June 26, 1996
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Charter Power Systems, Inc. to be held on Thursday, July 25, 1996, at 10:00
A.M., at The Union League of Philadelphia, 140 South Broad Street, Philadelphia,
Pennsylvania. Your Board of Directors and management look forward to personally
greeting those stockholders able to attend.
This year, in addition to electing directors and ratifying the appointment
of Coopers & Lybrand L.L.P. as independent accountants for the company, you are
being asked to consider and approve the 1996 Stock Option Plan. Your Board of
Directors recommends that you vote FOR these proposals. They are more fully
described in the accompanying Proxy Statement, which you are urged to read
carefully.
Whether or not you plan to attend, you can assure that your shares are
represented and voted at the Annual Meeting by promptly completing, signing,
dating and returning the enclosed proxy card in the envelope provided.
Thank you for your cooperation and continued support.
Sincerely,
/s/ Alfred Weber
ALFRED WEBER
Chairman of the Board,
President and Chief Executive Officer
<PAGE>
CHARTER POWER SYSTEMS, INC.
1400 Union Meeting Road
Blue Bell, Pennsylvania 19422
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
July 25, 1996
The Annual Meeting of Stockholders of Charter Power Systems, Inc. (the
"Company") will be held at The Union League of Philadelphia, 140 South Broad
Street, Philadelphia, Pennsylvania, on Thursday, July 25, 1996, at 10:00 A.M.,
for the following purposes:
1. To elect directors of the Company for the ensuing year.
2. To approve the 1996 Charter Power Systems, Inc. Stock Option Plan,
which provides for the grant of options to purchase up to 500,000
shares of the Company's Common Stock.
3. To ratify the appointment of Coopers & Lybrand L.L.P. as independent
accountants for the Company.
4. To transact such other business as may properly come before the
meeting and any adjournments thereof.
The Board of Directors has fixed the close of business on May 28, 1996 as
the record date for the determination of stockholders entitled to notice of and
to vote at the meeting and at any adjournments thereof.
IF YOU ARE UNABLE TO BE PRESENT PERSONALLY, PLEASE SIGN AND DATE THE
ENCLOSED PROXY, WHICH IS BEING SOLICITED BY THE BOARD OF DIRECTORS, AND RETURN
IT PROMPTLY IN THE ENCLOSED ENVELOPE.
BY ORDER OF THE BOARD OF DIRECTORS
GLENN M. FEIT
Secretary
June 26, 1996
<PAGE>
CHARTER POWER SYSTEMS, INC.
1400 Union Meeting Road
Blue Bell, Pennsylvania 19422
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JULY 25, 1996
GENERAL INFORMATION
The accompanying proxy is solicited by and on behalf of the Board of
Directors of Charter Power Systems, Inc. (the "Company") to be used at the
Annual Meeting of Stockholders to be held at The Union League of Philadelphia,
140 South Broad Street, Philadelphia, Pennsylvania, on Thursday, July 25, 1996
at 10:00 A.M., and at any adjournments thereof.
When the accompanying proxy is properly executed and returned, the shares
of common stock of the Company, par value $.01 per share (the "Common Stock"),
it represents will be voted at the meeting in accordance with any directions
noted thereon and, if no direction is indicated, the shares it represents will
be voted: (i) FOR the election of the nominees for directors set forth below;
(ii) FOR the approval of the 1996 Charter Power Systems, Inc. Stock Option Plan,
which provides for the grant of options to purchase up to 500,000 shares of
Common Stock; (iii) FOR the ratification of the appointment of Coopers & Lybrand
L.L.P. as independent public accountants for the Company; and (iv) in the
discretion of the holders of the proxy with respect to any other business that
may properly come before the meeting. Any stockholder signing and delivering a
proxy may revoke it at any time before it is voted by delivering to the
Secretary of the Company a written revocation or a duly executed proxy bearing a
date later than the date of the proxy being revoked. Any stockholder attending
the meeting in person may withdraw his proxy and vote his shares.
The cost of this solicitation of proxies will be borne by the Company.
Solicitations will be made initially by mail; however, officers and regular
employees of the Company may solicit proxies personally or by telephone or
telegram. Those persons will not be compensated specifically for such services.
In addition, the Company has retained the services of D. F. King & Co., Inc., a
proxy solicitation firm, to assist in the solicitation, for a fee of $5,000 plus
reimbursement of reasonable out of pocket expenses. The Company may reimburse
brokers, banks, custodians, nominees, and fiduciaries holding shares of Common
Stock in their names or in the names of their nominees for their reasonable
charges and expenses in forwarding proxies and proxy material to the beneficial
owners of such shares.
The approximate date on which this Proxy Statement first will be mailed to
stockholders of the Company is June 26, 1996.
VOTING RIGHTS
Only holders of record of shares of Common Stock at the close of business
on May 28, 1996 will be entitled to vote at the Annual Meeting of Stockholders.
On that date, there were outstanding 6,442,576 shares of Common Stock, the
holders of which are entitled to one vote per share on each matter to come
before the meeting. Voting rights are non-cumulative.
<PAGE>
The presence, in person or by proxy, of stockholders holding a majority of
the outstanding shares of Common Stock entitled to vote will constitute a quorum
at the Annual Meeting. Directors will be elected at the Annual Meeting by a
plurality of the votes cast (i.e., the seven nominees receiving the greatest
number of votes will be elected as directors). Abstentions and broker non-votes
(which occur when a nominee holding shares for a beneficial owner does not vote
on a particular proposal because the nominee does not have discretionary voting
power with respect to that item and has not received instructions from the
beneficial owner) are counted for purposes of determining the presence or
absence of a quorum at the meeting. Abstentions are counted in tabulations of
the votes cast on proposals presented to stockholders, but broker non-votes are
not counted for purposes of determining whether a proposal has been approved.
PRINCIPAL STOCKHOLDERS
As of June 6, 1996, the persons listed in the following table were the only
persons known to the Company (based on information set forth in Schedules 13D
and 13G filed with the Securities and Exchange Commission or otherwise provided
to the Company by these persons) to be the beneficial owners of more than five
percent of the Company's outstanding shares of Common Stock. Except as otherwise
noted below, each of the listed persons has sole voting and dispositive power
with respect to the shares listed opposite her or its name in the table.
Shares of
Name and address of Common Stock Percent
Beneficial Owner Beneficially Owned of Class
------------------- ------------------ --------
Candace K. Weir
and
Paradigm Capital Management (1)........... 478,800 7.4%
9 Elk Street
Albany, New York 12054
FMR Corporation (2)....................... 429,300 6.7%
82 Devonshire Street
Boston, Massachusetts 02109
Shell Pensions Trust Limited (3).......... 397,200 6.2%
Shell Centre
London SE1 7NA
- - --------------------
(1) Based on the Schedule 13D, dated October 27, 1995, jointly filed by Candace
K. Weir and Paradigm Capital Management. Candace K. Weir has sole
dispositive and voting power with respect to 152,400 shares and both
parties have shared dispositive power and no voting power with respect to
326,400 of the shares listed opposite her or its name in the table.
(2) Based on the Schedule 13G, dated February 14, 1996, filed by FMR
Corporation. This party has sole dispositive power with respect to all the
shares but no voting power with respect to 406,500 of the shares listed
opposite its name in the table.
(3) Based on the Schedule 13D, dated February 2, 1996, filed by Shell Pensions
Trust Limited as Trustee of the Shell Contributory Pension Fund.
2
<PAGE>
ELECTION OF DIRECTORS
At the Annual Meeting of Stockholders, the entire Board of Directors is to
be elected. In the absence of instructions to the contrary, the shares of Common
Stock represented by a proxy delivered to the Board of Directors will be voted
FOR the seven nominees named under "Management" below. Each nominee has
consented to being named as a nominee in this Proxy Statement and to serve if
elected. However, if any such nominee should become unable to serve as a
director for any reason, votes will be cast instead for a substitute nominee
designated by the Board of Directors or, if none is so designated, will be cast
according to the judgment of the person or persons voting the proxy.
MANAGEMENT
On November 1, 1995, stockholders affiliated with Charterhouse Group
International, Inc. ("Charterhouse") sold a significant portion of their shares
in an underwritten public offering (see "Certain Transactions" below). At the
same time two directors who are executive officers of Charterhouse resigned.
Effective as of the election of new directors at the Annual Meeting of
Stockholders, two other directors who are executive officers of Charterhouse,
and one additional director who is the president of several companies owned by
affiliates of Charterhouse, will not stand for reelection. The size of the Board
of Directors will remain at seven, and the Company is proposing three new
nominees for election as directors.
The table below and the paragraphs that follow it present certain
information concerning the nominees for directors and the executive officers of
the Company. Directors are elected annually to serve until the next annual
meeting of stockholders and until their successors have been elected. Officers
are elected by and serve at the discretion of the Board of Directors. There are
no family relationships between any of the directors and executive officers of
the Company.
<TABLE>
<CAPTION>
Shares of
Common Stock
Positions and Beneficially Percent
Offices with Owned as of of
Nominees for Directors the Company Age June 6, 1996 Class(7)
---------------------- ----------- --- ------------ --------
<S> <C> <C> <C> <C>
Alfred Weber (1)(2).................... Chairman of the Board, President 64 231,590 3.5%
and Chief Executive Officer
Warren A. Law (3)(4)(5)(6)............. Director 72 1,500 *
David Beretta (5)...................... Director 67 500 *
Glenn M. Feit (3)...................... Director and Secretary 66 1,000 *
William Harral, III (3)(4)(6).......... Nominee for Director 56 500 *
Alan G. Lutz (1)(6).................... Nominee for Director 50 -- *
John A. H. Shober (1)(5)............... Nominee for Director 63 1,000 *
Executive Officers who
are not Directors
-----------------
George C. Branca (2)................... Vice President and General 49 16,000 *
Manager - PowerCom Division
A. Gordon Goodyear (2)................. Vice President and General 47 21,500 *
Manager - International
Power Systems, Inc.
3
<PAGE>
Leslie S. Holden (2)................... Vice President - Technology 59 15,000 *
Apostolos Kambouroglou (2)............. Vice President and General 53 12,000 *
Manager - Motive Power
Systems Division
Stephen E. Markert, Jr. (2)............ Vice President - Finance and 45 7,940 *
Treasurer
Stephen J. Weglarz (2). . . . . ....... Vice President - Corporate 50 4,250 *
Services and Corporate Counsel
All directors, nominees for director and
officers as a group (13 persons)..... 312,780 4.7%
- - ---------------
</TABLE>
* Less than 1% of outstanding shares of Common Stock
(1) Member, or to become a member, of the Executive Committee.
(2) The figures for shares of Common Stock beneficially owned as of June 6,
1996 include fully vested and presently exercisable options to purchase
(a) 110,000 shares for Mr. Weber, (b) 10,000 shares for Mr. Branca, (c)
21,500 shares for Dr. Goodyear, (d) 13,000 shares for Dr. Holden, (e)
12,000 shares for Mr. Kambouroglou, (f) 4,000 shares for Mr. Markert and
(g) 4,250 shares for Mr. Weglarz. The figures for Percent of Class assume,
as to each individual only, that all shares issuable to such individual
upon exercise of such options have been issued.
(3) Member, or to become a member, of the Compensation Committee.
(4) To become a member of the Stock Option Subcommittee of the Compensation
Committee.
(5) Member of the Audit Committee.
(6) Member, or to become a member, of the Nominating Committee.
(7) Based upon shares outstanding as of June 6, 1996, excluding Treasury Stock
Alfred Weber has been President since joining the Company in April 1989,
became Chief Executive Officer in December 1992 and became Chairman of the Board
on November 1, 1995. From 1964 to 1987, Mr. Weber held various managerial
positions with Uniroyal, Inc. and its subsidiaries, rising to the position of
President and Chief Executive Officer of Uniroyal Plastics Company, Inc. Mr.
Weber is also a director of Microwave Power Devices, Inc. ("MPD"), a
manufacturer of power amplifiers and related subsystems for the wireless
telecommunications market, and Battery Council International, a worldwide
manufacturers' association.
Warren A. Law has been a director of the Company since February 1987. Mr.
Law has been a Professor at the Harvard Business School since 1958 (through June
1991 in an active capacity) and currently is the Edmund Cogswell Converse
Professor of Finance and Banking Emeritus. Professor Law is also a director of
MPD.
David Beretta became a director of the Company in May 1993. He has been a
director and Vice Chairman of the Board of AMTROL Inc., a manufacturer of tanks
for heating and well-water systems, since 1986 and from 1991 through May 1996
was its President and Chief Operating Officer. He is the former Chairman and
Chief Executive Officer of Uniroyal, Inc. and has been the President of
Executive Consulting,
4
<PAGE>
Inc. since 1982. Mr. Beretta is also a director of Faulding Pharmaceutical Inc.,
a manufacturer of pharmaceuticals.
Glenn M. Feit has been a director and the Secretary of the Company since
January 1986. He is a member of the law firm of Proskauer Rose Goetz &
Mendelsohn LLP, general counsel to the Company. Mr. Feit has been engaged in the
practice of law in New York since 1957.
William Harral, III is a nominee for director at the Annual Meeting of
Stockholders. He has been President and Chief Executive Officer of Bell Atlantic
- - - Pennsylvania, Inc.(formerly Bell of Pennsylvania) since 1994. Prior to 1994 he
held the position of Vice President-External Affairs and Chief Financial Officer
of Bell of Pennsylvania. Mr. Harral also serves as a director of Bell Atlantic
- - - Pennsylvania, Inc. and The Bryn Mawr Trust Company, a commercial bank.
Alan G. Lutz is a nominee for director at the Annual Meeting of
Stockholders. He has been Executive Vice President and President of the Computer
Systems Group at Unisys Corporation, an information management company, since
1994. Prior to 1994, he was Senior Vice President and President of the Public
Networks Group of Northern Telecom, Ltd., a manufacturer and distributor of
telecommunications equipment.
John A. H. Shober is a nominee for director at the Annual Meeting of
Stockholders. He currently serves as the Vice Chairman of the Board of Penn
Virginia Corporation, a natural resources company, and served as Chief Executive
Officer from 1989 to 1992. Mr. Shober is also a director of Airgas, Inc., a
distributor of industrial gases and related products, Betz Laboratories, Inc., a
specialty chemical company, and MIBRA gmbH, a German company principally
involved in coal mining and electric power production.
George C. Branca was appointed Vice President and General Manager - PowerCom
Division in February 1995. He joined C&D Batteries, the predecessor of the
Company, in 1978 as a manager of the quality assurance department, and
subsequently held the positions of Director of Quality, Director of Sales,
Director of Marketing, Vice President of Marketing and Vice President and
General Manager - Motive Power Systems Division.
A. Gordon Goodyear, Ph.D., was appointed Vice President and General Manager
- - - International Power Systems, Inc. in April 1994. He joined the Company in
March 1991 as Vice President and General Manager - Power Electronics. Prior to
joining the Company, Dr. Goodyear was President of IRD Mechanalysis (Canada).
Leslie S. Holden, F.R.I.C., Ph.D., has been Vice President-Technology of the
Company since September 1989. Prior to September 1989, Dr. Holden was Director -
Technology of Altus Corp., a manufacturer of sealed recombinant calcium lead
acid batteries primarily for the uninterruptible power systems market.
Apostolos Kambouroglou was appointed Vice President and General Manager -
Motive Power Systems in February 1995. He joined the Company in March 1991 as
plant manager of the Conyers, Georgia plant, and subsequently held the positions
of Senior Director - Standby Operations and Vice President - Operations, C&D
PowerCom. Prior to joining the Company, Mr. Kambouroglou was President of Enicon
Engineered Containers, Inc. of Bristol, Indiana.
Stephen E. Markert, Jr. was appointed Vice President and Chief Financial
Officer in February 1995. He joined the Company in May 1989 as Corporate
Controller. Prior to that time, Mr. Markert was a divisional controller of
Decision Data Computer Corporation.
5
<PAGE>
Stephen J. Weglarz was appointed Vice President - Corporate Services and
Corporate Counsel in August 1995. He joined the company in April 1990 as Manager
of Human Resources/Labor Counsel and subsequently held the position of Internal
General Counsel/Director of Labor Relations. Prior to joining the Company, Mr.
Weglarz was a partner in the law firm of Peckner, Dorfman, Wolffe, Rounick &
Cabot.
The Board of Directors has established an Executive Committee, a
Compensation Committee (including, after the 1996 Annual Meeting of
Stockholders, a Stock Option Subcommittee), an Audit Committee and a Nominating
Committee. The Executive Committee assists the Board in its responsibilities,
the Compensation Committee reviews the compensation of executives (including
awards pursuant to the Company's Incentive Compensation Plan) and administers
the Company's Stock Option Plan, and the Audit Committee, which is comprised of
directors who are not officers or employees of the Company, reviews the scope of
the independent audit, the Company's year-end financial statements and such
other matters relating to the Company's financial affairs as its members deem
appropriate. The Nominating Committee identifies and evaluates candidates for
election as members of the Board of Directors.
The Board of Directors held four regular meetings and two special meetings
during the year ended January 31, 1996. The Compensation Committee, Audit
Committee and Nominating Committee each held one meeting. Each of the directors
attended 75% or more of the meetings of the Board of Directors and each
Committee of which he or she was a member in the year ended January 31, 1996,
except for Mr. Beretta who attended two of the four regular Board of Directors
meetings and all special Board of Directors meetings and Committee meetings.
6
<PAGE>
Executive Compensation
- - ----------------------
The following table sets forth information concerning annual and long-term
compensation paid by the Company for each of the last three fiscal years to its
Chairman of the Board, President and Chief Executive Officer and four other most
highly compensated executive officers as of January 31, 1996 and one former
officer whose total annual salary and bonus for the Company for the year then
ended exceeded $100,000.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------- ------------
Securities
Other Underlying All
Name Annual Options Other
& Principal Fiscal Salary Bonus Compensation Granted Compensation
Position Year ($) (1) ($) (2) ($) (3) (#) ($) (4)
- - -------- ---- -------- -------- -------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
Alfred Weber 1996 $351,987 $221,000 -- -- $ 4,680
Chairman of the 1995 344,194 232,000 -- 50,000 4,620
Board, President and 1994 339,799 162,500 -- -- 217,213 (5)
Chief Executive Officer
George J. Sbordone 1996 87,508 100,000 $630,750 -- --
Former Chairman 1995 87,503 50,000 -- 20,000 --
of the Board (6) 1994 54,169 50,000 -- -- --
George C. Branca 1996 156,016 70,000 86,250 -- 4,673
Vice President 1995 143,339 60,000 -- 10,000 4,687
and General Manager 1994 120,005 52,500 28,750 5,000 4,530
- PowerCom Division
A. Gordon Goodyear 1996 142,500 50,000 -- -- 8,740 (7)
Vice President 1995 126,642 80,000 -- 9,000 70,152 (7)
and General Manager 1994 100,004 42,000 -- 5,000 4,169
- International Power
Systems, Inc.
Leslie S. Holden 1996 139,181 55,000 197,500 -- 4,454
Vice President - 1995 134,172 48,000 -- 8,000 4,637
Technology 1994 126,672 46,500 -- 5,000 4,514
Stephen E. Markert, Jr. 1996 120,012 53,000 -- -- 1,967
Vice President - 1995 86,003 40,000 20,625 4,000 1,215
Finance and Treasurer 1994 80,420 25,500 11,875 -- 877
- - ---------------
</TABLE>
(footnotes begin on following page)
7
<PAGE>
(1) Does not include the value of certain personal benefits. The estimated
value of such personal benefits for each listed officer did not exceed the
lesser of $50,000 or 10% of the total annual salary and bonus paid to that
officer for the relevant fiscal year.
(2) Represents incentive compensation under the Company's Incentive
Compensation Plan. Also includes payments to Mr. Weber and Dr. Goodyear of
$20,000 each, related to the acquisition of the PowerSystems Division of
ITT in fiscal 1995.
(3) Represents amounts earned relating to the exercise of stock options.
(4) Represents employer matching contributions under the Company's Savings
Plan.
(5) Includes $212,471 relocation and tax gross-up reimbursement in connection
with Mr. Weber's appointment as Chief Executive Officer in fiscal 1994.
(6) Chairman of the Board through November 1, 1995, and advisor to the Chief
Executive Officer thereafter through the date of the 1996 Annual Meeting of
Stockholders.
(7) Includes $4,560 relocation and tax gross-up reimbursement in fiscal 1996
and $65,936 relocation and tax gross-up reimbursement in fiscal 1995.
- - ---------------
The Company is entering into an employment agreement with Mr. Weber as of
April 1, 1996 providing for a base salary of $400,000 per year, increasing by
$35,000 per year in each of the next three years. The agreement has a term of
three years, and is thereafter renewable automatically for successive one-year
terms unless terminated by either party on three months advance notice. Mr.
Weber is subject to certain restrictions on competition with the Company for a
period of one year following termination of employment. If Mr. Weber's employ-
ment is terminated without cause or as a result of nonrenewal of the agreement,
the Company is obligated to pay Mr. Weber his base salary in effect at the date
of the termination for a one-year period and continues certain benefits for that
period. If, after a Change in Control of the Company (as defined in the employ-
ment agreement), Mr. Weber's employment is either terminated by the Company
(other than for death, disability or for cause) or not renewed by the Company or
is terminated by Mr. Weber for Good Reason (as defined in the employment agree-
ment), Mr. Weber will be entitled to receive a lump sum severance payment. This
payment generally will consist of two years of base salary, plus two times the
average annual bonus based on the past two fiscal years. Under these circum-
stances, the Company will also continue medical and certain other benefits for
up to two years and accelerate the vesting of stock options. Prior to April 1,
1996, Mr. Weber was employed pursuant to a prior employment agreement.
(page 8 continues)
<PAGE>
The Company has also entered into employment agreements with Mr. Branca, Dr.
Goodyear, Dr. Holden and Mr. Markert. Effective February 1993, March 1994, Octo-
ber 1993 and February 1995, respectively, their annual base salaries under these
agreements were $120,000, $100,000, $130,000 and $110,000, respectively, subject
to increase during the course of the year by the Compensation Committee of the
Board of Directors. Upon such review, effective December 1993, February 1995 and
April 1996, Mr. Branca's base salary was $140,000, $156,000 and $175,000,
respectively. Dr. Goodyear's base salary, effective April 1994, April 1995 and
April 1996, was $130,000, $145,000 and $170,000, respectively. Effective April
1994, April 1995 and April 1996, Dr. Holden's base salary was $135,000, $140,000
and $154,000, respectively. Mr. Markert's base salary, effective September 1995
and April 1996 was $120,000 and $140,000, respectively. Each of these agreements
are renewable automatically for successive terms of one month each, unless term-
inated by either party upon 60 days written notice. The agreements restrict each
of Mr. Branca, Dr. Goodyear, Dr. Holden and Mr. Markert from competing with the
Company for a period
8
<PAGE>
of one year following the termination of his employment. Each of the agreements
also provide that if employment is terminated by the Company without cause or as
a result of the nonrenewal of the agreement, the Company is obligated to pay the
employee his base salary in effect at the date of termination for a one-year
period.
Pension Plan
- - ------------
The C&D Charter Power Systems, Inc. Pension Plan for Salaried Employees
(the "Pension Plan") covers nonunion salaried employees of C&D Charter Power
Systems, Inc. ("C&D") who either have participated in its predecessor company's
pension plan or have completed one year of service with C&D. The Pension Plan
was amended during 1995 to provide participation to salaried employees of
International Power Systems, Inc. effective March 30, 1994, and to Ratelco
Electronics, Inc. and CalPacific Power Systems, Inc. effective July 1, 1994. The
Pension Plan is a qualified plan under Section 401(a) of the Code. The Pension
Plan is a noncontributory defined benefit plan that provides for normal
retirement benefits beginning at age 65 but permits early retirement benefits in
certain cases, subject to a reduction of benefits for employees who retire
earlier than age 62. Under the Pension Plan, the pension payable at normal or
late retirement equals 2.1% of a participant's "average pay" (as defined below)
during the highest paid five consecutive years of the participant's last ten
years of employment multiplied by the number of years of credited service up to
15 (including service with C&D's predecessor company), plus 1.6% of such average
pay for each year in excess of 15 years up to a maximum of 15 additional years,
reduced by .5% (the "Offset") of Covered Compensation (35-year average of the
Social Security wage base ending the year prior to Social Security Normal
Retirement Age) multiplied by his years of credited service up to 30 years. The
term "average pay" as used in the Pension Plan was amended January 1, 1994 to
include salary, overtime, executive incentive compensation, sales bonuses, 30%
of sales commissions, and any tax deferred contributions to the Savings Plan. An
unreduced disability benefit is provided after ten years of eligibility service,
and a death benefit to a surviving spouse equal to approximately 50% of the
value of the participant's pension benefit at the time of death is provided
after five years of eligibility service or age 65. The Code places certain
maximum limitations on the amount of benefit which may be payable under a
qualified pension plan such as the Pension Plan. The current limitation on an
employee's annual benefit is the lesser of $120,000 and the employee's average
compensation for the three years that he was most highly compensated.
(page 9 continues)
<PAGE>
The following table illustrates the total estimated annual pension benefits
that would be provided upon retirement under the benefit formula described above
to salaried employees for the specified remuneration and years of credited
service classifications set forth below. Benefit amounts shown are computed on a
straight life basis, prior to the Offset described above.
Years of Credited Service (1)(2)(3)
-----------------------------------
Average Pay 5 10 20 30 40
----------- --- ---- ---- ---- ---
$125,000................... $13,125 $26,250 $49,375 $69,375 $69,375
150,000 or greater (4) ... 15,750 31,500 59,250 83,250 83,250
- - ---------------
(1) It is expected that Mr. Weber, Mr. Branca, Dr. Goodyear, Dr. Holden and Mr.
Markert will have 8, 34, 22, 13, and 27 years of credited service,
respectively, at normal retirement.
(footnotes continue on following page)
9
<PAGE>
(2) For the plan year ended December 31, 1995, the amount of remuneration, for
purposes of calculations under the Pension Plan, for Messrs. Weber and
Branca and Drs. Goodyear and Holden was $150,000 and for Mr. Markert was
$147,648.
(3) The maximum annual benefit of $120,000 will be reduced for pension benefits
which begin before, and increased for pension benefits which begin after,
the participant's Social Security Normal Retirement Age.
(4) Effective January 1, 1994, the maximum compensation limit is $150,000. The
limit for prior years is $235,840. After reflecting these limits, Mr.
Weber's projected retirement benefit is $34,298 prior to offset.
Option Exercises in Last Fiscal Year and Fiscal 1996 Year-End Option Values
- - ---------------------------------------------------------------------------
No stock options were granted during the last fiscal year. The following
table presents certain information concerning the amount and value of all
unexercised stock options held by the Company's Chairman of the Board, President
and Chief Executive Officer, four named executive officers and one former
officer as of January 31, 1996.
<TABLE>
<CAPTION>
Value of Unexercised In-
Number of Securities the-Money Options at 1/31/96
Underlying Unexercised ----------------------------
Shares Options at 1/31/96 Exercisable Unexercisable
Acquired ------------------ ----------- -------------
on Value
Exercise Realized Exercisable Unexercisable Shares Value (2) Shares Value (2)
Name (#) ($) (#) (#) (#) ($) (#) ($)
- - ---- -------- -------- ----------- ------------- ------- --------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Alfred Weber 195,000 (1) 25,000 195,000 $3,798,100 25,000 $362,500
George J. Sbordone 29,000 $630,750 31,000 10,000 31,000 591,250 10,000 145,000
George C. Branca 5,000 86,250 10,000 5,000 10,000 154,375 5,000 72,500
A. Gordon Goodyear 17,000 4,500 17,000 284,000 4,500 65,250
Leslie S. Holden 10,000 197,500 9,000 4,000 9,000 139,875 4,000 58,000
Stephen E. Markert, Jr. 2,000 2,000 2,000 29,000 2,000 29,000
- - --------------------
</TABLE>
(1) Represents options to purchase 85,000 shares of Common Stock granted
pursuant to the Company's Stock Option Plan and an option to purchase
110,000 shares of Common Stock granted in connection with the commencement
of Mr. Weber's employment with the Company.
(2) Represents the excess of (i) the number of shares covered by the option
multiplied by the closing price for shares of Common Stock ($26.50 a share)
on January 31, 1996 over (ii) the aggregate exercise price of the option.
Compensation of Directors
- - -------------------------
For meetings occurring prior to the 1996 Annual Meeting of Stockholders,
the Company paid each of its directors who is not a salaried employee of the
Company, other than Mr. Feit, $2,000 for each meeting of the Board of Directors
or any of its committees attended. For meetings subsequent to that date, the
10
<PAGE>
Company has agreed to pay non-employee directors, other than Mr. Feit, an annual
retainer of $10,000, plus $1,000 for each meeting of the Board of Directors or
any of its committees or subcommittees attended.
Composition of Compensation Committee
- - -------------------------------------
During fiscal 1996 the Compensation Committee consisted of Mr. Feit and
Merril M. Halpern and Jerome L. Katz. Messrs. Halpern and Katz are not standing
for re-election as directors at the Annual Meeting of Stockholders and the
Compensation Committee will be reconstituted thereafter. See "Management" above.
Compensation Committee Report
- - -----------------------------
Compensation Philosophy. The principal goal of the Company's compensation
program as administered by the Compensation Committee is to help the Company
attract, motivate and retain the executive talent required to develop and
achieve the Company's strategic and operating goals with a view to maximizing
shareholder value. The key elements of this program and the objectives of each
element are as follows:
Base salary
o Establish base salaries that are competitive with those payable to
executives holding comparable positions at similar-sized industrial
companies.
o Provide periodic base salary increases as appropriate, consistent with
the Company's overall operating and financial performance, with a view
to rewarding successful individual performance and keeping pace with
competitive compensation practices.
Annual incentive
o Encourage both superlative individual effort and effective "team play"
by creating potential for earning annual incentive awards based in part
on Company achievement of budgeted earning objectives and in part on
achievement of individual performance objectives measuring the
individual executive's contribution to the key performance targets of
the internal business unit within which the executive functions or for
which he is responsible.
o Set potential awards at levels that offer covered executives the
opportunity to earn incentive amounts equal to a significant percentage
(ordinarily at least 35% for the most senior executives) of their base
salaries for full achievement of all Company and individual objectives,
with the opportunity to selectively grant even larger awards to
recognize outstanding individual performance.
Long-term incentive
o Facilitate the alignment of executives' interests with those of the
Company's shareholders by providing opportunities for meaningful stock
ownership.
(page 11 continues)
<PAGE>
Summary of Actions Taken with Respect to the Named Executive Officers: At
least once a year, and at more frequent periodic intervals when deemed necessary
in individual cases, the Compensation Committee reviews the performance of the
Company's executive officers with Mr. Weber, the Chairman of the Board (prior to
Mr. Sbordone's resignation as Chairman of the Board, he was also consulted). The
Compensation Committee also reviews the performance of Mr. Weber at least once a
year. The actions taken
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<PAGE>
by the Compensation Committee for the year ended January 31, 1996 with respect
to the named executive officers are described and discussed below.
Base Salary. The Company has employment agreements with its principal
executive officers that provide for annual reviews of their base salary.
Pursuant to these agreements, at the end of fiscal year 1996, the base salaries
for Messrs. Weber and Branca, Drs. Goodyear and Holden and Mr. Markert were
$353,600, $156,000, $145,000, $140,000 and $120,000, respectively.
Annual Incentive. Criteria for earning incentive awards pursuant to the
Company's Incentive Compensation Plan for the fiscal year ended January 31, 1996
were established by the Compensation Committee early in the fiscal year, based
in part on substantial achievement of the Company's budgeted earnings per share
and in part on achievement of specified individual performance objectives.
Based on the meeting of the earnings criteria and the report of an
independent consultant who examined the Company's compensation policies, the
Compensation Committee granted bonus awards to Messrs. Weber and Branca, Drs.
Goodyear and Holden and Mr. Markert in the amount of $221,000, $70,000, $50,000,
$55,000 and $53,000, respectively.
Glenn M. Feit
Merril M. Halpern
Jerome L. Katz
Compensation Committee Interlocks and Insider Participation
- - -----------------------------------------------------------
Messrs. Feit, Halpern and Katz served on the Compensation Committee for the
entire fiscal year ended January 31, 1996.
Mr. Feit is a member of the law firm of Proskauer Rose Goetz & Mendelsohn
LLP, which provides legal services to the Company and also owns 1,000 shares of
Common Stock. Messrs. Halpern and Katz are minority stockholders, directors and
Co-Chief Executive Officers of Charterhouse, which until November 1, 1995 was a
party to a consulting agreement with the Company (see "Certain Relationships and
Related Transactions" below). Each of Messrs. Halpern and Katz owns 31,928
shares of Common Stock.
Stock Price Performance Graph
- - -----------------------------
Prior to October 27, 1995, the Common Stock was principally traded on the
American Stock Exchange. After that date, it was principally traded on The
NASDAQ Stock Market. The following graphs compare on a cumulative basis the
yearly percentage change, assuming quarterly dividend reinvestment over the last
five fiscal years, in the total shareholder return on the Common Stock, with:
(i) in the case of the first graph, (a) the total return on the American
Stock Exchange Market Value Index (the "Amex Market Value Index"), a broad
entity market index and (b) the total return on a selected peer group index on
the American Stock Exchange (the "Amex Peer Group"); and
(ii) in the case of the second graph, (a) the total return on The NASDAQ
Stock Market Total Return Index (the "NASDAQ Total Return Index"), a broad
entity market index and (b) the total return on a selected peer group index on
The NASDAQ Stock Market (the "NASDAQ Peer Group").
12
<PAGE>
The Amex Peer Group is an industrial subindice of the Amex Market Value
Index called the "Consumer Goods Index," in which the Company was included for
analytical purposes by the American Stock Exchange. The NASDAQ Peer Group,
called "The NASDAQ Non-Financial Stocks Index," is a subindice on NASDAQ Total
Return Index, in which the Company is included for analytical purposes by The
NASDAQ Stock Market. The price of each unit has been set at $100 on January 31,
1991 for the purpose of preparation of each of the graphs.
13
<PAGE>
Graph (i):
- - ----------
Comparison of Five-Year Cumulative Total Return
Among Charter Power Systems, Inc., AMEX Market Value
Index and AMEX Peer Group
Performance Results through January 31, 1996
Fiscal Year Company AMEX Peer Group
----------- ------- ---- ----------
1991 100.0 100.0 100.0
1992 131.9 129.5 169.6
1993 81.7 129.5 187.5
1994 174.4 153.0 207.6
1995 302.7 137.1 190.7
1996 386.4 174.5 241.3
Graph (ii):
- - -----------
Comparison of Five-Year Cumulative Total Return
Among Charter Power Systems, Inc., NASDAQ
Total Return Index and NASDAQ Peer Group
Performance Results through January 31, 1996
Fiscal Year Company NASDAQ Peer Group
----------- ------- ------ ----------
1991 100.0 100.0 100.0
1992 131.9 153.0 152.3
1993 81.7 173.0 161.2
1994 174.4 198.9 187.3
1995 302.7 189.8 173.3
1996 386.4 268.3 239.5
14
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Two directors of the Company who are not standing for re-election at the
Annual Meeting of Stockholders, Messrs. Halpern and Katz, are directors,
minority stockholders and executive officers of Charterhouse. Two directors who
resigned effective November 1, 1995, A. Lawrence Fagan and Patricia R. Merrick,
are also executive officers of Charterhouse. Prior to November 1, 1995, Electra
Investment Trust, P.L.C., Globe Venture Nominees Limited, Slough Parks Holdings
Incorporated, Charterhouse Bank Limited, Charterhouse Finance Corporation
Limited and Merifin N.V., which are stockholders or affiliates of stockholders
of Charterhouse, owned an aggregate 1,147,475 shares of Common Stock (the
"Charterhouse Shares"). In addition, prior to November 1, 1995, Mezzanine
Capital Corporation, an entity to which Charterhouse provides advisory services,
owned 598,471 shares of Common Stock (the "MCC Shares").
Charterhouse was a party to an agreement with the Company, which was
terminated effective November 1, 1995, pursuant to which Charterhouse could be
requested to provide consulting and financial advisory services to the Company
in connection with the Company's efforts to identify, evaluate and, when it
deems appropriate, complete prospective acquisitions, whether or not they were
identified or introduced to the Company by Charterhouse. No fees were paid under
this agreement during fiscal 1996 prior to its termination.
In June 1988, in connection with the sale by the Company to Robert Alvine
(the then Vice Chairman of the Board and a holder of more than 5% of the
outstanding Common Stock during part of the last fiscal year) of 316,515 shares
of Common Stock (the "Alvine Shares") at a purchase price of $1,329,363, the
Company loaned $1,326,198 to Mr. Alvine. The loan, which was secured by the
Alvine Shares, did not bear interest, and was repaid on November 1, 1995.
In June 1989, in connection with the sale by the Company to Mr. Weber of
60,000 shares of Common Stock (the "Weber Shares") at a purchase price of
$330,000, the Company loaned $329,400 to Mr. Weber. The loan, which was secured
by the Weber Shares and initially bore interest at 12.5% and later at 6% payable
monthly, was repaid on November 1, 1995.
In an underwritten public offering effective November 1, 1995, the Alvine
Shares, Weber Shares, 1,052,058 Charterhouse Shares, 583,202 MCC Shares and an
aggregate 274,456 shares owned by Messrs. Halpern, Katz, Fagan and Sbordone and
Ms. Merrick were sold. The Company paid the expenses of the offering, other than
underwriting discounts, on behalf of the holders of those shares. The Company
and certain other stockholders also sold shares in the offering.
On April 30, 1996, Mr. Weber exercised an option to purchase 110,000 shares
of Common Stock at $6.04 per share, pursuant to an Option Agreement dated May
30, 1989, as amended. The options would have expired on April 30, 1996 had they
not been exercised. Under the terms of the Option Agreement, Mr. Weber paid the
exercise price with an interest-free promissory note in the original principal
amount of $664,400 that is secured by the shares received on exercise and is due
October 31, 1997. The Company loaned Mr. Weber $1,057,138 to pay the tax
withholding on the exercise of such option, evidenced by a promissory note (the
"Weber Tax Note"), bearing interest at 5.33% per annum payable annually, and due
on April 29, 1997, subject to extension until April 29, 1999 at the option of
Mr. Weber. The Weber Tax Note is also secured by the shares received on exercise
of such option. The Company further agreed to make payments to Mr. Weber in an
amount sufficient to reimburse him, on an after-tax basis, for all interest on
the Weber Tax Note incurred through the earlier of April 29, 1997 or the
prepayment of the Weber Tax Note.
15
<PAGE>
APPROVAL OF CHARTER POWER SYSTEMS, INC.
1996 STOCK OPTION PLAN
The Board of Directors of the Company has adopted the 1996 Charter Power
Systems, Inc. Stock Option Plan (the "Plan"), subject to stockholder approval at
the Annual Meeting of Stockholders. The following description is qualified in
its entirety by the provisions of the Plan, a copy of which is annexed hereto as
Exhibit A.
The Plan is a stock plan providing for the grant of incentive stock options
("ISOs") and nonqualified stock options ("NQSOs") to key employees of the
Company and its subsidiaries. The Plan provides for the grant of options to
purchase up to 500,000 shares of Common Stock. Shares subject to any option
which terminates or expires unexercised shall be available for subsequent
grants.
The Company's previous stock option plan expired by its terms on January
28, 1996. Options to purchase an aggregate 284,895 shares had been authorized
under that plan but had not been granted by the expiration date. The Board of
Directors believes it is in the Company's best interest to authorize a
sufficient number of options under the Option Plan to account for the ungranted
options under the prior plan.
The Plan will be administered by a stock option subcommittee of the
compensation committee of the Board of Directors (the "Committee"), each member
of which will qualify as a "disinterested person" under Rule 16b-3 promulgated
under the Securities Exchange Act of 1934, as amended ("Rule 16b-3") and an
"outside director" under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"). The Committee determines the employees eligible to receive
options and the terms of such options, all in a manner consistent with the Plan.
The Board of Directors may amend the Plan, except that no amendment may, without
the approval of the stockholders of the Company, (i) increase the maximum
aggregate number of shares of Common Stock with respect to which options may be
granted under the Plan except to take account of stock splits and other
significant corporate transactions, (ii) increase the maximum individual number
of shares of Common Stock with respect to which options may be granted in any
calendar year except to take account of stock splits and other significant
corporate transactions, (iii) decrease the exercise price for ISOs or for NQSOs
intended to be "performance based" under Section 162(m) of the Code, (iv) change
the eligibility provisions of the Plan or (v) effect any change that would
require stockholder approval under Section 162(m) of the Code or Rule 16b-3
under the Exchange Act. In addition, subject to the provisions of the Plan, no
amendment may adversely affect the rights of an optionee or other person holding
an option theretofore granted without the consent of the optionee or such other
person, as the case may be. No new options may be granted under the Plan after
the tenth anniversary of its effective date (i.e., after July 25, 2006).
All awards are to be made in the discretion of the Committee, and it is
therefore not possible to determine the number of options grantable in any
period under the Plan to any particular employee or group of employees. The
number of stock options that may be granted to any person is subject to two
limitations: (i) the aggregate fair market value as of the date of grant of the
shares of stock with respect to which ISOs (and incentive stock options under
any other stock option plan of the Company and its subsidiaries) are exercisable
(page 16 continues)
<PAGE>
for the first time during any calendar year may not exceed $100,000, and (ii)
the maximum number of shares with respect to which options may be granted to a
person under the Plan during any calendar year may not exceed 100,000 (subject
to adjustment for stock splits and other significant corporate transactions),
provided that to the extent that the maximum number of shares with respect to
which options may be granted to a person under this clause are not granted in a
particular year (beginning with the year in which the person receives his or her
first grant of options under the Plan), such ungranted options for that year
shall increase the maximum number of shares with respect to which options may be
granted to such
16
<PAGE>
person in subsequent calendar years until used. Non-employee directors are
ineligible to receive options under the Plan.
The exercise price of ISOs granted under the plan shall be at least 100% of
the fair market value of the Common Stock on the date of grant (110% in the case
of an employee owning more than 10% of the Common Stock), and that of NQSOs
shall be at least the par value of the Common Stock ($.01 per share). ISOs are
exercisable for not more than ten years (five years in the case of an employee
owning more than 10% of the Common Stock), and NQSOs for not more than ten years
and a day, from the date of grant. Under certain circumstances, including
termination of employment upon retirement, disability or death, the option may
be exercised during an extended period.
Holders of NQSOs will immediately upon exercise of the option realize
ordinary income on the excess of the fair market value of the securities
acquired on the date of exercise over the exercise price. The Company will be
entitled to a tax deduction equal to the amount of ordinary income realized by
an optionholder at the time the optionholder recognizes such income. Holders of
ISOs will not realize any income upon grant or exercise, provided that the
optionee was continuously employed by the Company since the grant of the option
or if not so employed, such exercise is within three months after the
termination of employment, or if the termination of employment was as a result
of the death or disability of the optionee, the exercise was within one year
after termination of employment. If these requirements are not met, an ISO is
treated as an NQSO.
Upon the sale of shares of Common Stock received upon the exercise of an
NQSO, the holder will realize a capital gain (or loss) based on the difference
between the sale price and the fair market value on the exercise date. The gain
or loss will be long-term or short-term depending on whether the shares have
been held for more than one year prior to sale.
Upon the sale of shares of Common Stock received upon the exercise of an
ISO, the holder will recognize ordinary income on the difference between the
exercise price and the lesser of the sale price and the fair market value on the
date of sale, and the Company will have a corresponding deduction. In addition,
if the shares are held until after the later of two years from the date of grant
or one year from the date of exercise, the holder will recognize long-term
capital gain (or loss) based on the difference between the exercise price and
the sale price. If the shares are not held for such period, the holder will
recognize ordinary income on that portion of the gain (or loss), and the Company
will have a corresponding deduction.
In addition, the sale of shares of Common Stock received upon the exercise
of an ISO is subject to special alternative minimum tax treatment. Generally,
the excess of the fair market value of the shares of Common Stock as to which
the option was exercised over the exercise price of the option will be
recognized as an addition to alternative minimum taxable income in the year of
exercise. If an optionee disposes of shares of Common Stock received on exercise
in the year of exercise, the timing and amount of income to be recognized for
regular tax and alternative minimum tax purposes will be the same. Otherwise,
income may be recognized for alternative minimum tax purposes in a taxable year
prior to the year in which such income would be recognized for regular tax
purposes.
(page 17 continues)
<PAGE>
RATIFICATION OF INDEPENDENT ACCOUNTANTS
Based upon the recommendation of the Audit Committee, the Board of
Directors has reappointed Coopers & Lybrand L.L.P. as the Company's independent
accountants for the fiscal year ending January 31, 1997 and recommends the
ratification by the stockholders of that reappointment. In the absence of
instructions to the contrary, the shares of Common Stock represented by a proxy
delivered to the Board of
17
<PAGE>
Directors will be voted FOR the ratification of the appointment of Coopers &
Lybrand L.L.P. A representative of Coopers & Lybrand L.L.P. is expected to be
present at the Annual Meeting of Stockholders and will be available to respond
to appropriate questions and make such statements as he may desire.
STOCKHOLDER PROPOSALS
Stockholders of the Company who intend to submit proposals at the 1997
Annual Meeting of Stockholders must submit such proposals to the Company no
later than March 27, 1997. Stockholder proposals should be submitted to Charter
Power Systems, Inc., 1400 Union Meeting Road, Blue Bell, Pennsylvania 19422
Attention: Vice President - Finance and Treasurer.
ANNUAL REPORT
The Company's Annual Report for the fiscal year ended January 31, 1996 is
being mailed together with this Proxy Statement to the Company's stockholders of
record at the close of business on May 28, 1996.
OTHER BUSINESS
The Board of Directors does not know of any other business to be presented
to the meeting and does not intend to bring any other matters before the
meeting. However, if any other matters properly come before the meeting or any
adjournments thereof, it is intended that the persons named in the accompanying
proxy will vote thereon according to their best judgment in the interests of the
Company.
BY ORDER OF THE BOARD OF DIRECTORS
GLENN M. FEIT
Secretary
STOCKHOLDERS ARE REQUESTED TO DATE AND SIGN THE ENCLOSED PROXY AND RETURN
IT IN THE ENCLOSED, SELF-ADDRESSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES. YOUR PROMPT RESPONSE WILL BE HELPFUL, AND YOUR COOPERATION
WILL BE APPRECIATED.
18
<PAGE>
PROXY
CHARTER POWER SYSTEMS, INC.
1400 Union Meeting Road, Blue Bell, Pennsylvania 19422
Solicited by the Board of Directors for the Annual Meeting of
Stockholders on July 25, 1996.
The undersigned hereby appoints ALFRED WEBER, STEPHEN E. MARKERT, JR. and
GLENN M. FEIT, or any of them, with the power of substitution, as proxies and
hereby authorizes them to represent and to vote, as designated below, all shares
of Common Stock of Charter Power Systems, Inc. (the "Corporation") held of
record by the undersigned at the close of business on May 28, 1996 at the Annual
Meeting of Stockholders to be held on Thursday, July 25, 1996, and any
adjournments thereof.
The Board of Directors recommends a vote FOR proposals 1, 2 and 3.
1. ELECTION OF DIRECTORS:
o FOR ALL NOMINEES LISTED BELOW (EXCEPT AS MARKED TO THE CONTRARY BELOW):
Alfred Weber David Beretta Glenn M. Feit Alan G. Lutz
William Harrall, III Warren A. Law John A. H. Shober
o WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES LISTED ABOVE.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE STRIKE A
LINE THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE.)
2. APPROVAL OF THE 1996 CHARTER POWER SYSTEMS, INC. STOCK OPTION PLAN:
o FOR o AGAINST o ABSTAIN
3. RATIFICATION OF THE APPOINTMENT OF COOPERS & LYBRAND L.L.P. as independent
accountants:
o FOR o AGAINST o ABSTAIN
(Continued and to be SIGNED on other side)
<PAGE>
(Continued from other side)
4. In their discretion, the Proxies are authorized to vote upon any other
business that may properly come before the meeting and any adjournments
thereof.
WHEN PROPERLY EXECUTED THIS PROXY WILL BE VOTED AS
DIRECTED. IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1, 2 AND 3.
PLEASE SIGN EXACTLY AS NAME APPEARS BELOW.
Dated: _____________________________________________, 1996
_________________________________________________________
Signature
_________________________________________________________
Signature, if held jointly
Please sign exactly as your name appears on this Proxy. If
shares are registered in more than one name, the signatures
of all such persons are required. A corporation should sign
in its full corporate name by a duly authorized officer,
stating such officer's title. Trustees, guardians, executors
and administrators should sign in their official capacity
giving their full title as such. A partnership should sign
in the partnership name by an authorized person, stating
such person's title and relationship to the partnership.
PLEASE COMPLETE, DATE, SIGN AND RETURN THIS PROXY PROMPTLY, USING THE ENCLOSED
ENVELOPE.
No postage is required if mailed in the United States of America.
<PAGE>
EXHIBIT INDEX
Exhibit A - Charter Power Systems, Inc. 1996 Stock Option Plan
<PAGE>
EXHIBIT A
CHARTER POWER SYSTEMS, INC.
1996 STOCK OPTION PLAN
1. PURPOSES
The purposes of the Charter Power Systems, Inc. 1996 Stock Option Plan (the
"Plan") are to aid Charter Power Systems, Inc. (the "Company") and its
subsidiaries in attracting and retaining highly capable employees and to enable
selected key employees of the Company and its subsidiaries to acquire or
increase ownership interests in the Company on a basis that will encourage them
to perform at increasing levels of effectiveness and use their best efforts to
promote the growth and profitability of the Company and its subsidiaries.
Consistent with these objectives, this Plan authorizes the granting to selected
key employees of Incentive Stock Options and Nonqualified Stock Options to
acquire shares of the Company's Common Stock, par value $.01 per share (the
"Common Stock"), pursuant to the terms and conditions hereinafter set forth. As
used herein the term "subsidiary" shall have the meaning ascribed to it under
Section 424(f) of the Internal Revenue Code of 1986, as amended (the "Code").
2. DEFINITIONS
As used in this Plan, the following words shall have the following
meanings:
(a) "Board of Directors" means the Board of Directors of the Company;
(b) "Incentive Stock Option" means a stock option to purchase shares of
Common Stock which is intended to qualify as an incentive stock option as
defined in Section 422(b) of the Code;
(c) "Nonqualified Stock Option" means a stock option to purchase shares of
Common Stock that is not an Incentive Stock Option;
(d) "Option" means an Incentive Stock Option or a Nonqualified Stock
Option.
3. EFFECTIVE DATE
This Plan shall become effective on July 25, 1996 (the "Effective Date"),
subject to approval of this Plan by the holders of a majority of the capital
stock entitled to vote thereon (at the time of approval). In the event that this
Plan is not so approved, it shall not become effective.
4. ADMINISTRATION
(a) This Plan shall be administered by a committee (the "Committee"), which
may be a subcommittee of the compensation committee, consisting of at least two
members of the Board of Directors selected by the Board of Directors, or such
greater number as the Board of Directors may from time to time determine. At the
time of such selection, each such member shall not have been granted an Option
under this Plan during the one-year period prior to the later of the Effective
Date or such member's appointment to the Committee, or received stock or an
option to purchase stock of the Company or any of its "affiliates" (as such term
is defined under Rule 405 under the Securities Act of 1933, as amended) under
any other plan maintained by the Company or any of its affiliates, except as may
be otherwise provided in Rule 16b-3(c) under the Securities Exchange Act of
1934, as amended (the "Exchange Act") (or any successor rule). In addition, each
such member shall qualify as an "outside director" as defined in Section 162(m)
of the Code
<PAGE>
and the regulations thereunder. If, at any time, there are less than two members
of the Committee eligible to serve in such capacity, the Board of Directors
shall appoint one or more other eligible members of the Board of Directors to
serve on the Committee. All Committee members shall serve, and may be removed,
at the pleasure of the Board of Directors.
(b) A majority of the members of the Committee (but not less than two)
shall constitute a quorum, and any action taken by a majority of such members
present at any meeting at which a quorum is present, or acts approved in writing
by all such members, shall be the acts of the Committee.
(c) Subject to the other provisions of this Plan, the Committee shall have
full authority to decide when Options to acquire shares of Common Stock will be
granted under this Plan, to select the key employees to whom the Options will be
granted, to determine whether the Options to be granted will be Incentive Stock
Options or Nonqualified Stock Options, and to determine the number of shares of
Common Stock to be covered by each Option, the price at which such shares may be
purchased upon the exercise of such Option (the "Option Exercise Price") and
other terms and conditions of such purchase including Company, department and
individual performance goals. In making those determinations, the Committee
shall solicit the recommendations of the Chief Executive Officer of the Company
and may take into account the key employee's present and potential contributions
to the Company's business and any other factors which the Committee may deem
relevant. Subject to the other provisions of this Plan, the Committee shall also
have full authority to interpret this Plan and any stock option agreements
evidencing Options granted hereunder, to issue rules for administering this
Plan, to change, alter, amend or rescind such rules, and to make all other
determinations necessary or appropriate for the administration of this Plan. All
determinations, interpretations and constructions made by the Committee pursuant
to this Section 4 shall be final and conclusive. No member of the Board of
Directors or the Committee shall be liable for any action, determination or
omission taken or made in good faith with respect to this Plan or any Option
granted hereunder.
5. ELIGIBILITY
(a) Subject to the provisions of Section 6 below, key employees of the
Company and its subsidiaries (including officers and directors who are
employees) shall be eligible to receive Options under this Plan.
(b) The aggregate Fair Market Value (as such term is defined in Section
7(a) below), determined as of the Date of Grant (as such term is defined in
Section 7(a) below), of the shares of stock with respect to which Incentive
Stock Options (and incentive stock options under all other incentive stock
option plans of the Company, its parent (if any) and its subsidiaries) are
exercisable for the first time by an Optionee (as such term is defined in
Section 7 below) during any calendar year may not exceed $100,000.
(c) In addition to the foregoing, the maximum number of shares with respect
to which Options may be granted to a person under this Plan during any calendar
year may not exceed 100,000 (subject to the adjustments set forth in Section
6(b) below). To the extent that the maximum number of shares with respect to
which Options may be granted to a person are not granted in a particular
calendar year (beginning with the year in which the person receives his or her
first grant of Options hereunder), such ungranted Options for that year shall
increase the maximum number of shares with respect to which Options may be
granted to such person in subsequent calendar years during the term of the Plan
until used.
A-2
<PAGE>
6. OPTION SHARES
(a) The shares subject to Options granted under this Plan shall be shares
of Common Stock and the aggregate number of shares with respect to which Options
may be granted shall not exceed 500,000 shares (subject to the adjustments set
forth in Section 6(b) below). If an Option expires, terminates or is otherwise
surrendered, in whole or in part, the shares allocable to the unexercised
portion of such Option shall again become available for grants of Options
hereunder. Notwithstanding the foregoing, in order to comply with Section 162(m)
of the Code, the Committee shall take into account that (1) if an Option is
canceled, the canceled Option continues to be counted against the maximum number
of shares for which Options may be granted to any person under the Plan in the
original year of grant and (2) for purposes of Section 162(m) of the Code, if
after the grant of an Option, the Committee or the Board of Directors reduces
the Option Exercise Price, the transaction is treated as a cancellation of the
Option and a grant of a new Option, and in such case, both the Option that is
deemed to be canceled and the Option that is deemed to be granted reduce the
maximum number of shares for which Options may be granted to the person under
the Plan. As determined from time to time by the Board of Directors, the shares
available under this Plan for grants of Options may consist either in whole or
in part of authorized but unissued shares of Common Stock or shares of Common
Stock which have been reacquired by the Company or a subsidiary following
original issuance.
(b) The aggregate number of shares of Common Stock as to which Options may
be granted hereunder, as provided in Section 6(a) above, the number of shares
covered by each outstanding Option and the Option Exercise Price shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split or other subdivision or
consolidation of shares or other capital adjustment, or the payment of a stock
dividend; provided, however, that any fractional shares resulting from any such
adjustment shall be eliminated. Notwithstanding the foregoing, no adjustment
shall be made upon the issuance of new shares of Common Stock for fair
consideration including the conversion of shares of Preferred Stock.
7. TERMS AND CONDITIONS OF OPTIONS
Each Option granted pursuant to this Plan shall be evidenced by a stock
option agreement between the Company and the key employee to whom the Incentive
Stock Option or Nonqualified Stock Option is granted (the "Optionee") in such
form or forms as the Committee, from time to time, shall prescribe, which
agreements need not be identical to each other but shall comply with and be
subject to the following terms and conditions:
(a) Option Exercise Price. The Option Exercise Price at which each share of
Common Stock may be purchased pursuant to a Nonqualified Stock Option intended
to be "performance-based" under Section 162(m) of the Code or an Incentive Stock
Option shall not be less than 100% of the Fair Market Value for each such share
on the date the Committee grants such Option (the "Date of Grant"). The Fair
Market Value of the shares of Common Stock on any date the Common Stock is
quoted on NASDAQ or listed upon an established stock exchange shall be,
respectively, the closing bid price of the shares of Common Stock as quoted on
NASDAQ on such date or the closing sale price of such shares as quoted on the
stock exchange on which such shares are listed, or if shares of Common Stock
were not traded on such date, on the next preceding trading day during which
such shares were traded. If the Common Stock is not quoted on NASDAQ or listed
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on an established stock exchange, then the Fair Market Value shall be determined
by such other method consistent with the Code and applicable regulations
thereunder, as the Committee shall in its discretion select and apply at the
time of grant of the Option concerned. Subject to the foregoing, the Committee
in fixing the Option Exercise Price shall have full authority and discretion and
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be fully protected in doing so. Anything contained in this Section 7(a) to the
contrary notwithstanding, in the event that the number of shares of Common Stock
subject to any Option is adjusted pursuant to Section 6(b) above, a
corresponding adjustment shall be made in the Option Exercise Price per share.
The Option Exercise Price at which each share of Common Stock may be purchased
pursuant to a Nonqualified Stock Option, other than a Nonqualified Stock Option
intended to be "performance-based" under Section 162(m) of the Code, shall be
not less than the par value of each such share on the Date of Grant.
(b) Duration of Options. Each Incentive Stock Option granted hereunder
shall expire and all rights to purchase shares of Common Stock pursuant thereto
shall cease on a date not later than the tenth anniversary of the Date of Grant
of the Option, which date shall be fixed by the Committee. Each Nonqualified
Stock Option granted hereunder shall expire and all rights to purchase shares of
Common Stock pursuant thereto shall cease on a date not later than ten years and
one day from the Date of Grant of the Option which date shall be fixed by the
Committee. (The expiration date for the Incentive Stock Option and Nonqualified
Stock Options may collectively be referred to herein as the "Expiration Date".)
(c) Vesting of Options. Each Option granted hereunder shall vest at such
time and in such amounts and based on lapse of time, or such Company, department
or individual performance goals as the Committee may specify upon the grant
thereof. Only Options which have vested may be exercised. Anything contained in
this Section 7(c) to the contrary notwithstanding, unless the Committee shall
specify otherwise, an Optionee shall become fully (100%) vested in each of his
or her Options upon his or her termination of employment with the Company or any
of its subsidiaries for reasons of death, disability or retirement. The
Committee shall, in its sole discretion, determine whether or not disability or
retirement has occurred. Notwithstanding the foregoing, the Committee at any
time may in its sole discretion limit the number of Options that can be
exercised in any taxable year of the Company, to the extent necessary to prevent
the application of Section 162(m) of the Code (or any similar or successor
provision), provided that the Committee may not postpone the earliest date on
which Options can be exercised beyond the last day of the stated term of such
Options.
(d) Merger, Consolidation, etc. In the event the Company shall, pursuant to
action by its Board of Directors, at any time propose to merge with or into,
consolidate with, or sell or otherwise transfer all or substantially all of its
assets to, another entity or in the event of the acquisition of all or
substantially all of the Company's outstanding Common Stock by a single person
or entity and/or group of entities acting in concert and provision is not made
pursuant to the terms of such transaction for (i) the continuation or assumption
by the surviving, resulting or acquiring entity of all outstanding Options, (ii)
the substitution of new options therefor, or (iii) the payment of cash or other
consideration in respect thereof, the Committee shall cause written notice of
the proposed transaction to be given to each Optionee not less than 30 days
prior to the anticipated effective date of the proposed transaction. On a date
which the Committee shall specify in such notice, which date shall not be less
than 10 days prior to the anticipated effective date of the proposed
transaction, each Optionee's Options shall become fully (100%) vested and each
Optionee shall have the right to exercise his or her Options to purchase any or
all shares then subject to such Options (conditioned on the consummation of the
proposed transaction). If the transaction is consummated, each Option, to the
extent not previously exercised prior to the effective date of the transaction,
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shall terminate on such effective date. If the transaction is abandoned or
otherwise not consummated then, to the extent that any Option not exercised
prior to such abandonment or termination shall have vested solely by operation
of this Section 7(d), such vesting shall be annulled and be of no further force
or effect, and the vesting period set forth in Section 7(c) above shall be
re-instituted, as of the date of such abandonment or termination.
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(e) Exercise of Options. A person entitled to exercise an Option may
exercise it in whole at any time, or in part from time to time, by delivering to
the Company at its principal office, directed to the attention of its Treasurer,
written notice specifying the number of shares of Common Stock with respect to
which the Option is being exercised, together with payment in full of the
purchase price for such shares. Such payment shall be made in cash or by
certified check or bank draft to the order of the Company; provided, however,
that the Committee may, in its sole discretion, authorize such payment, in whole
or in part, in any other form, including payment by personal check or by the
exchange of shares of Common Stock of the Company previously acquired by the
person entitled to exercise the Option and having a Fair Market Value on the
date of exercise equal to the price for which the shares of Common Stock may be
purchased pursuant to the Option. Subject to applicable securities laws, the
Committee may also permit "cashless exercise" of Options through the delivery of
irrevocable instructions to a broker to deliver promptly to the Company an
amount equal to the aggregate Option Exercise Price plus all applicable tax
withholding by payment through a cash or margin arrangement with such broker.
(f) Nontransferability. Options shall not be transferable other than by
will or the laws of descent and distribution and no Option may be exercised by
anyone other than the Optionee, except that, if the Optionee dies or becomes
incapacitated, the Option may be exercised by his or her estate, legal
representative or beneficiary, as the case may be, subject to all other terms
and conditions contained in this Plan.
(g) Termination and Employment. Unless the Committee shall specify
otherwise, the following rules shall apply in the event of an Optionee's
termination of employment with the Company or any of its subsidiaries:
(i) In the event of an Optionee's termination of employment with the
Company or any of its subsidiaries either (1) by the Company or any of its
subsidiaries for cause given by the Optionee, or (2) voluntarily on the
part of the Optionee, his or her Options shall immediately terminate.
(ii) In the event of an Optionee's termination of employment with the
Company or any of subsidiaries for reason of retirement or under
circumstances other than those specified in Section 7(g)(i) immediately
above, and for reasons other than death or disability, such Options shall
terminate three months after the date of such termination of employment or
on their respective Expiration Dates, whichever shall first occur;
provided, however, that if the Optionee dies within such 3 month period,
the time period set forth in Section 7(g)(iii) immediately below shall
apply.
(iii) In the event of the death or disability of an Optionee while
such Optionee is employed by the Company or any of its subsidiaries, such
Options shall terminate on the first anniversary of the Optionee's death or
disability, as the case may be, or on their respective Expiration Dates,
whichever shall first occur.
(iv) Anything contained in this Section 7(g) to the contrary
notwithstanding, an Option may only be exercised following the Optionee's
termination of employment with the Company or any of its subsidiaries for
reasons other than death, disability or retirement if, and to the extent
that, such Option was exercisable immediately prior to such termination of
employment.
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(v) An Optionee's transfer of employment between the Company and any
of its subsidiaries or between subsidiaries shall not constitute a
termination of employment and the Committee shall determine in each case
whether an authorized leave of absence for military service
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or otherwise shall constitute a termination of employment. Furthermore, the
Committee may in its discretion determine that, if an Optionee provides
consulting services to the Company after his or her cessation of
employment, the Optionee's employment will be deemed, for purposes of
Options held by him or her, to continue until the termination of his or her
consulting services or at such earlier time as the Committee may determine.
(h) No Rights as Stockholder or to Continued Employment. No Optionee shall
have any rights as a stockholder of the Company with respect to any shares
covered by an Option prior to the date of issuance to such Optionee of the
certificate or certificates for such shares, and neither this Plan nor any
Option granted hereunder shall confer upon an Optionee any right to continuance
of employment by the Company or any of its subsidiaries or interfere in any way
with the right of the Company or of its subsidiaries to terminate the employment
of such Optionee.
8. TEN PERCENT STOCKHOLDERS
The Committee shall not grant an Incentive Stock Option to an individual
who owns, at the time such Option is granted (directly or by attribution
pursuant to Section 424(d) of the Code), shares of capital stock of the Company
possessing more than 10% of the voting power of all classes of capital stock of
the Company unless, at the time such Option is granted, the price at which each
share of Common Stock may be purchased pursuant to the Option is at least 110%
of the Fair Market Value for each such share on the Date of Grant and such
Option, by its terms, is not exercisable after the expiration of five years from
the Date of Grant.
9. ISSUANCE OF SHARES; RESTRICTIONS
(a) Subject to the conditions and restrictions provided in this Section 9,
the Company shall, within 20 business days after an Option has been duly
exercised in whole or in part, deliver to the person who exercised the Option
one or more certificates, registered in the name of such person, for the number
of shares of Common Stock with respect to which the Option has been exercised.
The Company may legend any stock certificate issued hereunder to reflect any
restrictions provided for in this Section 9.
(b) Unless the shares subject to Options granted under the Plan have been
registered under the Securities Act of 1933, as amended (the "Act") (and, in the
case of any Optionee who may be deemed an "affiliate" of the Company as such
term is defined in Rule 405 under the Act, such shares have been registered
under the Act for resale by such Optionee), or the Company has determined that
an exemption from registration under the Act is available, the Company may
require prior to and as a condition of the issuance of any shares of Common
Stock, that the person exercising an Option hereunder furnish the Company with a
written representation in a form prescribed by the Committee to the effect that
such person is acquiring such shares solely with a view to investment for his or
her own account and not with a view to the resale or distribution of all or any
part thereof, and that such person will not dispose of any of such shares
otherwise than in accordance with the provisions of Rule 144 under the Act
unless and until either such shares are registered under the Act or the Company
is satisfied that an exemption from such registration is available.
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(c) Anything contained herein to the contrary notwithstanding, the Company
shall not be obligated to sell or issue any shares of Common Stock pursuant to
the exercise of an Option granted hereunder unless and until the Company is
satisfied that such sale or issuance complies with all applicable provisions of
the Act and all other laws or regulations by which the Company is bound or to
which the Company or such shares are subject.
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10. SUBSTITUTE OPTIONS
Anything contained herein to the contrary notwithstanding, Options may, at
the discretion of the Board of Directors, be granted under this Plan in
substitution for options to purchase shares of capital stock of another
corporation which is merged into, consolidated with, or all or a substantial
portion of the property or stock of which is acquired by, the Company or a
subsidiary.
11. TERM OF THE PLAN
Unless the Plan has been sooner terminated pursuant to Section 12 below,
this Plan shall terminate on, and no Options shall be granted after, the tenth
anniversary of the Effective Date. The provisions of this Plan, however, shall
continue thereafter to govern all Options theretofore granted, until the
exercise, expiration or cancellation of such Options.
12. AMENDMENT AND TERMINATION OF PLAN
The Board of Directors at any time may terminate this Plan or amend it from
time to time in such respects as it deems desirable; provided, however, that,
without the further approval of the stockholders of the Company, no amendment
shall (i) increase the maximum aggregate number of shares of Common Stock with
respect to which Options may be granted under this Plan (except by operation of
Section 6(b)), (ii) increase the maximum individual number of shares of Common
Stock with respect to which Options may be granted in any calendar year under
this Plan (except by operation of Section 6(b)), (iii) decrease the Option
Exercise Price provided for in Section 7(a) hereof, (iv) change the eligibility
provisions of Section 5 hereof, or (v) effect any change that would require
stockholder approval under Section 162(m) of the Code or Rule 16b-3 under the
Exchange Act and provided, further, that, subject to the provisions of Section 9
hereof, no termination of or amendment hereto shall adversely affect the rights
of an Optionee or other person holding an Option theretofore granted hereunder
without the consent of such Optionee or other person, as the case may be.
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