONS AT IN-THE-MONEY
SHARES FY-END OPTIONS AT FY-END
ACQUIRED ---------------- -----------------
ON VALUE EXERCISABLE/ EXERCISABLE/
NAME(1) EXERCISE VALUE REALIZED($) UNEXERCISABLE(#) UNEXERCISABLE(2)($)
- ---------------------------------- -------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
James A. Risher................... -0- -0- 70,000/20,000 $440,000/$127,500
Alden R. Schnaidt................. -0- -0- 18,750/20,250 $142,187/$174,312
Marty R. Kittrell................. -0- -0- 34,500/25,500 $173,625/$179,250
William J. Raddi.................. -0- -0- 29,500/20,000 $217,375/$156,875
Mark A. Ascolese.................. -0- -0- 23,500/24,500 $164,000/$183,250
</TABLE>
- ---------------
(1) Information with regard to the fiscal year-end value of Mr. Costanza's
unexercised options are as follows:
<TABLE>
<S> <C> <C> <C> <C>
Nicholas J. Costanza.............. -0- -0- 15,688/14,062 $121,333/$121,605
</TABLE>
(2) The closing price of the Common Stock of the Company at September 30, 1997
was $22.75.
11
<PAGE> 12
CERTAIN EMPLOYMENT AND SEVERANCE AGREEMENTS WITH CERTAIN EXECUTIVE OFFICERS
In fiscal 1986, the Company entered into an employment agreement with Mr.
Risher at the time he was hired. Upon the expiration of that employment
agreement, in fiscal 1990 the Company entered into a new employment agreement
with Mr. Risher. The agreement provides that in the event of termination of Mr.
Risher's employment by the Company, other than for cause, Mr. Risher would be
entitled to severance payments equal to three years total compensation,
including base salary and bonus. The agreement also includes provisions
prohibiting Mr. Risher from competing with the Company for a period of time
after termination of his employment under certain circumstances. The Company
also entered into an employment agreement with Mr. Raddi, which provide for
severance up to two years total compensation, and otherwise contains terms
similar to those described above for Mr. Risher. In addition, the Company
adopted in 1989 a "Severance Plan After a Change of Control" (the "1989
Severance Plan") for Messrs. Risher, Kittrell, Costanza and Raddi, providing for
severance payments if their employment was terminated (including constructive
termination) for reasons other than cause during the five-year period following
a "change in control" of the Company. The plan defines a "change in control" as
occurring when a person acquires 30% or more of the Company's voting securities
or when there is a business combination (as defined in the plan) which has been
approved by the Company's shareholders, a change in a majority of the members of
the Board of Directors over a three-year period (other than due to death,
disability or resignation), or a change in control for purposes of specified
federal securities laws. Under this plan, the affected officer would receive a
payment equal to six months compensation plus an additional two months
compensation for each year of service, up to an aggregate maximum severance
payment equal to 30 months compensation.
On July 21, 1997, the Board authorized the Company to enter into severance
agreements (the "Severance Agreements") with each of the four participants in
the 1989 Severance Plan; Messrs. Risher, Kittrell, Costanza and Raddi and with
Messrs. Ascolese, Metzler, Schnaidt and Warren J. Johnson, Vice
President -- Communications Group. Mr. Johnson subsequently left the Company's
employ and has foregone all rights under the Severance Agreements. The Severance
Agreements contain the same substantive provisions as the 1989 Severance Plan,
with the exceptions described in the following two paragraphs.
The Severance Agreements provide that a change of control of the Company (a
"Change of Control") is, in general, deemed to occur if (i) any individual,
entity or group becomes the beneficial owner of 30% or more of the outstanding
Common Stock or of the outstanding voting securities of the Company (but not
including (a) any acquisition directly from the Company, (b) any acquisition by
the Company, (c) any acquisition by an employee benefit plan of the Company or
(d) any acquisition that complies with the provisions described in clauses (x),
(y) and (z) of subsection (iii) of this paragraph; (ii) a change in the majority
of the Board occurs; (iii) a reorganization, merger, share exchange,
consolidation or sale or other disposition of all or substantially all of the
assets of the Company, or the acquisition of assets of another entity (any of
the foregoing, a "Business Combination") is consummated unless, following such
Business Combination, (x) owners of the Common Stock and other voting securities
prior to such Business Combination own more than 60% of the Common Stock and
other voting securities of the surviving corporation, in substantially the same
proportions as before the Business Combination, (y) no person owns 30% or more
of the voting power of the surviving corporation (except to the extent that such
ownership existed before the Business Combination) and (z) a change in the
majority of the membership of the Board has not occurred; and (iv) the
shareholders approve a complete liquidation or dissolution of the Company.
Consummation of the BTR Offer or the Merger will constitute a Change of Control.
The Severance Agreements also (i) provide that severance payments are based
on a 2.5 multiple (3 multiple in the case of Mr. Risher) of Compensation (as
defined below), rather than a multiple based on length of the participant's
service, (ii) provide that health benefits for participants generally continue
for 30 months (36 months in the case of Mr. Risher) following wrongful
termination of such person's employment, (iii) provide for the payment by the
Company of an additional amount to make the executive whole for any excise tax
imposed under Section 280G of the Internal Revenue Code of 1986, as amended,
(iv) subject Messrs. Kittrell, Costanza, Ascolese, Metzler and Schnaidt to
noncompetition provisions for a period of two years following termination of
employment and (v) clarify that Compensation means the sum of (1) the higher of
(A) base salary immediately prior to the Change of Control and (B) the highest
base salary
12
<PAGE> 13
following the Change of Control and (2) an amount equal to the average of the
bonuses paid with respect to the most recent three fiscal years prior to the
fiscal year in which the participant becomes eligible for severance or, if
higher, with respect to the most recent three fiscal years prior to the fiscal
year of the Change of Control.
The Severance Agreements are intended to be in lieu of benefits under the
1989 Severance Plan, and the Board of Directors has terminated the 1989
Severance Plan.
Conforming changes were made to the employment agreements of Messrs. Risher
and Raddi, in each case to incorporate by reference the applicable Severance
Agreement.
STOCK PURCHASE AGREEMENTS
In fiscal years 1986 and 1988, Mr. Risher purchased an aggregate of 200,000
shares of Common Stock from the Company at $4.00 per share in exchange for
10-year promissory notes secured by the Common Stock. The promissory notes
delivered by Mr. Risher bear interest at the applicable Federal rate, as
determined under Section 1274(d) of the Internal Revenue Code (the "Federal
Rate"), and are payable immediately upon the sale of the shares purchased with
the promissory notes. The maturity date of the 1986 promissory note has been
extended to coincide with the maturity date of the 1988 promissory note. As of
September 30, 1997, the aggregate principal and interest amount outstanding on
these promissory notes was $580,000 and $374,026, respectively. The largest
principal amount outstanding during fiscal 1997 was $580,000 in September 1997.
The largest amount of interest accrued on these promissory notes during fiscal
1997 was $378,306 in November 1996.
During fiscal 1989, all of the Company's current executive officers who
were at that time employees of the Company, except for Messrs. Plimpton and
Knox, purchased Common Stock from the Company pursuant to stock purchase
agreements for $8.00 per share in exchange for 10-year promissory notes. The
promissory notes delivered by the executive officers are secured by the shares
of Common Stock, bear simple interest at the prime rate and are payable
immediately upon the sale of the underlying shares and, following termination of
an executive officer's employment, upon the first to occur of (i) the original
maturity date of the promissory note, (ii) three years after the date of
termination of employment or (iii) 90 days after the Company has filed its
second registration statement under the Securities Act of 1933, as amended, for
its Common Stock, following such termination of employment, pursuant to which
such person could have registered such shares. The following information sets
forth the name of each current executive officer who purchased shares during
fiscal 1989 in exchange for notes, the number of shares purchased and the
principal amount outstanding on the notes as of September 30, 1997: Mr. Risher,
136,090 shares, $1,008,720; Mr. Ascolese, 35,000 shares, $280,000; Mr. Costanza,
28,250 shares, $176,472; Mr. Johnson, 18,250 shares, $0; Mr. Kittrell, 50,000
shares, $218,224; Mr. Metzler, 12,250 shares, $72,712; Mr. Raddi, 68,000 shares,
$534,536; Mr. Schnaidt, 30,000 shares, $194,752. These balances were the largest
principal amounts outstanding at any time during fiscal 1997 for Messrs.
Ascolese and Risher. In the case of Messrs. Costanza, Kittrell, Johnson, Metzler
and Schnaidt, the largest principal outstanding during fiscal 1997 was $205,432,
$275,008, $127,824, $80,280 and $221,632, respectively, each in November 1996.
The interest accrued on these notes exchanged for stock for each of the
executive officers as of September 30, 1997, is as follows: Mr. Risher,
$588,741; Mr. Ascolese, $156,716; Mr. Costanza, $122,810; Mr. Johnson, $180,554;
Mr. Kittrell, $142,329; Mr. Metzler, $48,960; Mr. Raddi, $326,857; Mr. Schnaidt,
$137,463. These amounts were the largest amounts of interest accrued at any time
during fiscal 1997 for all but three of the executive officers. The largest
amount of interest accrued on these notes for Messrs. Costanza, Kittrell and
Schnaidt was $127,162, $159,832 and $139,328, respectively, in November 1996.
All shares were vested as of September 30, 1997, and are registered for resale
through a currently effective registration statement on Form S-3.
On July 21, 1997, each such note was amended to provide that if, at the
time such note would otherwise become payable, the obligor is unable, by reason
of applicable law, regulation or agreement with the Company, to dispose of his
shares of Common Stock purchased with such note in an orderly fashion or if the
disposition of any such shares would, in the view of the Company's independent
accountants, jeopardize the intended accounting treatment of any transaction to
which the Company is a party, then such note will not become
13
<PAGE> 14
payable until such time as there has occurred at least 75 consecutive business
days during which the obligor has not been so unable to sell the shares and such
disposition would not, in the view of the Company's independent accountants,
jeopardize such accounting treatment.
MANAGEMENT INCENTIVE COMPENSATION PLAN ("MIP")
The objective of MIP is to attract, retain and motivate key executives and
managers by providing annual cash incentives for goal achievement. The Company
maintains a formalized annual incentive opportunity for key executives
responsible and accountable for achieving the annual operating plan. The MIP
generates 50th percentile awards in comparison to survey groups of peer
companies upon the achievement of targeted Company results. Proportionately
higher or lower awards are achieved if results are above or below target. No
awards are made if a threshold level of corporate financial performance is not
achieved, unless the Board of Directors determines it is in the best interests
of the Company to do so pursuant to its discretion under the MIP. Each eligible
grade level is assigned a fixed percentage of annual salary as the target annual
incentive opportunity. For executive officers, this ranged from 20 percent to 60
percent of annual salary in fiscal 1997.
Under the MIP, payments are made based on the Company achieving
predetermined goals established annually by the Board of Directors. These goals
typically include: (i) targets for corporate growth, such as improvements year
over year in earnings per share and cash flow; (ii) targets for strategic
business unit growth, such as improvements year over year in specific areas of
financial performance of each individual strategic business unit; and (iii)
attainment of certain individually tailored non-financial objectives for each
executive. The relative weighting for each objective is determined each year by
the Human Resources Committee, and may vary depending upon the Company's
financial and strategic objectives for that year. Mr. Schnaidt will receive a
special $50,000 bonus associated with his performance of an extraordinary
assignment during fiscal 1997.
On July 21, 1997, certain amendments (the "MIP Amendments") to the MIP were
adopted. The MIP Amendments provide that, in the event of a Change of Control
that occurs pursuant to an agreement authorized by the Board of Directors prior
to September 30, 1998 (which would include consummation of the BTR Offer), (i)
all participants in the 1997 MIP (other than the employees for whom the Board
authorized Severance Agreements) will become entitled to receive the maximum
applicable MIP Payment (as defined in the 1997 MIP) available to such person
pursuant to the 1997 MIP and certain other key employees for whom Severance
Agreements were not authorized will become entitled to receive specified
bonuses, (ii) each of Messrs. Risher, Kittrell and Costanza will become entitled
to receive (a) the target level MIP Payment applicable to such employee
($270,000, $90,000 and $72,000 for Mr. Risher, Mr. Kittrell and Mr. Costanza,
respectively) and (b) an additional payment (the "Incremental Payment") equal to
a portion (50%, 25% and 25% for Mr. Risher, Mr. Kittrell and Mr. Costanza,
respectively) of the Incremental Amount (as defined below) and (iii) each of
Messrs. Raddi, Ascolese, Metzler and Schnaidt will become entitled to receive
(a) the target level MIP Payment applicable to such employee and (b) an
additional payment (the "MIP Spread Payment") equal to a portion (which portion
is based on their relative target level MIP Payments) of the Additional
Incremental Amount (as defined below), provided that with respect to the
individuals described in this clause (iii) in no event shall the sum of any of
such person's target MIP Payment and such person's MIP Spread Payment exceed
such person's maximum applicable MIP Payment ($160,000, $153,600, $113,600 and
$152,000 for each of Mr. Raddi, Mr. Ascolese, Mr. Metzler and Mr. Schnaidt). The
payments to be made upon a Change of Control pursuant to the MIP Amendments will
be the amounts described in the preceding sentence, less any MIP bonuses
previously paid under the 1997 MIP without regard to the Change of Control. Such
payments are to be made in two installments, the first on the date of the Change
of Control and the second on the date which is six months following such date
or, if earlier, on the date such person resigns for "Good Reason" or is
terminated without "Cause"; provided that such person has not voluntarily
resigned from the Company (other than for death, retirement or "Good Reason") or
been terminated for "Cause," as those terms are defined in the Severance
Agreements.
For purposes of the MIP Amendments, the "Incremental Amount" is defined as
1% of the amount by which the Aggregate Change of Control Equity Value (as
defined below) exceeds $221,230,000, and the "Additional Incremental Amount" is
defined as 1% of the amount by which the Aggregate Change of Control
14
<PAGE> 15
Equity Value exceeds $221,230,000. The "Aggregate Change of Control Equity
Value" is (a) the higher of the highest trading price of the Common Stock during
the 60-day period ending on the date of the Change of Control or, if the Change
of Control is the result of a tender offer or a merger or similar corporate
transaction, the highest price per share paid in such tender offer or merger
times (b) the number of outstanding shares of voting stock as of the date of the
MIP Amendments (as the same may be adjusted to account for stock splits or
combinations, stock dividends and similar adjustments to capitalization). To the
extent that the consideration paid in any such transaction described above
consists all or in part of securities or other noncash consideration, the value
of such securities or other noncash consideration will be valued based upon
public trading prices or, if such consideration is not publicly traded, by the
Board of Directors.
SUPPLEMENTARY MANAGEMENT INCENTIVE PLAN ("SUPPLEMENTARY MIP")
In November 1994, the Company adopted a supplementary plan to motivate
executives with matching cash awards designed to reduce individual notes
associated with 1988 and 1989 stock purchase agreements (described under "Stock
Purchase Agreements"), which incent continued equity positions in the Company of
certain key executive officers, including the Chief Executive Officer. Under
this plan, executives in good standing who have paid for the purchase of Common
Stock by promissory notes prior to the Company's 1989 initial public offering
are eligible to receive matching contributions up to individually set annual
limits during calendar years 1995 through 1999 of 50% of the executives'
voluntary prepayments of the balances outstanding under their notes. The match
amounts are grossed up and tax assisted. The maximum annual contribution by the
Company is limited to $200,000 per calendar year, allocated among eligible
executives based on performance and their outstanding note balance. Any portion
of the maximum annual contribution by the Company remaining unused at the end of
the calendar year will be retired and will not increase the maximum for future
calendar years. In calendar 1997, no supplementary MIP payments had been made as
of September 30, 1997.
OPTION PLANS FOR EMPLOYEES
The Company provides long-term incentive compensation through its employee
stock option plans, adopted in 1989 and 1995. Key managers as well as executive
officers are eligible for grants under the plans.
1989 Stock Option Plan and 1995 Employee Stock Option and Restricted Stock
Plan. In October 1989, the Board of Directors authorized the grant of up to
550,000 shares for the 1989 Stock Option Plan ("1989 Option Plan"). At December
31, 1994, all options had been granted. In order to ensure that there was a
sufficient number of stock options and restricted stock available to meet the
intent and purpose of stock incentive programs determined in the long term
interests of the Company, the 1995 Employee Stock Option and Restricted Stock
Plan (the "1995 Option Plan") was adopted in 1995.
Under the terms of the 1995 Option Plan, 750,000 shares of the Common Stock
were reserved for issuance. The 1995 Option Plan provides for the grant of
options that are intended to qualify as Incentive Stock Options ("ISOs") as
defined under Section 422 of the Internal Revenue Code of 1986, as amended,
nonqualified options, and restricted stock. Unlike the 1989 Option Plan, it does
not provide for Stock Appreciation Rights ("SARs"). It is administered by the HR
Committee, which selects the officers and employees of the Company and its
subsidiaries to whom options may be granted.
With respect to the grant of options, the HR Committee is charged with
determining the option grant date, the vesting schedule and expiration of
options, all in accordance with the 1995 Option Plan. The maximum number of
shares subject to options that can be granted under the 1995 Option Plan to any
individual executive officer or other employee of the Company or any subsidiary
is 300,000 shares during the first ten years of the 1995 Option Plan and 50,000
shares per year thereafter.
With respect specifically to ISOs, no person may receive any ISO if, at the
time of grant, such person owns directly or indirectly more than 10% of the
total combined voting power of the Company. There is also a $100,000 limit on
the value of stock (determined at the time of grant) covered by incentive stock
options that first become exercisable by an optionee in any calendar year. No
incentive stock option may be granted more than 10 years after the effective
date of the 1995 Option Plan.
15
<PAGE> 16
The HR Committee determines the service requirements and performance goals
necessary for awards of restricted stock to be made. The maximum number of
shares of restricted stock that can be granted under the 1995 Option Plan to any
individual executive officer or other employee of the Company or any subsidiary
is 300,000 shares during the first ten years of the 1995 Option Plan, and 50,000
shares per year thereafter. At its discretion, the HR Committee may grant
restricted stock subject to objective performance goals established prior to
April 15 of the year in which the grant is made and while the outcome is
substantially uncertain. Performance goals must be in accordance with the terms
of the 1995 Option Plan.
On July 21, 1997, certain amendments (the "Option Amendments") to the
Company's 1989 Option Plan and 1995 Option Plan (collectively the "Employee
Option Plans") were adopted. The Option Amendments (i) provide for automatic
full vesting of all unvested options granted pursuant to the Employee Option
Plans and the automatic lapse of all restrictions to which restricted stock
awards are subject, in each case upon a Change of Control and (ii) provide that
in the event of a change in corporate capitalization, such as a stock split or a
corporate transaction, including, without limitation, a merger, consolidation,
spin-off, reorganization, or liquidation, the Board or a committee thereof
administering such Employee Option Plan may make such substitution or
adjustments in the number and kind of shares reserved for issuance under the
Employee Option Plan, in the number, kind and purchase price of shares subject
to outstanding options, restricted stock and stock appreciation rights granted
under the Employee Option Plan and/or such other equitable substitutions and/or
adjustments as it may determine to be appropriate in its discretion, in each
case except to the extent that such change would make ineligible for
pooling-of-interests accounting any transaction that the Company intends to be
eligible for such accounting treatment.
401(k) Retirement Benefit Plan. The Company maintains a savings plan
qualified under Section 401(k) of the Internal Revenue Code of 1986, as amended,
for the benefit of all active U.S. employees. Employees may elect to defer from
Federal income tax up to 15% of their total compensation up to the annual
statutory maximum, which was $9,500 for calendar year 1997. The Company
contributes to the employee's account an amount equal to 2% of an employee's
total annual compensation up to annual compensation of $160,000 for calendar
year 1997 and matches up to 4% of an employee's contributions at a rate of 50
cents on the dollar. In addition, the HR Committee may recommend that the Board
of Directors make additional discretionary contributions each year based on the
Company meeting certain profit objectives. In fiscal 1997, the Company made a
discretionary contribution of $150,000, which was allocated in accordance with
the terms of the plan to the accounts of all eligible participants.
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ADDITIONAL INFORMATION
Litigation. On July 9, 1997, Danaher and a subsidiary thereof filed a suit
encaptioned Danaher Corporation and PQR Acquisition Corp. v. Exide Electronics
Group, Inc., et al. (C.A. No. 15796) in the Court of Chancery of the State of
Delaware, New Castle County, against the Company and the members of the Board of
Directors. The complaint alleges, among other things, that the defendants have
refused and will refuse to deal in good faith with Danaher in negotiating an
acquisition of the Company by Danaher's subsidiary and have taken certain
actions in response to Danaher's expressions of interest in such an acquisition,
which conduct is alleged to be in breach of the fiduciary duties of the Board of
Directors to stockholders. In particular, the complaint alleges that the Board
of Directors acted in violation of its fiduciary duties in amending the
Company's by-laws to provide for certain time periods with respect to any
stockholder call for a special meeting. The complaint seeks as relief, among
other things, (i) to compel redemption of the Company's preferred stock purchase
rights, (ii) to compel the Board of Directors to render Section 203 of the
General Corporation Law of Delaware inapplicable to the proposed acquisition by
Danaher, (iii) to compel the Board of Directors to call a special meeting of its
stockholders at an unspecified future date, (iv) to enjoin the Board of
Directors from taking any action that would impede or interfere with the tender
offer of Danaher (the "Danaher Offer") to acquire the Company or the exercise by
the Company's stockholders of their franchise and (v) to enjoin the Board of
Directors from taking any actions inconsistent with their fiduciary obligations
to Exide's stockholders. On September 11, 1997, the Company filed an answer
denying the material allegations of the complaint.
On July 9, 1997, a purported class action encaptioned Rima Spielman v.
Exide Electronics Group, Inc., et al (C.A. No. 15800) was commenced in Delaware
Chancery Court against the Company and the members of the Board (the
"Shareholder Action"). The Shareholder Action was purportedly brought on behalf
of the public stockholders of the Company. The complaint alleges, among other
things, that (i) the defendants have refused to take the steps necessary to
maximize stockholder value, including properly considering the Danaher Offer,
(ii) by purportedly failing and refusing to take such steps, including
adequately considering the Danaher Offer, the defendants have breached their
fiduciary duty to the plaintiff and the public stockholders and are using their
fiduciary positions of control to thwart others in their legitimate attempts to
acquire the Company and (iii) the members of the Board of Directors have
purportedly attempted to entrench themselves in their positions with the Company
by instituting certain by-law amendments. The Shareholder Action seeks as
relief, among other things, (i) to require the directors to cooperate with any
person or entity, including Danaher, having a bona fide interest in proposing
any transaction that would maximize stockholder value, including a merger or
acquisition of the Company, (ii) to enhance the value and attractiveness of the
Company as a merger/acquisition candidate, (iii) to take all appropriate steps
to create an active auction of the Company and (iv) to have such by-law
amendments declared void. On September 11, 1997, the Company filed its answer to
the complaint in the Shareholder Action denying the material allegations
contained in the complaint.
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