FORM 10-K/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JANUARY 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to ____________
Commission file number 1-9389
CHARTER POWER SYSTEMS, INC.
(Exact name of Registrant as specified in its Charter)
State or other jurisdiction of incorporation or organization: Delaware
I.R.S. Employer Identification Number: 13-3314599
Address of principal executive offices: 1400 Union Meeting Road
Blue Bell, Pennsylvania 19422
Registrant's telephone number, including area code: (215) 619-2700
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
--------------
Common Stock
par value $.01 per share
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days:
Yes ( x ) No ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X]
Aggregate market value of the voting stock held by nonaffiliates of the
Registrant, based on the closing price on April 23, 1996: $165,833,800
Number of shares outstanding of each of the Registrant's classes of common
stock as of April 23, 1996: 6,285,276 shares of Common Stock, par value $.01 per
share.
<PAGE>
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The table below and the paragraphs that follow it present certain
information concerning the 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 May 22, 1996 Class(8)
---------------------- ----------- --- ------------ --------
<S> <C> <C> <C> <C>
Alfred Weber (1)(2).............. Chairman of the Board, 63 231,590 3.5%
President and Chief
Executive Officer
George J. Sbordone (2)(5)(7)..... Director 76 31,000 *
Merril M. Halpern (1)(3)(7)...... Director 62 31,928 *
Jerome L. Katz (3)(7)............ Director 62 31,928 *
Warren A. Law (4)(5)............. Director 72 1,500 *
David Beretta (4)................ Director 67 1,000 *
Glenn M. Feit (3)................ Director and Secretary 66 1,000 *
Executive Officers who
are not Directors
-----------------
George 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.
Leslie S. Holden (2)............. Vice President - Battery 59 15,000 *
Technology
Apostolos Kambouroglou (2)....... Vice President and General 53 12,000 *
Manager - Motive Power
Systems Division
Stephen E. Markert, Jr. (2)...... Vice President - Finance and 44 7,940 *
Treasurer
Stephen J. Weglarz (2)(6)........ Vice President - Corporate 50 4,250 *
Services and Corporate Counsel
All directors and
officers as a group
(13 persons).................... 406,636 6.1%
- ---------------
</TABLE>
(footnotes begin on following page)
<PAGE>
* Less than 1% of outstanding shares of Common Stock
(1) Member of the Executive Committee.
(2) The figures for shares of Common Stock beneficially owned as of April
30, 1996 include fully vested and presently exercisable options to
purchase (a) 110,000 shares for Mr. Weber, (b) 31,000 shares for Mr.
Sbordone, (c) 10,000 shares for Mr. Branca, (d) 21,500 shares for Dr.
Goodyear, (e) 13,000 shares for Dr. Holden, (f) 12,000 shares for Mr.
Kambouroglou, (g) 4,000 shares for Mr. Markert and (h) 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 of the Compensation Committee.
(4) Member of the Audit Committee.
(5) Member of the Nominating Committee.
(6) Elected as Executive Officer as of August 15, 1995.
(7) Not standing for re-election.
(8) Based upon shares outstanding as of May 22, 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. He was an independent consultant from June 1987 to March
1989. From November 1986 to May 1987, Mr. Weber was President and Chief
Executive Officer of Uniroyal Plastics Company, Inc. From November 1983 to
October 1986, he was Vice President and General Manager of the Uniroyal Plastics
Division of Uniroyal, Inc. From April 1981 to October 1983, he was Chairman and
Chief Executive of Uniroyal Ltd., based in England, while simultaneously serving
as Regional Vice President of Uniroyal Europe. From 1964 through April 1981, Mr.
Weber held various managerial positions at several other Uniroyal companies. 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.
George J. Sbordone was Chairman of the Board of the Company from December
1992 to November 1995, having previously served as a director of the Company
since February 1987. Since November 1, 1995 Mr. Sbordone has served as an
advisor to the Chairman of the Board and Chief Executive Officer of the Company.
Since September 1991, Mr. Sbordone has been the Chief Executive Officer of a
number of holding companies (in which a Charterhouse Group International, Inc.
["Charterhouse"] affiliate is a significant investor) that own several
subsidiaries engaged in the manufacture of electronic components used in
avionics, radar and communication. From January 1990 to September 1991, Mr.
Sbordone was a nonstockholding Principal of Charterhouse. From 1971 until his
retirement in January 1990, he was Chairman of the Board and President of Tempo
Instrument Incorporated, a wholly owned subsidiary of Bowthorpe Holdings PLC and
a manufacturer of electronic devices and power supplies. Mr. Sbordone is also a
director of MPD.
Merril M. Halpern has been a director of the Company since August 1986 and
was Chairman of the Board from August 1986 until February 1989. He has been an
executive officer of Charterhouse since 1973, and currently serves as its
Chairman and Co-Chief Executive Officer. See "Certain Relationships and Related
Transactions." Mr. Halpern also is a director of Dreyer's Grand Ice Cream, Inc.
("Dreyer's"), a manufacturer and distributor of ice cream products; Del Monte
Corporation, a processor and marketer of canned foods and vegetables; Insignia
Financial Group, Inc., a residential property management firm; Designer
Holdings, Ltd., a manufacturer and distributor of jeanswear and other apparel
products; and MPD.
2
<PAGE>
Jerome L. Katz has been a director of the Company since August 1986. He has
been an executive officer of Charterhouse since 1973 and currently serves as its
President and Co-Chief Executive Officer. Mr. Katz also is a director of Cryenco
Sciences, Inc., a manufacturer of sophisticated leak-tight container systems;
and Dreyer's.
Warren A. Law has been a director of the Company since February 1987. He
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 in 1991 became 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,
Inc. since 1982. Mr. Beretta was Executive-in-Residence and a member of the
teaching staff at the Graduate School of Business at the University of Rhode
Island from 1982 to 1990. Mr. Beretta is also a director of Purepac
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.
George Branca joined C&D Batteries, the predecessor of Charter Power
Systems, Inc., in 1978 as a manager of the quality assurance department. He has
held the positions of Director of Quality, Director of Sales, Director of
Marketing, Vice President of Marketing, Vice President and General Manager -
Motive Power Systems Division and in February 1995 was appointed Vice President
and General Manager - PowerCom Division.
A. Gordon Goodyear, Ph.D., joined the Company in June 1991 as Vice
President and General Manager - Power Electronics. In April, 1994 he became Vice
President and General Manager - International Power Systems, Inc. Prior to
joining the Company he was President of IRD Mechanalysis (Canada).
Leslie S. Holden, F.R.I.C., Ph.D., joined the Company in September 1989 as
Vice President-Technology and later became Vice President - Battery Technology.
From June 1988 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. He was subsequently promoted in
February 1993 to Senior Director - Standby Operations and was promoted to
divisional Vice President of C&D PowerCom operations in March 1994. Prior to
this, he was President of Enicon Engineered Containers, Inc. of Bristol,
Indiana.
Stephen E. Markert, Jr. was appointed Vice President - Finance and
Treasurer in February 1995. He joined the Company in May 1989 as Corporate
Controller. From 1981 to 1989 he was with Decision Data Computer Corporation of
Horsham, Pennsylvania where he advanced to Corporate Controller.
Stephen J. Weglarz joined the Company in April 1990 as Labor Counsel and
Manager of Human Resources. He subsequently served as Director of Labor
Relations and Legal Counsel and was appointed Vice President - Corporate
Services and Corporate Counsel in August 1995. Prior to joining the Company, he
was a Partner in the law firm of Peckner, Dorfman, Wolffe, Rounick & Cabot in
Philadelphia, Pennsylvania.
The Board of Directors has established an Executive Committee, a
Compensation Committee, 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
3
<PAGE>
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.
4
<PAGE>
Item 11. 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 1995 344,194 232,000 -- 50,000 4,620
the Board, 1994 339,799 162,500 -- -- 217,213 (5)
President and
Chief Executive
Officer
George J. Sbordone 1996 87,508 100,000 $630,750 -- --
Director (6) 1995 87,503 50,000 -- 20,000 --
1994 54,169 50,000 -- -- --
George Branca 1996 156,016 70,000 86,250 -- 4,673
Vice President 1995 143,339 60,000 -- 10,000 4,687
and General 1994 120,005 52,500 28,750 5,000 4,530
Manager - 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 1994 100,004 42,000 -- 5,000 4,169
Manager - Inter-
national 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
Battery 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)
5
<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
thereafter.
(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 will be entitled to receive certain severance payments if his employment
terminates under specified circumstances after a change in control of the
Company occurs, as defined in the agreement. 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 employment 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. Prior to April 1, Mr. Weber was employed pursuant to a prior
employment agreement.
The Company has also entered into employment agreements with Mr. Branca,
Dr. Goodyear, Dr. Holden and Mr. Markert. Effective February 1993, March 1994,
October 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 terminated 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 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
6
<PAGE>
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.
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.
(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 $34,298 prior to offset.
7
<PAGE>
Option Exercises in Last Fiscal Year and Fiscal 1996 Year-End Option Values
- ---------------------------------------------------------------------------
No stock options were granted during the last fiscal year. The following
table presents certain information concerning the amount and value (if they were
in-the-money) of all unexercised stock options held by the Company's Chairman of
the Board, President and Chief Executive Officer and four named executive
officers, as of January 31, 1996 and one former officer.
<TABLE>
<CAPTION>
Value of Unexercised In-
Number of Securities the-Money Options at 1/31/96
Underlying Unexercised ----------------------------
Shares Options at 1/31/96 Exercisable Unexercisable
Acquired ---------------------- ----------- -------------
on Value
Exercise Realized Exercisable Unexercisable Shares Value (2) Shares Value (2)
Name (#) ($) (#) (#) (#) ($) (#) ($)
- ---- -------- -------- ----------- ------------- ------ --------- ------ ---------
<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 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
- -------------------------
During the year ended January 31, 1996, 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.
Mr. Sbordone received a salary of $100,000 a year through November 1, 1995
for his service as Chairman of the Board of the Company, and after that date
received a salary of $50,000 a year for the provision of advisory services. Mr.
Sbordone received a $100,000 bonus for the period ending January 31, 1996. In
addition, Mr. Sbordone recognized an aggregate $630,750 from the exercise of
employee stock options during the last fiscal year.
Composition of Compensation Committee
- -------------------------------------
During fiscal 1996 the Compensation Committee consisted of Messrs. Feit,
Halpern and Katz.
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
8
<PAGE>
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.
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 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
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<PAGE>
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
the Company's 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 the Company's 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 Company's 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").
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.
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<PAGE>
Graph (i):
- ----------
Comparison of Five-Year Cumulative Total Return
-----------------------------------------------
Among Charter Power Systems, Inc., AMEX Market Value
Index & 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 Stock Market
Total Return Index & 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
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Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of May 22, 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 his or its name in the table.
Security ownership of management is set forth in the response to Item 10.
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. Those parties have
shared dispositive power and Paradigm Capital Management had no voting
power with respect to 326,400 of the shares listed opposite their
names 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.
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Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Two directors of the Company, 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 that is secured by the
shares received on exercise and is due October 30, 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 5.76%
per annum payable monthly, and due on April 29, 1997 subject to extension until
April 29, 1999 at the option of Mr. Weber. 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.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CHARTER POWER SYSTEMS, INC.
May 30, 1996 By: /s/ Alfred Weber
---------------------------
Alfred Weber
Chairman, President and
Chief Executive Officer
May 30, 1996 By: /s/ Stephen E. Markert, Jr.
---------------------------
Stephen E. Markert, Jr.
Vice President Finance
and Treasurer
14
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