<PAGE> 1
===============================================================================
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
RELIANCE ELECTRIC COMPANY
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
WILLIAM R. NORTON,
VICE PRESIDENT, GENERAL
COUNSEL AND SECRETARY
(NAME OF PERSON FILING PROXY STATEMENT)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
______________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
______________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: __________________________________
(4) Proposed maximum aggregate value of transaction:______________________
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid: ______________________________________________
(2) Form, schedule or registration statement no.: ________________________
(3) Filing party: ________________________________________________________
(4) Date filed: __________________________________________________________
===============================================================================
<PAGE> 2
[LOGO]
RELIANCE ELECTRIC COMPANY
6065 Parkland Boulevard
Cleveland, Ohio 44124-6106
March 10, 1994
To the Stockholders of Reliance Electric Company:
The Annual Meeting of Stockholders of Reliance Electric Company will be
held at 9:30 A.M. (EDT), on Thursday, April 21, 1994, at The Forum Conference
Center, One Cleveland Center Building, 1375 East Ninth Street, Cleveland, Ohio
44114. We will be reporting on your Company's activities. You will have an
opportunity to meet the Directors and officers of the Company and to ask
questions about our operations.
Included with this letter is a Notice of the Annual Meeting, Proxy
Statement, Proxy Card and an Advance Registration Form. If you plan to attend
the Annual Meeting, please return, with your signed Proxy, the completed Advance
Registration Form and an admission ticket will be sent to you. If you do attend
the Annual Meeting, you may withdraw your Proxy should you wish to vote in
person.
On behalf of the Board of Directors and management of Reliance Electric
Company, I would like to thank you for your continued support and confidence.
Sincerely yours,
JOHN C. MORLEY
President and
Chief Executive Officer
<PAGE> 3
RELIANCE ELECTRIC COMPANY
6065 Parkland Boulevard
Cleveland, Ohio 44124-6106
------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 21, 1994
------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Reliance
Electric Company (the "Company") will be held at The Forum Conference Center,
One Cleveland Center Building, 1375 East Ninth Street, Cleveland, Ohio 44114, on
Thursday, April 21, 1994 at 9:30 A.M. (EDT), for the following purposes:
1. To elect six Directors;
2. To approve and adopt the 1994 Reliance Electric Company Executive
Stock Option Plan;
3. To approve and adopt the 1994 Reliance Electric Company Outside
Directors Stock Option Plan;
4. To approve and adopt the 1994 Reliance Electric Company Executive
Long Term Incentive Plan;
5. To ratify the appointment of Price Waterhouse as the Company's
independent accountants for the current year; and
6. To transact such other business as may properly come before the
Annual Meeting and any adjournments or postponements thereof.
Holders of Class A Common Stock of record as of the close of business on
February 28, 1994 are entitled to receive notice of and to vote at the Annual
Meeting.
It is important that your shares be represented at the Annual Meeting. For
that reason we ask that you promptly sign, date and mail the enclosed Proxy Card
in the return envelope provided. Stockholders who attend the Annual Meeting may
revoke their Proxies and vote in person.
By Order of the Board of Directors
WILLIAM R. NORTON
Vice President, General Counsel
and Secretary
Cleveland, Ohio
March 10, 1994
<PAGE> 4
RELIANCE ELECTRIC COMPANY
PROXY STATEMENT
MAILED ON OR ABOUT MARCH 10, 1994
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 21, 1994
------------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
Proxies by the Board of Directors of Reliance Electric Company (the "Company")
to be used at the Annual Meeting of Stockholders of the Company to be held on
April 21, 1994, and any adjournments or postponements thereof. The time, place
and purposes of the Annual Meeting are stated in the Notice of Annual Meeting of
Stockholders which accompanies this Proxy Statement.
The accompanying Proxy is solicited by the Board of Directors of the
Company and will be voted in accordance with the instructions contained thereon,
if it is returned duly executed and is not revoked. If no choice is specified on
the Proxy, it will be voted FOR the election of each of the individuals
nominated by the Board of Directors, FOR the proposal to approve and adopt the
Company's 1994 Executive Stock Option Plan, FOR the proposal to approve and
adopt the Company's 1994 Outside Directors Stock Option Plan, FOR the proposal
to approve and adopt the Company's 1994 Executive Long Term Incentive Plan and
FOR the proposal to ratify the appointment of Price Waterhouse as the Company's
independent accountants for the current year. A stockholder may revoke a Proxy
at any time before it is exercised by delivery of written notice to the
Secretary of the Company or by a duly executed Proxy bearing a later date.
The costs of soliciting Proxies will be borne by the Company. Brokers,
custodians and fiduciaries will be requested to forward proxy soliciting
materials to the owners of stock held in their name and the Company will
reimburse them for their out-of-pocket expenses in connection therewith. In
addition to solicitation by mail, the Company's Directors, officers and
employees, without additional compensation, may solicit Proxies by telephone,
mail and personal interview. The Company also has agreed to pay Corporate
Investors Communications, Inc. $3,500 to aid in the solicitation of proxies.
The record date for determination of stockholders entitled to vote at the
Annual Meeting was the close of business on February 28, 1994. On that date,
there were outstanding and entitled to vote 32,886,289 shares of Class A Common
Stock of the Company. Each share of Class A Common Stock is entitled to one
vote. The Company's Certificate of Incorporation does not provide for cumulative
voting rights.
At the Annual Meeting, in accordance with the Delaware General Corporation
Law and the Company's Certificate of Incorporation, the inspectors of election
appointed by the Board of Directors for the Annual Meeting will determine the
presence of a quorum and will tabulate the results of stockholder voting.
Pursuant to the Company's By-Laws, at the Annual Meeting the holders of a
majority of the outstanding shares of Class A Common Stock entitled to vote at
the meeting, present in person or represented by proxy, constitute a quorum. The
shares represented
1
<PAGE> 5
at the Annual Meeting by proxies which are marked, with respect to the election
of Directors, "withheld" or, with respect to any other proposals, "abstain,"
will be counted as shares present for purposes of determining whether a quorum
is present.
Under the rules of the New York Stock Exchange, Inc., brokers who hold
shares in street name for beneficial owners have the authority to vote on
certain items when they have not received instructions from such beneficial
owners. Under applicable Delaware law, if a broker returns a proxy and has not
voted on a certain proposal, such broker non-votes will count for purposes of
determining a quorum.
Pursuant to the Company's By-Laws, at the Annual Meeting, a plurality of
the votes cast is sufficient to elect a nominee as a Director. In the election
of Directors, votes may be cast in favor or withheld; votes that are withheld or
broker non-votes will have no effect on the outcome of the election of
Directors.
Pursuant to the Company's By-Laws, all other questions and matters brought
before the Annual Meeting shall be decided by the vote of the holders of a
majority of the outstanding shares entitled to vote thereon present in person or
by proxy at the meeting, unless otherwise provided by law or by the Certificate
of Incorporation or By-Laws of the Company. In voting for such other proposals,
votes may be cast in favor, against or abstained. Abstentions will count as
present for purposes of the proposal on which the abstention is noted and will
have the effect of a vote against such proposal. Broker non-votes, however, are
not counted as present and entitled to vote for purposes of determining whether
a proposal has been approved and will have no effect on the outcome of any such
proposal.
2
<PAGE> 6
STOCK OWNERSHIP OF PRINCIPAL HOLDERS AND MANAGEMENT
The following table sets forth the beneficial ownership of Class A Common
Stock, as of February 28, 1994 unless otherwise noted, by (i) each person or
group known by the Company to own beneficially more than 5% of its outstanding
shares of Class A voting Common Stock on a fully converted basis or otherwise,
(ii) each Director and nominee for election as a Director of the Company, (iii)
each executive officer named in the Executive Compensation tables below and (iv)
all Directors and executive officers as a group. All information with respect to
beneficial ownership has been furnished by the respective Director, officer or
stockholder, as the case may be. Unless otherwise indicated below, each
stockholder named below has sole voting and investment power with respect to the
number of shares set forth opposite such stockholder's respective name.
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
NAME OF NUMBER OF SHARES OF CLASS A OF VOTING
BENEFICIAL OWNER BENEFICIALLY OWNED(1) COMMON STOCK(1) POWER(2)
- ----------------------------------- --------------------- --------------- ----------
<S> <C> <C> <C>
Citicorp(3) 14,217,000 28.3% --
College Retirement Equities Fund(4) 1,738,100 3.5 5.3%
RCM Capital Management(5) 1,662,800 3.3 5.1
The Equitable Companies
Incorporated(6) 3,796,300 7.6 11.5
Anthony C. Howkins(7) 30,000 0.1 0.1
John C. Morley(8) 806,525 1.6 2.5
Alfred M. Rankin, Jr.(9) 2,000 0.01 0.01
Dudley P. Sheffler(10) 198,127 0.4 0.6
H. Virgil Sherrill(11) 1,131,820 2.3 3.4
E. Mandell de Windt(12) 75,000 0.1 0.2
E. Scott Dalton(13) 197,022 0.4 0.6
Joseph D. Swann(14) 54,761 0.1 0.2
Peter J. Tsivitse, Ph.D.(15) 272,213 0.5 0.8
Society National Bank, as 2,316,103 4.6 7.0
Trustee under the Company's
Savings and Investment Plan
(16)
All Directors and executive 3,051,158 6.1 9.3
officers as a group
(14 persons
including the individuals
named above)(17)
</TABLE>
- ---------------
(1) In calculating the number of and percentage of Class A Common Stock
beneficially owned, all 3,161,032 outstanding shares of Class B and all
5,250,000 outstanding shares of Class C Common Stock are assumed to have
been converted into Class A Common Stock. The Class B Common Stock may be
converted into Class A Common Stock on a one share to one share basis. The
Class C Common Stock may be converted into Class A Common Stock on a one
share of Class C Common Stock to 2.708 shares of Class A Common Stock basis
upon disposition by the holder or pursuant to certain requirements of the
Bank Holding Company Act of 1956, as amended, the applicable rules and
regulations promulgated thereunder and the Certificate of Incorporation of
the Company. In accordance with Securities and Exchange Commission
("Commission") rules, each beneficial owner's holdings have been calculated
assuming full exercise of outstanding options covering Class A Common Stock
exercisable by such owner within 60 days after February 28, 1994, but no
exercise of outstanding options covering Class A Common Stock held by any
other person.
(2) The outstanding shares of Class B Common Stock and Class C Common Stock are
not assumed to have been converted into Class A Common Stock for purposes
of calculating the percentage of voting power because they are
3
<PAGE> 7
non-voting. In addition, in accordance with Commission rules, each
beneficial owner's holdings have been calculated assuming full exercise of
outstanding options covering Class A Common Stock exercisable by such owner
within 60 days after February 28, 1994, but no exercise of outstanding
options covering Class A Common Stock held by any other person.
(3) Citicorp's ("Citicorp") share ownership is comprised of 5,250,000 shares of
non-voting Class C Common Stock which are held by its wholly owned
subsidiary, Court Square Capital Limited ("Court Square Capital"), and
which are convertible into 14,217,000 shares of Class A Common Stock,
subject to certain restrictions.This information was obtained by the
Company from Citicorp's Schedule 13G as filed with the Commission in
February 1994. The address of Citicorp is 399 Park Avenue, New York, New
York 10043.
(4) College Retirement Equities Fund ("CREF") has sole voting and dispositive
power over the 1,738,100 shares of Class A Common Stock shown in the table
above. This information is as of December 31, 1993 and was obtained by the
Company from CREF's Schedule 13G as filed with the Commission in February
1994. The address of CREF is 730 Third Avenue, New York, New York 10017.
(5) RCM Capital Management ("RCM") has sole voting power over 1,219,800 shares
of Class A Common Stock and no voting power over 443,000 shares of Class A
Common Stock shown in the table above. RCM has sole dispositive power over
all 1,662,800 of such shares of Class A Common Stock. This information is
as of December 31, 1993 and was obtained by the Company from RCM's Schedule
13G as filed with the Commission in February 1994. The address of RCM is
Four Embarcadero Center, Suite 2900, San Francisco, California 94111.
(6) The Equitable Companies Incorporated ("Equitable") has sole voting power
over 2,784,300 shares of Class A Common Stock, shared voting power over
62,000 shares of Class A Common Stock and no voting power over 950,000
shares of Class A Common Stock shown in the table above. Equitable has sole
dispositive power over 3,783,300 shares of Class A Common Stock and no
dispositive power over 13,000 shares of Class A Common Stock. This
information is as of December 31, 1993 and was obtained by the Company from
Equitable's Schedule 13G as filed with the Commission in February 1994. The
address of Equitable is 787 Seventh Avenue, New York, New York 10019.
(7) Mr. Howkins is a Director of the Company.
(8) Mr. Morley is a Director and an executive officer of the Company. Mr.
Morley's ownership is comprised of 769,584 shares of Class A Common Stock
which he owns directly, 6,736 shares of Class A Common Stock owned by one
of his children, 205 shares of Class A Common Stock which he owns
indirectly through the Company's Savings and Investment Plan and 30,000
shares of Class A Common Stock which he has the right to acquire through
the exercise of stock options. The ownership of the shares held by his
child is attributed to Mr. Morley pursuant to Commission rules.
(9) Mr. Rankin is a Director of the Company.
(10) Mr. Sheffler is Director and an executive officer of the Company. Mr.
Sheffler's ownership is comprised of 182,920 shares of Class A Common Stock
which he owns directly, 207 shares of Class A Common Stock which he owns
indirectly through the Company's Savings and Investment Plan and 15,000
shares of Class A Common Stock which he has the right to acquire through
the exercise of stock options.
(11) Mr. Sherrill is a Director of the Company. Mr. Sherrill's share ownership
includes 40,000 shares of Class A Common Stock owned by the Sherrill
Foundation, of which Mr. Sherrill is the President. Mr. Sherrill has no
financial interest in the shares owned by the Sherrill Foundation. The
ownership of the shares held by the Sherrill Foundation is attributed to
Mr. Sherrill pursuant to Commission rules.
(12) Mr. de Windt is a Director of the Company. Mr. de Windt's ownership is
comprised of 75,000 shares of Class A Common Stock which he has the right
to acquire through the exercise of stock options.
(13) Mr. Dalton is an executive officer of the Company. Mr. Dalton's ownership
is comprised of 178,800 shares of Class A Common Stock which he owns
directly, 222 shares of Class A Common Stock which he owns indirectly
through the Company's Savings and Investment Plan, 6,000 shares of Class A
Common Stock owned by his wife and 12,000 shares of Class A Common Stock
which he has the right to acquire through the exercise of stock options.
The ownership of the shares held by his wife is attributed to Mr. Dalton
pursuant to Commission rules.
(14) Mr. Swann is an executive officer of the Company. Mr. Swann's ownership is
comprised of 50,000 shares of Class A Common Stock which he owns directly,
261 shares of Class A Common Stock which he owns indirectly through the
Company's Savings and Investment Plan and 4,500 shares of Class A Common
Stock which he has the right to acquire through the exercise of stock
options.
(15) Dr. Tsivitse is an executive officer of the Company. Dr. Tsivitse's
ownership is comprised of 120,150 shares of Class A Common Stock which he
owns directly, 2,063 shares which he owns indirectly through the Company's
Savings and Investment Plan, 135,000 shares of Class A Common Stock owned
by his wife and 15,000 shares of Class A Common Stock which he has the
right to acquire through the exercise of stock options. The ownership of
the shares held by his wife is attributed to Dr. Tsivitse pursuant to
Commission rules.
(16) Society National Bank ("Society") is the Trustee of the Company's Savings
and Investment Plan. All participants in this Plan, including the executive
officers of the Company, have the power to vote the shares of Class A
Common Stock in their personal accounts under the Plan. The address of
Society is 127 Public Square, Cleveland, Ohio 44114.
(17) Includes the 183,600 shares of Class A Common Stock which the executive
officers and Directors of the Company have the right to acquire within 60
days after February 28, 1994 through the exercise of stock options. For
purposes of calculating the number and percentage of outstanding shares of
Class A Common Stock owned by the executive officers and Directors, the
shares which they have the right to acquire during that period by exercise
of stock options are deemed to be outstanding. Also includes 7,857 shares
of Class A Common Stock in executive officers' personal accounts under the
Savings and Investment Plan.
4
<PAGE> 8
Pursuant to an agreement with the Company, as long as Prudential Securities
Incorporated ("Prudential Securities") and Court Square Capital own at least 5%
of any class of the Company's outstanding Common Stock and an employee of such
stockholder is not a member of the Board of Directors of the Company, each of
them has the right to designate an observer to attend meetings of the Company's
Board of Directors and committees thereof. Prudential Securities and Court
Square Capital were investors in the Company as part of its organization in
December 1986. No observer has the right to vote on any matter presented to the
Board of Directors or any committee thereof. An affiliate of Prudential
Securities, The Prudential Insurance Company of America, owns 2,466,968 shares
of Class B Common Stock, which represent 78.0% of the outstanding shares of
Class B Common Stock and 4.9% of the outstanding Class A Common Stock on a fully
converted basis. This information was obtained by the Company from a
representative of The Prudential Insurance Company of America. Court Square
Capital owns 5,250,000 shares of Class C Common Stock, which represent 100% of
the outstanding shares of Class C Common Stock and 28.3% of the outstanding
Class A Common Stock on a fully converted basis. Both Prudential Securities and
Court Square Capital have designated observers.
ELECTION OF DIRECTORS
At the Annual Meeting, six Directors will be elected to serve a one-year
term until the Annual Meeting in 1995 and until their successors have been
elected and qualified. In January 1994, the Board of Directors nominated each of
Anthony C. Howkins, John C. Morley, Alfred M. Rankin, Jr., Dudley P. Sheffler,
H. Virgil Sherrill and E. Mandell de Windt to stand for re-election as Directors
at the Annual Meeting.
Unless otherwise directed, the persons named in the accompanying Proxy will
vote for the election of the six nominees set forth in the table below as
Directors of the Company for a one-year term. In the event of the death of or
inability to act of any of the nominees, the Proxies will be voted for the
election as a Director of such other person as the Board of Directors may
recommend. The Board of Directors has no reason, however, to anticipate that
this will occur. In no event will the accompanying Proxy be voted for more than
six nominees or for persons other than those named below and any such substitute
nominee for any of them.
NOMINEES PROPOSED BY THE BOARD OF DIRECTORS
ANTHONY C. HOWKINS, 69
Retired Group Head and
Policy Committee Member
Citibank, N.A.
New York, New York
A graduate of Fordham University with a B.S., Mr. Howkins is a retired Group
Head and Policy Committee Member of Citibank, N.A., a capacity in which he
served from 1982 to 1986. Mr. Howkins is also a director of Yasuda Trust and
Banking Co. Ltd. Mr. Howkins has served as a Director of the Company since March
1987.
5
<PAGE> 9
JOHN C. MORLEY, 62
President and
Chief Executive Officer
Reliance Electric Company
Cleveland, Ohio
A graduate of Yale University, with an M.B.A. from the University of Michigan
Graduate School of Business Administration, Mr. Morley is the Company's
President and Chief Executive Officer. From 1958 to 1980, Mr. Morley held
numerous executive positions with Exxon Corporation, including President of
Exxon Chemical USA and Senior Vice President of Exxon USA. Mr. Morley has been
the President and Chief Executive Officer of the Company and its predecessor
since December 1980. He is also a director of AMP Incorporated, Ferro
Corporation and KeyCorp. Mr. Morley has served as a Director of the Company
since its organization in December 1986.
ALFRED M. RANKIN, JR., 52
President and
Chief Executive Officer
NACCO Industries, Inc.
Mayfield Heights, Ohio
A graduate of Yale University and its Law School with a Juris Doctorate, Mr.
Rankin has been the President and Chief Executive Officer of NACCO Industries,
Inc., a Cleveland, Ohio-based holding company for The North American Coal
Corporation, Hamilton Beach/Proctor Silex, Inc., NACCO Materials Handling Group,
Inc., Materials Handling, Inc. and The Kitchen Collection, Inc., since 1991.
From 1989 until 1991, Mr. Rankin was the President and Chief Operating Officer
of NACCO. Prior to that, from 1987 until 1989, he was the Vice Chairman and
Chief Operating Officer of Eaton Corporation. He is also a director of the
BFGoodrich Company, The Vanguard Group, The Standard Products Company, NACCO
Materials Handling Group, Inc. and NACCO Industries, Inc. Mr. Rankin has served
as a Director of the Company since January 1993.
DUDLEY P. SHEFFLER, 49
Vice President
Reliance Electric Company
Cleveland, Ohio
A graduate of the University of Kentucky, with an M.B.A. from the University of
Michigan Graduate School of Business Administration, Mr. Sheffler is a Vice
President of the Company and the President of its wholly owned subsidiary,
Reliance Comm/Tec Corporation. Mr. Sheffler joined the Company in 1970 and has
been a Vice President of the Company and its predecessor since 1981. He has been
the President of Reliance Comm/Tec Corporation since April 1989. Mr. Sheffler
has served as a Director of the Company since October 1993.
6
<PAGE> 10
H. VIRGIL SHERRILL, 73
Senior Director and
Retired Vice Chairman
Prudential Securities Incorporated
New York, New York
A graduate of Yale University, also with an LL.B. from the Yale Law School, Mr.
Sherrill has been a Senior Director, a non-officer position, of Prudential
Securities since 1986. From 1981 to 1982 he was President and from 1982 until
1986 he was Vice Chairman of Prudential Securities. Mr. Sherrill has served as
Chairman of the Board of Directors of the Company since its organization in
December 1986.
E. MANDELL DE WINDT, 72
Retired Chairman and
Chief Executive Officer
Eaton Corporation
Cleveland, Ohio
Mr. de Windt is the retired Chairman and Chief Executive Officer of Eaton
Corporation, a Cleveland, Ohio-based manufacturer of engine components,
transmissions, electrical equipment and controls. He served Eaton Corporation in
that capacity from 1969 to 1986. Mr. de Windt also served as Eaton's President
from 1967 to 1969. Mr. de Windt attended Williams College. He is also a director
of Birmingham Steel Corp., Cleveland-Cliffs Inc. and DTM Investors, Inc., and is
a Trustee of Carnegie Funds Group. Mr. de Windt has served as a Director of the
Company since April 1987.
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors has four standing Board committees: the Executive
Committee, the Audit Committee, the Compensation Committee and the Nominating
Committee. The members of these committees are indicated below.
The Executive Committee exercises the power and authority of the Board of
Directors in the interim period between Board meetings. The Executive Committee
did not meet during the last fiscal year. The members of the Executive Committee
are Messrs. Morley and Sherrill. Mr. Sherrill is the Chairman of the Executive
Committee.
The Audit Committee is responsible for overseeing the effectiveness of the
Company's accounting policies and practices, financial reporting and internal
controls. Specifically, the Committee reviews and approves the scope of the
annual examination of the books and records of the Company and reviews the
findings and recommendations of the independent accountants on completion of the
audit; reviews and approves the fees of the independent accountants; considers
the organization, scope and adequacy of the Company's internal controls and
internal audit functions; monitors the extent to which the Company has
implemented changes recommended by the independent accountants or the Committee;
and provides oversight with respect to accounting principles employed in the
Company's financial reporting. The Audit Committee met two times
7
<PAGE> 11
during the last fiscal year. The members of the Audit Committee are Messrs.
Howkins, Rankin and de Windt. Mr. de Windt is the Chairman of the Audit
Committee.
The Compensation Committee is responsible for the determination of
compensation payable to the executive officers of the Company consistent with
the Company's compensation philosophy as stated in this Proxy Statement.
Pursuant to the Compensation Committee charter, the Committee's responsibilities
include, but are not limited to, the oversight of the development and
administration of executive incentive programs, executive compensation structure
and the approval of base pay, bonus awards and long-term incentive awards for
executive officers. The Compensation Committee also is responsible for the
administration of the Company's employee stock option plans and has the
authority to determine to whom options are granted, the number of shares covered
by the options, the time at which options are granted and the exercise price of
the options, all subject to the provisions of the applicable Plan. The
Compensation Committee met three times during the last fiscal year. The members
of the Compensation Committee are Messrs. Howkins, Rankin, Sherrill and de
Windt. Mr. Sherrill is the Chairman of the Compensation Committee.
The Nominating Committee reviews potential candidates for election as
Directors of the Company and makes recommendations to the Board of Directors as
to nominees for election. The Nominating Committee did not meet during the last
fiscal year. Stockholders of the Company desiring to submit names of potential
candidates for consideration by the Nominating Committee for election as
Directors of the Company may do so by writing to the Chairman of the Nominating
Committee, at the address of the Company's principal executive offices, 6065
Parkland Boulevard, Cleveland, Ohio 44124-6106. The members of the Nominating
Committee are Messrs. Howkins, Sherrill and de Windt. Mr. Sherrill is the
Chairman of the Nominating Committee.
The Company's Board of Directors met ten times during the last fiscal year,
four of such meetings by telephone. No Director attended fewer than 75% of the
aggregate number of meetings of the Board of Directors and the committees on
which he served during the period for which he was a member of the Board. In
1993 the Company paid each Director who is not an employee of the Company an
annual retainer of $25,000 plus $1,000 for each Board of Directors meeting
attended and $1,000 for each committee meeting attended. In addition, the
Chairman of each of the Audit, Compensation and Nominating Committees received
an annual retainer of $3,000. The Board of Directors is scheduled to meet five
times in fiscal 1994.
8
<PAGE> 12
EXECUTIVE COMPENSATION
There is shown below information concerning the annual and long-term
compensation for services in all capacities to the Company for the fiscal years
ended December 31, 1993, 1992 and 1991, of those persons who were, at December
31, 1993: (i) the chief executive officer; and (ii) the other four most highly
compensated executive officers of the Company. The Chief Executive Officer and
such other executive officers are hereinafter referred to collectively as the
"Named Executive Officers."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
------------------------------------------ AWARDS
OTHER ------------
ANNUAL SECURITIES ALL OTHER
NAME AND COMPEN- UNDERLYING COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS SATION(1) OPTIONS SATION(6)
- -------------------- ----- -------- -------- ------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
John C. Morley 1993 $567,000 $260,000 $52,104(2) 15,000(4) $ 357,870(7)
President and 1992 545,000 325,000 54,649(3) 60,000(5) 364,520(8)
Chief Executive 1991 515,000 274,000 -- -- --
Officer
Peter J. Tsivitse 1993 288,000 175,500 -- -- 30,864(9)
Vice President 1992 277,000 195,000 -- 30,000(5) 48,171(10)
1991 263,000 192,000 -- -- --
Dudley P. Sheffler 1993 262,000 130,000 -- 7,500(4) 76,785(11)
Vice President 1992 247,000 145,000 -- 30,000(5) 86,502(12)
1991 233,000 120,000 -- -- --
E. Scott Dalton 1993 188,000 100,000 -- 6,000(4) 77,558(13)
Vice President 1992 181,000 110,000 -- 24,000(5) 86,932(14)
1991 171,000 105,000 -- -- --
Joseph D. Swann 1993 183,000 95,000 -- 6,000(4) 6,216(15)
Vice President 1992 170,700 85,000 -- 9,000(5) 9,225(16)
1991 163,320 76,000 -- -- --
</TABLE>
- ---------------
(1) Unless otherwise indicated, no executive officer named in the Summary
Compensation Table received personal benefits or perquisites in excess of
the lesser of $50,000 or 10% of his aggregate salary and bonus. Pursuant to
Commission transition rules, only 1992 and 1993 information is required to
be shown.
(2) Annual compensation related to incremental costs to the Company of,
including among other things (i) personal use under Company policy of the
Company airplane for personal security reasons ($22,464); (ii) group term
life insurance ($18,041); (iii) financial and tax services; (iv) use of a
Company car; and (v) reimbursement of club dues, all of which are reported
for personal income tax purposes.
(3) Annual compensation related to incremental costs to the Company of,
including among other things (i) personal use under Company policy of the
Company airplane for personal security reasons ($28,565); (ii) group term
life insurance ($13,127); (iii) financial and tax services; (iv) use of a
Company car; and (v) reimbursement of club dues, all of which are reported
for personal income tax purposes.
(4) These options were granted on December 16, 1993 pursuant to the 1990 Key
Employee Stock Option Plan. Fifty percent of the shares subject to the
option becomes exercisable on December 16, 1995, while the remaining 50%
becomes exercisable on December 16, 1996.
9
<PAGE> 13
(5) These options were granted on March 6, 1992 pursuant to the 1990 Key
Employee Stock Option Plan. Fifty percent of the shares subject to the
option became exercisable on September 6, 1993, while the remaining 50%
becomes exercisable on September 6, 1994.
(6) This column includes benefits provided to the Named Executive Officers
under (i) the Reliance Electric Company Savings and Investment Plan (the "S
& I Plan") and (ii) the Reliance Electric Company Deferred Compensation
Plan with respect to the S & I Plan (the "Deferred Compensation Plan").
This column also includes contingent amounts which may be payable under the
nonqualified Special Retirement Program for Elected Officers (the
"Retirement Program"). Pursuant to Commission transition rules, only 1992
and 1993 information is required to be shown.
(7) Includes benefits provided to Mr. Morley under (i) the S & I Plan ($4,497),
(ii) the Deferred Compensation Plan ($15,687) and (iii) the Retirement
Program ($337,686).
(8) Includes benefits provided to Mr. Morley under (i) the S & I Plan ($4,364),
(ii) the Deferred Compensation Plan ($26,782) and (iii) the Retirement
Program ($333,374).
(9) Includes benefits provided to Dr. Tsivitse under (i) the S & I Plan
($4,497), (ii) the Deferred Compensation Plan ($5,385) and (iii) the
Retirement Program ($20,982).
(10) Includes benefits provided to Dr. Tsivitse under (i) the S & I Plan
($4,436), (ii) the Deferred Compensation Plan ($14,314) and (iii) the
Retirement Program ($29,421).
(11) Includes benefits provided to Mr. Sheffler under (i) the S & I Plan
($4,497), (ii) the Deferred Compensation Plan ($4,833) and (iii) the
Retirement Program ($67,455).
(12) Includes benefits provided to Mr. Sheffler under (i) the S & I Plan
($4,364), (ii) the Deferred Compensation Plan ($9,526) and (iii) the
Retirement Program ($72,612).
(13) Includes benefits provided to Mr. Dalton under (i) the S & I Plan ($4,497),
(ii) the Deferred Compensation Plan ($1,923) and (iii) the Retirement
Program ($71,138).
(14) Includes benefits provided to Mr. Dalton under (i) the S & I Plan ($4,364),
(ii) the Deferred Compensation Plan ($6,736) and (iii) the Retirement
Program ($75,832).
(15) Includes benefits provided to Mr. Swann under (i) the S & I Plan ($4,497)
and (ii) the Deferred Compensation Plan ($1,719).
(16) Includes benefits provided to Mr. Swann under (i) the S & I Plan ($4,364)
and (ii) the Deferred Compensation Plan ($4,861).
10
<PAGE> 14
OPTION GRANTS
Shown below is information on grants of stock options pursuant to the
Company's 1990 Key Employee Stock Option Plan during the fiscal year ended
December 31, 1993 to the Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- --------------------------------------------------------------------------------------------- POTENTIAL REALIZABLE
PERCENTAGE
OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OR OPTION TERMS
OPTIONS IN FISCAL BASE PRICE EXPIRATION ----------------------
NAME GRANTED(1)(2) YEAR (PER SHARE)(3) DATE 5% 10%
- --------------------------- ------------- ---------- -------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
John C. Morley 15,000 6.4% $17.25 12/16/2003 $ 162,726 $ 412,381
President and Chief
Executive Officer
Peter J. Tsivitse(4) -- -- -- -- -- --
Vice President
Dudley P. Sheffler 7,500 3.2 17.25 12/16/2003 81,368 206,190
Vice President
E. Scott Dalton 6,000 2.6 17.25 12/16/2003 65,091 164,952
Vice President
Joseph D. Swann 6,000 2.6 17.25 12/16/2003 65,091 164,952
Vice President
</TABLE>
- ---------------
(1) These options were granted on December 16, 1993 pursuant to the 1990 Key
Employee Stock Option Plan. Fifty percent of the shares subject to the
option becomes exercisable on December 16, 1995, while the remaining 50%
becomes exercisable on December 16, 1996.
(2) In general, an optionee's rights under an option shall cease upon his or her
termination of employment. In the event of a "change of control" an option
will become immediately exercisable for all shares subject to the option.
Change of control means either (a) the purchase of at least 30% of the
Company's Class A Common Stock by a person or group of persons under common
control which is not approved by the Company's Board of Directors or (b) a
change in the membership of the Company's Board of Directors of a magnitude
of at least 30% but only if such change in the membership of the Board of
Directors is not approved by at least three-quarters of the Directors
sitting prior to such change.
(3) Based on the closing price of the Class A Common Stock of $17.25 on the New
York Stock Exchange on December 16, 1993.
(4) Dr. Tsivitse, who is 64 years old, was not granted options in 1993 because
such options, pursuant to the terms of the 1990 Key Employee Stock Option
Plan, would not vest prior to his required retirement age.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Shown below is information with respect to unexercised stock options at
December 31, 1993 to purchase the Company's Class A Common Stock by the Named
Executive Officers. No named Executive Officer exercised any stock options to
purchase the Company's Class A Common Stock during the fiscal year ended
December 31, 1993.
11
<PAGE> 15
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR,
AND DECEMBER 31, 1993 OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
NUMBER OF UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS
ACQUIRED DECEMBER 31, 1993 AT DECEMBER 31, 1993(1)
ON VALUE ----------------------------- -------------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ---------- ---------- ----------- ------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
John C. Morley -- -- 30,000 45,000 -- --
President and Chief
Executive Officer
Peter J. Tsivitse -- -- 15,000 15,000 -- --
Vice President
Dudley P. Sheffler -- -- 15,000 22,500 -- --
Vice President
E. Scott Dalton -- -- 12,000 18,000 -- --
Vice President
Joseph D. Swann -- -- 4,500 10,500 -- --
Vice President
</TABLE>
- ---------------
(1) Based on the closing price of the Class A Common Stock of $16.875 on the New
York Stock Exchange on December 31, 1993. As a result, all unexercised
options were not "in-the-money" options as of that date.
SEVERANCE AGREEMENTS
The Company has entered into Amended and Restated Severance Agreements with
the Named Executive Officers of the Company (collectively, the "Current
Severance Agreements"). Pursuant to the Current Severance Agreements, in the
event of the Named Executive Officer's involuntary termination of employment
without cause, or as a result of disability or death, the Named Executive
Officer will be paid (i) an amount equal to two years' salary at the Named
Executive Officer's base salary rate in effect on the date of his termination of
employment and (ii) an amount equal to twice the amount of the bonus paid or
payable to the Named Executive Officer for the Company's fiscal year immediately
preceding the date of his termination of employment. In addition, certain other
benefits of the Company, including the ability to exercise stock options, will
continue for a period of two years from the date of his termination. No
severance benefits are payable due to a Named Executive Officer's involuntary
termination of employment for cause or his voluntary termination of employment.
The Current Severance Agreements terminate in April 1994. Effective as of April
1994 the Company will enter into new Severance Agreements with the executive
officers of the Company (the "New Severance Agreements"). The New Severance
Agreements are substantially similar to the Current Severance Agreements, except
that the New Severance Agreements do not provide for severance benefits in the
event of an executive's disability or death. The New Severance Agreements will
terminate in April 1996.
GOLDEN PARACHUTE EXCISE TAX AGREEMENT
The Company has entered into an Agreement Relating to Golden Parachute
Excise Tax (the "Excise Tax Agreement") with the executive officers of the
Company. Under the Excise Tax Agreement, the Company agreed to pay each
executive officer, under certain circumstances, an amount or amounts
("gross-ups") equal to any excise tax payable by such executive officer under
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or
any successor provision, with respect to certain payments received by the
executive officer from the Company. The Company's obligation to make payments
under the Excise Tax Agreement arises only under those circumstances in which
the executive officer's shares of Class A Common Stock or non-qualified
12
<PAGE> 16
stock options or both are sold or exchanged, in whole or in part, contingent on
a "change of ownership or control" (as defined under Section 4999 of the Code,
or any successor provision) and the payment of any amount with respect to, or
the receipt of any securities or options in exchange for such shares or options
gives rise, directly or indirectly, to the imposition of the excise tax.
DEFINED BENEFIT PENSION PLANS
The following table shows the estimated annual retirement benefit payable
to participating employees, including executive officers, in the earnings and
years of service classifications indicated under the Company's defined pension
benefit plans.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL RETIREMENT BENEFITS
AVERAGE FOR YEARS OF SERVICE INDICATED
ANNUAL ------------------------------------------------------------
EARNINGS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- ---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 125,000 $33,700 $45,500 $49,400 $53,400 $57,300
150,000 40,900 55,200 60,100 64,900 69,800
175,000 48,100 64,900 70,700 76,500 82,300
200,000 55,300 74,500 81,300 88,100 94,800
300,000 84,000 113,300 123,800 134,300 144,800
400,000 112,800 152,000 166,300 180,600 194,800
500,000 141,500 190,800 208,800 226,800 244,800
600,000 170,300 229,500 251,300 273,100 294,800
700,000 199,000 268,300 293,800 319,300 344,800
800,000 227,800 307,000 336,300 365,600 394,800
900,000 256,500 345,800 378,800 411,800 444,800
1,000,000 285,300 384,500 421,300 458,100 494,800
</TABLE>
The compensation covered consists of salary and bonus set forth in the
Summary Compensation Table. The calculation of retirement benefits under the
plans is based upon average earnings for the highest 60 consecutive months
within the 120 months preceding termination of employment.
Sections 401(a)(17) and 415 of the Code limit the annual benefits which may
be paid from a tax-qualified retirement plan. As permitted by the Employee
Retirement Income Security Act of 1974, the Company has supplemental plans which
authorize the payment out of general funds of the Company of any benefits
calculated under provisions of the applicable plan which may be above the limits
under these sections.
The credited years of service for Messrs. Morley, Tsivitse, Sheffler,
Dalton and Swann are 7, 42, 24, 17 and 24, respectively.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
In connection with the Company's organization in December 1986, the Board
of Directors established the Compensation Committee to review and make
recommendations regarding the Company's compensation programs. The following
report of the Compensation Committee describes the philosophy, objectives and
components of the Company's executive compensation programs for 1993 and
discusses the determinations concerning the compensation for the President and
Chief Executive Officer of the Company for 1993.
The members of the Compensation Committee are H. Virgil Sherrill, Chairman,
Anthony C. Howkins, Alfred M. Rankin, Jr. and E. Mandell de Windt. Each of
Messrs. Sherrill, Howkins, Rankin and de Windt are non-employee Directors of the
Company.
13
<PAGE> 17
COMPENSATION PHILOSOPHY
Reliance's compensation philosophy is to ensure that its compensation
programs are competitive and support the achievement of the Company's
performance objectives. To that end, the compensation programs are intended to
- relate to the creation of shareholder value;
- relate executive compensation to the achievement of annual and
longer term financial, operational and strategic objectives;
- provide competitive levels of compensation; and
- provide assistance in attracting and retaining highly qualified
management personnel.
COMPENSATION PROGRAM
As a means of implementing these compensation philosophies and objectives,
the Company's 1993 compensation program for executive officers consisted of the
following primary elements: base salary, an executive performance award and a
non-qualified stock option award. These particular elements are further
explained below.
Base Salary -- Base salaries are determined by evaluating the executive
officer's responsibilities and by comparisons to other companies' compensation
programs in the competitive marketplace. For many years the Company has
participated in the Towers Perrin Executive Compensation Survey (the "Towers
Perrin Survey") and the Committee relies heavily on the Towers Perrin
Compensation Data Bank which contains the results of the survey. The 1993 Towers
Perrin Survey included 407 corporate participants that had sales ranging from
$50 million to $132 billion. Of the eight companies that comprise the Dow Jones
Electrical Equipment Index (the "Electrical Index Participants") used for
comparison purposes in the Performance Graph in this Proxy Statement, five are
included in the Towers Perrin Survey. These five companies are Emerson Electric,
Honeywell, Thomas & Betts, Westinghouse Electric and W. W. Granger Inc.
Compensation decisions are not based on specific comparisons to the Electrical
Index Participants. Comparisons are made with the 69 companies in the Towers
Perrin Survey that had sales in the $1 billion to $3 billion range (the
"Comparison Companies"). The Company's base salaries are determined upon a
review and analysis of the Comparison Companies and consistently have fallen in
the middle of the data ranges of the Comparison Companies. Actual salaries are
adjusted based upon the performance of the Company and the performance of the
individual executive within Company-wide salary guidelines as determined by the
competitive environment.
Performance Awards -- For 1993, the Compensation Committee approved
payments under an executive performance award program (the "EPA Program") to
approximately 140 key employees, including executive officers. The EPA Program
awards are based upon targeted corporate goals and a formula which takes into
account measures such as net sales billed and earnings before interest and taxes
("EBIT"), with a heavier weight attributed to EBIT. Individual awards under the
EPA Program take into consideration corporate, business unit and individual
performance versus these targeted goals and formulas. Awards under the EPA
Program are reviewed and approved by the Compensation Committee.
Long-Term Incentive Awards -- The Company maintains the 1990 Key Employee
Stock Option Plan to provide long-term incentives to its employees, including
executive officers. In 1993, the Compensation Committee provided stock option
grants of 232,800 shares of Class A Common Stock to its executives and other key
employees under this Plan. During 1993, Hewitt Associates was engaged to review
the adequacy of the Company's 1990 Key Employee Stock Option Plan, the
14
<PAGE> 18
Company's only long-term incentive program. Under the 1990 plan officers
received awards in 1992 and 1993 only. The size of the awards was found to be
comparatively low with reference to the Hewitt data base of more than 400 major
manufacturing and service companies and certain comparative companies. The
Hewitt Associates review indicated that the Company's total long-term incentive
compensation offering for executive officers was approximately 50% of the
competitive long-term compensation of similarly sized companies. As a result,
two new long-term executive compensation plans were developed and are proposed
for stockholder approval at the upcoming 1994 Annual Meeting of Stockholders.
The two plans are the 1994 Reliance Electric Company Executive Stock Option Plan
and the 1994 Reliance Electric Company Executive Long Term Incentive Plan, both
of which are described in this Proxy Statement. Previous stock option awards to
individuals were not considered in determining the individual's award in 1993.
The Committee believes that by providing these persons who have substantial
responsibility for the management and growth of the Company with a more
competitive total compensation opportunity by increasing their potential
ownership in the Company, the best interests of the stockholders and executives
will be more closely aligned.
Each of these plans is intended to satisfy the requirements of Section
162(m) of the Internal Revenue Service regulations to be "performance-based"
compensation and therefore deductible by the Company.
1993 COMPENSATION FOR THE PRESIDENT AND CHIEF EXECUTIVE OFFICER
In considering the compensation for the President and Chief Executive
Officer (the "CEO") for 1993, the Compensation Committee reviewed his existing
compensation arrangements and both Company and individual performance. For
fiscal year 1993 the CEO received a base salary of $567,000, representing a 4.0%
increase from 1992. This increase reflected the Committee's comparison of Mr.
Morley's compensation versus compensation of chief executives of similarly sized
companies. The CEO also received a cash bonus of $260,000 under the EPA Program.
This bonus represents a 20% decrease from the bonus awarded for 1992. This
reduced bonus reflects the Company's less favorable overall performance in 1993
compared to 1992. The bonus at the same time includes the Committee's
recognition of the CEO's efforts to align the Company's workforce, manufacturing
capacity and structure with the current and expected market conditions in an
effort to improve productivity, capacity and administrative efficiency. As an
incentive for future performance and consistent with competitive practices, Mr.
Morley was granted an option to purchase up to 15,000 shares of Class A Common
Stock under the Company's 1990 Key Employee Stock Option Plan.
Compensation Committee
of the Board of Directors
H. Virgil Sherrill, Chairman
Anthony C. Howkins Alfred
M. Rankin, Jr.
E. Mandell de Windt
15
<PAGE> 19
PERFORMANCE GRAPH
Set forth below is a line graph comparing the percentage change in the
cumulative total shareholder return on the Company's Class A Common Stock
against the cumulative total return of the S&P Composite -- 500 Stock Index and
the Dow Jones -- Electrical Equipment Index for the period beginning upon the
Company's initial public offering of its Class A Common Stock on May 6, 1992 to
December 31, 1993. The graph assumes that the value of the investment in the
Company's Class A Common Stock and each index was $100 at May 6, 1992 and that
all dividends, if any, were reinvested.
<TABLE>
COMPARISON OF THE COMPANY'S CLASS A COMMON STOCK,
S&P 500 INDEX AND DOW JONES ELECTRICAL EQUIPMENT INDEX
<CAPTION>
May 6, June 30, Sept. 30, Dec. 31, March 31, June 30, Sept 30, Dec. 31,
1992 1992 1992 1992 1993 1993 1993 1993
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REE $100.00 90.79 90.79 106.58 113.84 98.68 96.71 $ 88.82
S&P 500 $100.00 97.92 100.24 104.54 108.37 108.10 110.11 $111.91
DJ EE $100.00 92.44 97.64 95.66 99.68 103.23 99.87 $101.50
</TABLE>
COMPENSATION COMMITTEE INSIDER INTERLOCKS AND INSIDER PARTICIPATION
John C. Morley, the Company's President and Chief Executive Officer, served
as a member of the Compensation Committee of the Board of Directors until
February 1993. Mr. Morley did not participate or vote on matters pertaining to
his compensation while a member of the Compensation Committee, nor was he
present at meetings relating to his compensation.
16
<PAGE> 20
CERTAIN TRANSACTIONS
In connection with the Company's April 1993 public offering of its ten year
6.80% notes due April 2003, Prudential Securities acted as one of the two
managing underwriters for the offering. The entire group of underwriters,
including the two managing underwriters, received an aggregate of $975,000 in
commissions, based on rates which were consistent with industry practices.
At the time when the transaction discussed above was entered into, the
Company took steps to determine that this transaction was on terms no less
favorable than those which could have been obtained from an unrelated third
party.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's officers and Directors and persons who own 10% or more of
a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership on Forms 3, 4 and 5 with the Commission and
the New York Stock Exchange. Officers, Directors and 10% or greater stockholders
are required by Commission regulations to furnish the Company with copies of all
Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received, the Company believes that all of its officers, Directors, and 10% or
greater stockholders complied with all filing requirements applicable to them
with respect to transactions during 1993, except for the officers referred to
below. Messrs. E. Scott Dalton, Robert L. Matejka and William R. Norton each
inadvertently omitted to report one transaction in 1993. Each officer, however,
did promptly report the inadvertent omission when it was brought to his
attention.
ADOPTION OF 1994 EXECUTIVE STOCK OPTION PLAN
BACKGROUND
The stockholders will be asked at the meeting to vote on a proposal to
approve the adoption of the 1994 Reliance Electric Company Executive Stock
Option Plan (the "1994 Executive Plan" or the "Plan"). The 1994 Executive Plan
was adopted by the Board of Directors in February 1994, subject to stockholder
approval. It is anticipated that options under the 1994 Executive Plan will be
granted prior to December 31, 1994. However, the recipients and the number of
shares subject to such initial options have not yet been determined.
The Board of Directors believes that substantial benefits accrue to the
Company from the granting of stock options to employees. Such options encourage
employees to acquire a proprietary interest in the Company through stock
ownership and thereby afford them a greater incentive to enhance the value of
the Class A Common Stock through their own efforts in improving the Company's
business. The granting of options also assists in attracting and retaining key
executives. Furthermore, the Company's existing 1990 Key Employee Stock Option
Plan expires in 1994. For these reasons, the Board adopted the 1994 Executive
Plan. Accordingly, the Board of Directors and management believe that approval
of the 1994 Executive Plan is in the best interests of the Company and recommend
that stockholders vote in favor of the proposal.
17
<PAGE> 21
The affirmative vote of the holders of a majority of the outstanding shares
of Class A Common Stock entitled to vote present in person or by proxy at the
meeting is required for the adoption of the 1994 Executive Plan. Thus,
stockholders who vote to abstain will in effect be voting against the proposal.
Brokers who hold shares of Class A Common Stock as nominees will have
discretionary authority to vote such shares if they have not received voting
instructions from the beneficial owners by the tenth day before the meeting,
provided that this Proxy Statement is transmitted to the beneficial owners at
least 15 days before the meeting. Broker non-votes, however, are not counted as
present for determining whether this proposal has been approved and have no
effect on its outcome.
The following is a summary of the material features of the 1994 Executive
Plan and is qualified in its entirety by reference to it. A copy of the Plan is
attached hereto as Exhibit A.
THE BOARD RECOMMENDS A VOTE FOR THE ADOPTION OF THE 1994 RELIANCE ELECTRIC
COMPANY EXECUTIVE STOCK OPTION PLAN.
GENERAL
The 1994 Executive Plan provides for the issuance of incentive stock
options (which qualify under Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code")) and non-qualified stock options to purchase a maximum
of 1,000,000 shares of the Company's Class A Common Stock, which constitutes
approximately 3% of the Company's outstanding shares of Class A Common Stock.
Options under the 1994 Executive Plan may be issued to officers and other
employees of the Company and its subsidiaries who, in the judgment of the
Committee (as hereinafter defined), are in a position to contribute
significantly to the Company's success ("Eligible Employees"). There are
presently approximately 400 Eligible Employees (including ten executive
officers).
DURATION AND ADMINISTRATION OF THE 1994 EXECUTIVE PLAN
The 1994 Executive Plan will terminate on April 20, 1999, unless earlier
terminated by resolution of the Board of Directors. Initially, the 1994
Executive Plan will be administered by the Company's Compensation Committee (the
"Committee"). The Committee must consist of at least two members who are
non-employee Directors, and the present members of the Committee are H. Virgil
Sherrill, Anthony C. Howkins, Alfred M. Rankin, Jr. and E. Mandell de Windt,
each of whom is a non-employee Director. The members of the Committee are
appointed by the Board of Directors and serve at its discretion. Each member of
the Committee acts as an administrative manager of the Plan and is a
"disinterested person" within the meaning of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934 (the "Exchange Act"). A majority of the
Committee constitutes a quorum, and the acts of a majority of the members
present at any meeting at which a quorum is present, or acts approved in writing
by all of the members, are acts of the Committee. Subject to the terms and
conditions of the Plan, the Committee has full and final authority in its
absolute discretion: (i) to determine the terms and conditions of the options;
(ii) to construe and interpret the 1994 Executive Plan and any agreement or
instrument entered into thereunder; (iii) to adopt, amend and rescind rules and
regulations that may be advisable in the administration of the Plan; and (iv) to
establish, amend or waive the rules and regulations and the instruments
evidencing options granted under the Plan and to make all other determinations
deemed necessary or advisable for the administration of the Plan. Any decision
made or action taken by the Committee in connection with the administration,
18
<PAGE> 22
interpretation and implementation of the 1994 Executive Plan and of its rules
and regulations will be, to the extent permitted by law, conclusive and binding
upon all Eligible Employees and upon any person claiming under or through any
Eligible Employees. Neither the Committee nor any of its members is liable for
any act taken by the Committee pursuant to the Plan. No member of the Committee
is liable for the act of any other member.
SECURITIES SUBJECT TO THE 1994 EXECUTIVE PLAN
Not more than 1,000,000 shares of the Class A Common Stock of the Company
may be issued pursuant to the 1994 Executive Plan in the aggregate, and not more
than 150,000 shares of Class A Common Stock may be issued to any one Eligible
Employee, except that in the event of stock splits, stock dividends,
combinations, exchanges of shares or similar capital adjustments, the Committee
must make an appropriate adjustment in the stock subject to the Plan. If any
option expires without having been fully exercised, the shares with respect to
which such option has not been exercised will be available for further options.
GRANT AND EXERCISE OF OPTIONS
Subject to certain conditions, the duration of each option granted under
the 1994 Executive Plan will be determined by the Committee, provided that no
option shall be exercisable later than the tenth anniversary of the date the
option was granted. Each option granted under the Plan will have an exercise
price equal to the fair market value at the date of grant by reference to the
closing price on the New York Stock Exchange on such date. Except as otherwise
provided in the event of an Eligible Employee's death, only the Eligible
Employee may exercise an option, provided that a guardian or other legal
representative who has been duly appointed for such Eligible Employee may
exercise an option on behalf of the Eligible Employee. Upon satisfaction of all
conditions, the option may be exercised in whole or in part at any time until
expiration of the right to exercise the option, but this right of exercise is
limited to whole shares. Options may be exercised by the Eligible Employee
giving written notice to the Company of the Eligible Employee's exercise of the
option accompanied by full payment of the purchase price in cash or its
equivalent. The Committee also may allow cashless exercise as permitted under
the Federal Reserve Board's Regulation T.
An option granted under the Plan will become exercisable in equal one-third
increments of the shares of Class A Common Stock which are covered by the option
on each of the first three anniversary dates of the grant. In the event of a
Change in Control, as defined in the 1994 Executive Plan, an Eligible Employee
may exercise his option with respect to all shares of Class A Common Stock which
are covered by the option.
TERMINATION OF EMPLOYMENT
If an Eligible Employee ceases to be an employee of the Company and all
subsidiaries because of death or disability, the option may be exercised until
the earlier to occur of either (i) the first anniversary of the Eligible
Employee's termination of employment or (ii) the expiration of the option, but
only to the extent the option was exercisable at the date of the Eligible
Employee's termination of employment. If any option is exercisable following the
Eligible Employee's death, then that option may be exercisable by the Eligible
Employee's estate, such person as shall have been named as the Eligible
Employee's beneficiary, the person designated in the Eligible Employee's Last
Will and
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<PAGE> 23
Testament, or the person to whom the option was transferred by the applicable
laws of descent and distribution.
If an Eligible Employee ceases to be an employee of the Company and all
subsidiaries because of retirement, the Eligible Employee may exercise the
option until the earlier to occur of either (i) the third anniversary of the
Eligible Employee's termination of employment or (ii) the expiration of the
option, but only to the extent the option was exercisable at the Eligible
Employee's termination of employment.
If an Eligible Employee ceases to be an employee of the Company and all
subsidiaries at the request of his employer and without cause or by his
voluntary resignation, the Eligible Employee may exercise his option until the
earlier to occur of either (i) the 30th day following the Eligible Employee's
termination of employment or (ii) the expiration date of the option, but only to
the extent the option was exercisable at the date of the Eligible Employee's
termination of employment.
If an Eligible Employee ceases to be an employee of the Company and all
subsidiaries because he is discharged by his employer for cause, his option will
be canceled to the extent not exercisable at the time of his termination of
employment.
The Committee may waive any restrictions or conditions set forth in an
option agreement concerning an Eligible Employee's right to exercise any option
and/or the time and method of exercise.
INCOME TAX TREATMENT
The Company has been advised that under current law certain of the income
tax consequences under the laws of the United States to Eligible Employees and
the Company of options granted under the 1994 Executive Plan generally should be
as set forth in the following summary. The summary only addresses income tax
consequences for Eligible Employees and the Company.
An Eligible Employee who is granted an incentive stock option which
qualifies under Section 422 of the Code will not recognize income at the time of
grant or exercise of such option. No federal income tax deduction will be
allowable to the Company upon the grant or exercise of such option. However,
upon the exercise of an incentive option, special alternative minimum tax rules
apply for the Eligible Employee. When the Eligible Employee sells such shares
more than one year after the date of exercise of the option and more than two
years after the date of grant of such option, the employee will normally
recognize a long-term capital gain or loss equal to the difference, if any,
between the sales price of such shares and the option exercise price. If the
Eligible Employee does not hold such shares for this period, when the employee
sells such shares, the employee will recognize ordinary compensation income and
possibly capital gain or loss in such amounts as are prescribed by the Code and
regulations thereunder. Subject to applicable provisions of the Code and
regulations thereunder, the Company generally will be entitled to a federal
income tax deduction in the amount of such ordinary compensation income.
An Eligible Employee to whom a non-qualified option (an option which is not
an incentive stock option) is granted will not recognize income at the time of
grant of such option. When such Eligible Employee exercises such non-qualified
option, the Eligible Employee will recognize ordinary compensation income equal
to the difference, if any, between the option price paid and the fair market
value, as of the date of option exercise, of the shares the Eligible Employee
receives. The tax
20
<PAGE> 24
basis of such shares to such Eligible Employee will be equal to the option price
paid plus the amount includable in the Eligible Employee's gross income, and the
Eligible Employee's holding period for such shares will commence on the day on
which the Eligible Employee recognized taxable income in respect of such shares.
Subject to applicable provisions of the Code and regulations thereunder, the
Company generally will be entitled to a federal income tax deduction in respect
of non-qualified options in an amount equal to the ordinary compensation income
recognized by the Eligible Employee. Any compensation includable in the gross
income of an Eligible Employee in respect to a non-qualified option will be
subject to appropriate withholding for federal income and employment taxes.
The discussion set forth above does not purport to be a complete analysis
of all potential tax consequences relevant to recipients of options or the
Company or to describe tax consequences based on particular circumstances. It is
based on United States federal income tax law and interpretational authorities
as of the date of this Proxy Statement, which are subject to change at any time.
The discussion does not address state or local income tax consequences or income
tax consequences for taxpayers who are not subject to taxation in the United
States.
ADOPTION OF 1994 OUTSIDE DIRECTORS STOCK OPTION PLAN
BACKGROUND
The stockholders will be asked at the meeting to vote on a proposal to
approve the adoption of the 1994 Reliance Electric Company Outside Directors
Stock Option Plan (the "1994 Outside Directors Plan" or the "Plan"). The 1994
Outside Directors Plan was adopted by the Board of Directors in February 1994,
subject to stockholder approval.
The purpose of the Plan is to provide each of the Company's non-employee
Directors an added incentive to continue in the service of the Company and a
more direct interest in the future success of the Company's operations. The Plan
also will help the Company attract outstanding individuals to become Directors
of the Company. Furthermore, the Company's previous Outside Directors Stock
Option Plan has expired. For these reasons, the Board adopted the 1994 Outside
Directors Plan. Accordingly, the Board of Directors and management believe that
approval of the Plan is in the best interests of the Company and recommend that
stockholders vote in favor of the proposal.
The affirmative vote of the holders of a majority of the outstanding shares
of Class A Common Stock entitled to vote present in person or by proxy at the
meeting is required for the adoption of the 1994 Outside Directors Plan. Thus,
stockholders who vote to abstain will in effect be voting against the proposal.
Brokers who hold shares of Class A Common Stock as nominees will have
discretionary authority to vote such shares if they have not received voting
instructions from the beneficial owners by the tenth day before the meeting,
provided that this Proxy Statement is transmitted to the beneficial owners at
least 15 days before the meeting. Broker non-votes, however, are not counted as
present for determining whether this proposal has been approved and have no
effect on its outcome.
The following is a summary of the material features of the 1994 Outside
Directors Plan and is qualified in its entirety by reference to it. A copy of
the Plan is attached hereto as Exhibit B.
THE BOARD RECOMMENDS A VOTE FOR THE ADOPTION OF THE 1994 RELIANCE ELECTRIC
COMPANY OUTSIDE DIRECTORS STOCK OPTION PLAN.
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<PAGE> 25
GENERAL
The 1994 Outside Directors Plan provides for the issuance of options to
purchase a maximum of an aggregate of 50,000 shares of the Company's Class A
Common Stock, which constitutes approximately 0.15% of the Company's outstanding
shares of Class A Common Stock, to Directors who are not also employees of the
Company or any subsidiary ("Outside Directors"). There are presently four
eligible Outside Directors. The Plan will terminate on April 21, 1998, unless
earlier terminated by resolution of the Board of Directors.
GRANTS OF OPTIONS
On the date of stockholders' approval of the Plan, each Outside Director
will be granted an option to purchase 1,000 shares of Class A Common Stock at
the then fair market value calculated by reference to the closing price of the
Class A Common Stock on the New York Stock Exchange. On each anniversary date
thereafter through 1998, each Outside Director then serving in such capacity
will receive an automatic grant of an option to purchase 1,000 shares of Class A
Common Stock at the then fair market value.
EXERCISE OF OPTIONS
Each option granted under the 1994 Outside Directors Plan will expire on
the tenth anniversary of the date the option was granted. Except as otherwise
provided in the event of an Outside Director's death, only the Outside Director
may exercise an option, provided that a guardian or other legal representative
who has been duly appointed for such Outside Director may exercise an option on
behalf of the Eligible Employee. Upon satisfaction of all conditions, the option
may be exercised in whole or in part at any time until expiration of the right
to exercise the option, but this right of exercise is limited to whole shares.
Options may be exercised by the Outside Director giving written notice to the
Company of the Outside Director's exercise of the option accompanied by full
payment of the purchase price in cash or its equivalent. The Plan also allows
cashless exercises as permitted under the Federal Reserve Board's Regulation T.
Each option granted under the Plan will become exercisable for equal
one-third increments of the shares of Class A Common Stock subject to the option
on each of the first three anniversary dates of the grant. In the event of a
Change in Control, as defined in the 1994 Outside Directors Plan, an Outside
Director may exercise his option with respect to all shares of Class A Common
Stock which are covered by the option.
SECURITIES SUBJECT TO THE 1994 OUTSIDE DIRECTORS PLAN
Not more than 50,000 shares of the Class A Common Stock of the Company may
be issued pursuant to the 1994 Outside Directors Plan in the aggregate and not
more than 5,000 shares of Class A Common Stock may be issued to any one Outside
Director, except that in the event of stock splits, stock dividends,
combinations, exchanges of shares or similar capital adjustments, an appropriate
adjustment in the stock subject to the Plan will be made. If any option expires
without having been fully exercised, the shares with respect to which such
option has not been exercised will be available for further options.
22
<PAGE> 26
TERMINATION OF DIRECTORSHIP
If an Outside Director ceases to be a Director of the Company because of
death or disability, the option may be exercised until the earlier to occur of
either (i) the first anniversary of the Outside Director's termination of
directorship or (ii) the expiration of the option, but only to the extent the
option was exercisable at the date of the Outside Director's termination of
directorship. If any option is exercisable following the Outside Director's
death, then that option may be exercisable by the Outside Director's estate, the
person as shall have been named as the Outside Director's beneficiary, the
person designated in the Outside Director's Last Will and Testament, or the
person to whom the option was transferred by the applicable laws of descent and
distribution.
If an Outside Director ceases to be a Director of the Company after the
attainment of age 65, the Outside Director may exercise the option until the
earlier to occur of either (i) the third anniversary of the Outside Director's
termination of directorship or (ii) the expiration of the option, but only to
the extent the option was exercisable at the Outside Director's termination of
directorship.
INCOME TAX TREATMENT
The Company has been advised that under current law certain of the income
tax consequences under the laws of the United States to Outside Directors and
the Company of options granted under the 1994 Outside Directors Plan generally
should be as set forth in the following summary. The summary only addresses
income tax consequences for Outside Directors and the Company.
The options granted under the Plan shall be non-qualified options for
federal income tax purposes. An Outside Director to whom an option is granted
will not recognize income at the time of grant of such option. When such Outside
Director exercises such non-qualified option, the Outside Director will
recognize ordinary compensation income equal to the difference, if any, between
the option price paid and the fair market value, as of the date of option
exercise, of the shares the Outside Director receives. The tax basis of such
shares to such Outside Director will be equal to the option price paid, and the
Outside Director's holding period for such shares will commence on the day on
which the Outside Director recognized taxable income in respect of such shares.
Subject to applicable provisions of the Code and regulations thereunder, Company
will generally be entitled to a federal income tax deduction in respect of
non-qualified options in an amount equal to the ordinary compensation income
recognized by the Outside Director.
The discussion set forth above does not purport to be a complete analysis
of all potential tax consequences relevant to recipients of options or the
Company or to describe tax consequences based on particular circumstances. It is
based on United States federal income tax law and interpretational authorities
as of the date of this Proxy Statement, which are subject to change at any time.
The discussion does not address state or local income tax consequences or income
tax consequences for taxpayers who are not subject to taxation in the United
States.
ADOPTION OF 1994 EXECUTIVE LONG TERM INCENTIVE PLAN
BACKGROUND
The stockholders will be asked at the meeting to vote on a proposal to
approve the adoption of the 1994 Reliance Electric Company Executive Long Term
Incentive Plan (the "1994 Incentive Plan" or the "Plan"). The 1994 Incentive
Plan was adopted by the Board of Directors in February 1994,
23
<PAGE> 27
subject to stockholder approval. It is anticipated that Performance Awards (as
hereinafter defined) will be granted prior to December 31, 1994. However, the
recipients and the amount of Performance Awards to be granted have not yet been
determined.
The Plan is designed to promote the interests of the Company and its
stockholders by attracting and retaining officers and key employees of the
Company and its subsidiaries; motivating such employees by reason of
performance-related incentives to achieve longer term performance goals; and
enabling such employees to participate in the long-term growth and financial
success of the Company. Accordingly, the Board of Directors and management
believe that approval of the 1994 Incentive Plan is in the best interests of the
Company and recommend that stockholders vote in favor of the proposal.
The affirmative vote of the holders of a majority of the outstanding shares
of Class A Common Stock entitled to vote present in person or by proxy at the
meeting is required for the adoption of the 1994 Incentive Plan. Thus,
stockholders who vote to abstain will in effect be voting against the proposal.
Brokers who hold shares of Class A Common Stock as nominees will have
discretionary authority to vote such shares if they have not received voting
instructions from the beneficial owners by the tenth day before the meeting,
provided that this Proxy Statement is transmitted to the beneficial owners at
least 15 days before the meeting. Broker non-votes, however, are not counted as
present for determining whether this proposal has been approved and have no
effect on its outcome.
The following is a summary of the material features of the 1994 Incentive
Plan and is qualified in its entirety by reference to it. A copy of the Plan is
attached hereto as Exhibit C.
THE BOARD RECOMMENDS A VOTE FOR THE ADOPTION OF THE 1994 RELIANCE ELECTRIC
COMPANY EXECUTIVE LONG TERM INCENTIVE PLAN.
GENERAL
The Plan provides for the granting of performance awards (the "Performance
Awards"). The final value, if any, of a Performance Award is determined by the
degree to which specified Company performance objectives ("Performance
Objectives") are achieved during a specified performance period ("Performance
Period"). Awards may be granted to officers and other employees of the Company
and its subsidiaries who, in the judgment of the Committee (as hereinafter
defined), are in a position to contribute significantly to the Company's success
("Eligible Employees"). Performance Awards shall be paid in shares of Class A
Common Stock ("Shares") and cash through Share Equivalents (as hereinafter
defined). There are presently approximately 35 Eligible Employees (including ten
executive officers).
DURATION AND ADMINISTRATION OF THE 1994 LONG TERM INCENTIVE PLAN
The Plan will terminate on December 31, 1998, unless earlier terminated by
resolution of the Board of Directors. Initially, the Plan will be administered
by the Company's Compensation Committee (the "Committee"). The Committee must
consist of at least two members who are non-employee Directors, and the present
members of the Committee are H. Virgil Sherrill, Anthony C. Howkins, Alfred M.
Rankin, Jr. and E. Mandell de Windt, each of whom is a non-employee Director of
the Company. The members of the Committee are appointed by the Board of
Directors and serve at its discretion. Each member of the Committee acts as an
administrative manager of the Plan and
24
<PAGE> 28
is a "disinterested person" within the meaning of Rule 16b-3 promulgated under
the Exchange Act. A majority of the Committee constitutes a quorum, and the acts
of a majority of the members present at any meeting at which a quorum is
present, or acts approved in writing by all of the members, are acts of the
Committee. Subject to the terms and conditions of the Plan, the Committee has
full and final authority in its absolute discretion: (i) to determine the size
and type of Performance Award and Performance Award payout; (ii) to determine
the performance goals, performance periods and other applicable terms and
conditions of the Performance Awards and Performance Award payouts; (iii) to
construe and interpret the Plan and any agreement or instrument entered into
thereunder; (iv) to establish, amend or waive the rules and regulations for the
Plan's administration; and (v) to amend the terms and conditions of any
outstanding Performance Award to the extent such terms and conditions may be
amended within the discretion of the Committee. Any decision made or action
taken by the Committee in connection with the administration, interpretation and
implementation of the 1994 Incentive Plan and of its rules and regulations will
be, to the extent permitted by law, conclusive and binding upon all Eligible
Employees and upon any person claiming under or through any Eligible Employees.
Neither the Committee nor any of its members is liable for any act taken by the
Committee pursuant to the 1994 Incentive Plan. No member of the Committee is
liable for the act of any other member.
PERFORMANCE AWARDS
The final value, if any, of a Performance Award is determined by the degree
to which specified Performance Objectives are achieved during a specified
Performance Period. Pursuant to the terms of the Plan, specific Performance
Objectives shall be determined by the Committee using the measures of return on
capital employed and earnings growth. A Performance Period shall be three years
or such shorter period of time as determined by the Committee.
Performance Awards are to be made by the Committee after the applicable
Performance Objective and Performance Period are determined and will be based on
a percentage of an Eligible Employee's annual base salary as in effect on the
last day of the Performance Period. Performance Award payouts will be made in
Shares and cash through Share Equivalents (as hereinafter defined). Not less
than 50% of the total Performance Award (based on the value of a share of Class
A Common Stock on the payment date) shall be paid in cash. Generally, all Shares
issued pursuant to a Performance Award payout shall not be transferable for two
years from the date of issuance.
SECURITIES SUBJECT TO THE PLAN
The total number of shares of Class A Common Stock available for
Performance Award payouts when combined with the total number of Share
Equivalents shall be 500,000. The maximum number of shares of Class A Common
Stock available for Performance Award payouts shall be 250,000, constituting
approximately 0.8% of the Company's outstanding shares of Class A Common Stock.
"Share Equivalents" represent the cash paid by the Company as a Performance
Award payout divided by the fair market value of a share of Class A Common Stock
on the date of such payout. No individual may receive more than a combined total
of 75,000 shares of Class A Common Stock and Share Equivalents pursuant to a
Performance Award. No Performance Award payout will be made after the total of
all Performance Award payouts equals 500,000 Shares and Share Equivalents,
except that in the event of stock splits, stock dividends, combinations,
exchanges of shares or similar capital adjustments, the Committee must make an
appropriate adjustment in the stock subject to the 1994 Incentive Plan. If any
Performance Award expires without having been paid out,
25
<PAGE> 29
the shares of Class A Common Stock and the Share Equivalents which could have
been paid out with respect to such expired Performance Award will be available
for future Performance Awards.
TERMINATION OF EMPLOYMENT
If an Eligible Employee ceases to be an employee of the Company and all
subsidiaries because of death, disability or retirement during a Performance
Period, the Performance Award shall be prorated and be paid based upon the
length of time that the Eligible Employee held the Performance Award during the
Performance Period and the achievement of the Performance Objectives during the
Performance Period. If a Performance Award is payable following the Eligible
Employee's death, then the Performance Award payout is payable to the Eligible
Employee's estate, the person as shall have been named as the Eligible
Employee's beneficiary, the person designated in the Eligible Employee's Last
Will and Testament, or the person to whom the Performance Award was transferred
by the applicable laws of descent and distribution.
If an Eligible Employee ceases to be an employee of the Company and all
subsidiaries for any other reason, any Performance Award shall be canceled as of
the date of termination.
The Committee may waive any restrictions or conditions set forth in an
agreement concerning an Eligible Employee's right to the Performance Award.
INCOME TAX TREATMENT
The Company has been advised that under current law certain of the income
tax consequences under the laws of the United States to Eligible Employees and
the Company of Performance Awards granted under the 1994 Incentive Plan should
generally be as set forth in the following summary. The summary only addresses
income tax consequences for Eligible Employees and the Company.
An Eligible Employee to whom a Performance Award is granted will not
recognize income at the time of grant of such Performance Award. When such
Eligible Employee receives the Performance Award payout, the Eligible Employee
will recognize ordinary compensation income equal to the fair market value of
any shares of Class A Common Stock received plus the amount, in cash, of any
Share Equivalents received. Subject to applicable provisions of the Code and
regulations thereunder, the Company will generally be entitled to a federal
income tax deduction in respect of Performance Award payouts in an amount equal
to the ordinary compensation income recognized by the Eligible Employee. Any
compensation includable in the gross income of an Eligible Employee in respect
to a Performance Award payout will be subject to appropriate withholding for
federal income and employment taxes.
The discussion set forth above does not purport to be a complete analysis
of all potential tax consequences relevant to recipients of Performance Awards
or the Company or to describe tax consequences based on particular
circumstances. It is based on United States federal income tax law and
interpretational authorities as of the date of this Proxy Statement, which are
subject to change at any time. The discussion does not address state or local
income tax consequences or income tax consequences for taxpayers who are not
subject to taxation in the United States.
26
<PAGE> 30
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Price Waterhouse, Cleveland, Ohio has served as the Company's independent
accountants since the Company's organization in December 1986. In January 1994,
Price Waterhouse was reappointed as the Company's independent accountants by the
Board of Directors of the Company for the year ending December 31, 1994, subject
to ratification by the stockholders. Although the By-laws of the Company do not
require the submission of the selection of independent accountants to the
stockholders for approval, the Board of Directors considers it desirable that
its appointment of independent accountants be ratified by the stockholders. If
the stockholders reject the nomination, the Board of Directors will reconsider
its selection. Representatives of Price Waterhouse will be present at the Annual
Meeting, will be afforded the opportunity to make a statement at the Annual
Meeting and will be available to respond to appropriate questions.
OTHER MATTERS
The Board of Directors is not aware of any matter to come before the Annual
Meeting other than those mentioned in the Notice of Annual Meeting of
Stockholders. If other matters, however, properly come before the Meeting, it is
the intention of the persons named in the accompanying Proxy to vote in
accordance with their best judgment on such matters insofar as the Proxies are
not limited to the contrary.
27
<PAGE> 31
DATE TO SUBMIT STOCKHOLDER
PROPOSALS FOR 1995 ANNUAL MEETING
Any stockholder who wishes to submit a proposal for inclusion in the proxy
materials to be distributed by the Company in connection with its Annual Meeting
of Stockholders to be held in 1995 must do so no later than November 12, 1994.
To be eligible for inclusion in the 1995 Proxy materials of the Company,
proposals must conform to the requirements set forth in Regulation 14A under the
Exchange Act.
Upon the receipt of a written request from any stockholder, the Company
will mail, at no charge to the stockholder, a copy of the Company's Annual
Report on Form 10-K, including the financial statements and schedules required
to be filed with the Commission pursuant to Rule 13a-1 under the Exchange Act,
for the Company's most recent fiscal year. Written requests for such Report
should be directed to:
Director of Investor Relations
Reliance Electric Company
6065 Parkland Boulevard
Cleveland, Ohio 44124-6106
You are urged to sign and return your Proxy promptly in the enclosed return
envelope to make certain your shares will be voted at the Annual Meeting.
By order of the Board of Directors
WILLIAM R. NORTON
Vice President, General Counsel
and Secretary
March 10, 1994
28
<PAGE> 32
1994 ANNUAL MEETING OF STOCKHOLDERS
9:30 A.M., APRIL 21, 1994
THE FORUM CONFERENCE CENTER
ONE CLEVELAND CENTER BUILDING
1375 EAST NINTH STREET
CLEVELAND, OHIO 44114
ADVANCE REGISTRATION FORM
Send your completed and signed Proxy Card in the enclosed envelope. Include
this Advance Registration Form in the envelope if you plan to attend or send a
representative to the Annual Meeting.
Attendance at the Annual Meeting is limited to Reliance Electric Company
stockholders, members of their immediate family or their named representative.
We reserve the right to limit the number of guests or representatives who may
attend the meeting.
(PLEASE PRINT)
STOCKHOLDER'S
NAME _________________________________________________________________________
ADDRESS ______________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________ ZIP ___________________
NAME(S) OF
FAMILY MEMBER(S)
WHO WILL ALSO
ATTEND
I AM A RELIANCE ELECTRIC COMPANY STOCKHOLDER. MY REPRESENTATIVE AT THE ANNUAL
MEETING WILL BE:
______________________________________________________________________________
(Admission card will be returned c/o the Stockholder's address)
______________________________________________________________________________
Stockholder's Signature
<PAGE> 33
EXHIBIT A
1994 RELIANCE ELECTRIC COMPANY
EXECUTIVE STOCK OPTION PLAN
TO BE EFFECTIVE APRIL 21, 1994
<PAGE> 34
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Article 1. Definitions................................................................ A-1
Article 2. Establishment, Purpose, and Duration....................................... A-3
Article 3. Administration............................................................. A-3
Article 4. Shares Subject to the Plan................................................. A-4
Article 5. Eligibility and Participation.............................................. A-4
Article 6. Grant of Options........................................................... A-4
Article 7. Beneficiary Designation.................................................... A-7
Article 8. Change in Control.......................................................... A-7
Article 9. Amendment, Modification, and Termination................................... A-7
Article 10. Withholding................................................................ A-8
Article 11. Indemnification............................................................ A-8
Article 12. Successors................................................................. A-8
Article 13. Miscellaneous.............................................................. A-8
</TABLE>
<PAGE> 35
1994 RELIANCE ELECTRIC COMPANY
EXECUTIVE STOCK OPTION PLAN
ARTICLE 1. DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings set
forth below:
(a) "Board of Directors" means the Board of Directors of the Company.
(b) "Cause" means, with respect to any Participant:
(i) The Participant's commission of either a felony or any crime
against the Company or a Subsidiary; or
(ii) The Participant's disclosure of the trade secrets of the
Company or any Subsidiary; or
(iii) The Participant's taking any action that would aid a
competitor of the Company or any Subsidiary; or
(iv) The Participant's habitual failure, for reasons other than any
physical or mental ailment, to attend to his or her duties as an
employee of the Company or a Subsidiary, but only after the Participant
has been given written notice by an officer of the Company or a
Subsidiary of the pattern of behavior deemed by such officer to
constitute such habitual failure and has failed to cure or take all
reasonable steps to cure such pattern of behavior within thirty (30)
days of receipt of that notice; or
(v) The Participant's failure to comply with the conflict of
interest or business ethics policies established by the Company; or
(vi) The Participant's willful failure to take actions which are
permitted by law, necessary to implement policies of the Board of
Directors, within the Participant's power to effect, and which the Board
of Directors has communicated to him in writing; provided that minutes
of any such Board of Directors meeting attended in its entirety by the
Participant shall be deemed communicated to the Participant.
(c) "Change in Control" shall be deemed to have occurred upon:
(i) The acquisition of beneficial ownership of thirty percent (30%)
of the Company's Shares by a person or group of persons under common
control unless such acquisition is approved by the Board; or
(ii) A change in the membership of the Board at any time during any
twelve (12) month period such that, following such change, at least
thirty percent (30%) of the members of the Board were not members of the
Board at the start of such twelve (12) month period but only if the
election of such new members of the Board was not approved by a least
three-quarters ( 3/4) of the Directors who were either sitting at the
beginning of such twelve (12) month period or elected to the Board
during such twelve (12) month period with the approval of three-quarters
( 3/4) of the Directors who were sitting at the beginning of such twelve
(12) month period.
(d) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
<PAGE> 36
(e) "Committee" means the committee designated to administer the Plan
in accordance with Article 3 herein.
(f) "Company" means Reliance Electric Company, a Delaware corporation,
or any successor thereto.
(g) "Director" means any individual who is a member of the Board of
Directors.
(h) "Disability" shall have the meaning ascribed to such term in the
Reliance Electric Company Long Term Disability Plan.
(i) "Effective Date" means April 21, 1994, subject to ratification by
an affirmative vote of a majority of Shares entitled to vote thereon.
(j) "Employee" means any person who is employed by the Company or any
of the Company's Subsidiaries. Directors who are otherwise employed by the
Company or a Subsidiary of the Company shall be considered Employees under
this Plan. Directors who are not otherwise employed by the Company shall
not be considered Employees under this Plan.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor Act thereto.
(l) "Fair Market Value" shall mean (a) if the Shares are listed on a
nationally recognized stock exchange or the NASDAQ National Market System,
the closing price of the Shares on the date the fair market value of the
Shares is being determined, or (b) in all other circumstances, the value
determined by the Committee after obtaining an appraisal by one or more
independent appraisers meeting the requirements of regulations issued under
Section 170(a)(1) of the Code.
(m) "Incentive Stock Option" or "ISO" means an option to purchase
Shares, granted under Article 6 herein, which is designated as an Incentive
Stock Option and is intended to meet the requirements of Section 422 of the
Code.
(n) "Insider" shall mean an Employee who is, on the relevant date,
subject to Section 16, or any successor thereto, of the Exchange Act.
(o) "Nonqualified Stock Option" or "NQSO" means an option to purchase
Shares, granted under Article 6 herein, which is not intended to be an
Incentive Stock Option.
(p) "Option" means an Incentive Stock Option or a Nonqualified Stock
Option.
(q) "Option Agreement" means an agreement entered into by each
Participant and the Company, setting forth the terms and provisions
applicable to an Option.
(r) "Option Price" shall be equal to one hundred percent (100%) of the
Fair Market Value of a Share at the close of the date the Option is
granted.
(s) "Participant" means an Employee who has been granted an Option.
(t) "Plan" means the Reliance Electric Company Executive Stock Option
Plan.
(u) "Retirement" shall mean a Participant's retirement under either
the early retirement or normal retirement provisions of the Reliance
Electric Company Retirement Plan, or any successor thereto.
A-2
<PAGE> 37
(v) "Shares" means the shares of the $.0l par value Class A common
stock of the Company.
(w) "Subsidiary" means any corporation, at least fifty percent (50%)
of the common stock of which is owned directly or indirectly by the
Company.
ARTICLE 2. ESTABLISHMENT, PURPOSE, AND DURATION
2.1 Establishment of the Plan. The Company hereby establishes the Plan as
set forth herein.
2.2 Purpose of the Plan. The purpose of the Plan is to promote the
success and enhance the value of the Company by linking more closely the
personal interests of Participants to those of Company shareholders, and by
providing Participants with an incentive for outstanding performance. The Plan
is further intended to provide flexibility to the Company in its ability to
motivate, attract, and retain the services of Participants upon whose judgment,
interest, and special effort the successful conduct of its operation largely is
dependent.
2.3 Duration of the Plan. The Plan shall commence on the Effective Date
and shall remain in effect until the later of April 20, 1999 or the date the
last Shares have been purchased pursuant to the exercise of an Option and the
last Option has expired. In no event shall the Company grant any Option after
April 20, 1999.
ARTICLE 3. ADMINISTRATION
3.1 The Committee. The Plan shall be administered by a Committee
appointed by the Board of Directors consisting of not less than three (3)
Directors, including but not limited to the Compensation Committee of the Board
of Directors. The members of the Committee shall be appointed from time to time
by, and shall serve at the discretion of, the Board of Directors. The Committee
shall be comprised solely of Directors who qualify as "outside directors" under
Section 162(m) of the Code and who are eligible to administer the Plan pursuant
to Rule 16b-3(c)(2), or any successor thereto, under the Exchange Act. If for
any reason any member of the Committee ceases to meet the requirements of
Section 162(m) of the Code or Rule 16b-3(c)(2) of the Exchange Act, the Board of
Directors shall appoint new member(s) of the Committee in order to comply with
such requirements.
3.2 Authority of the Committee. The Committee shall have full power
except as limited by law or by the Certificate of Incorporation or Bylaws of the
Company, and subject to the provisions herein, to determine the size and types
of Options; to determine the terms and conditions of such Options in a manner
consistent with the Plan; to construe and interpret the Plan and any agreement
or instrument entered into under the Plan; to establish, amend, or waive rules
and regulations for the Plan's administration; and to amend the terms and
conditions of any outstanding Option to the extent such terms and conditions are
within the discretion of the Committee as provided in the Plan. Further, the
Committee shall make all other determinations which may be necessary or
advisable for the administration of the Plan. As permitted by law, the Committee
may delegate its authorities as identified hereunder.
3.3 Decisions Binding. Subject to the provisions of the Plan, all
determinations and decisions made by the Committee pursuant to the provisions of
the Plan and all related orders or resolutions
A-3
<PAGE> 38
of the Board shall be final, conclusive, and binding on all persons, including
the Company, its stockholders, Employees, Participants, and their estates and
beneficiaries.
ARTICLE 4. SHARES SUBJECT TO THE PLAN
4.1 Number of Shares. Subject to adjustment as provided in Section 4.3
herein, the total number of Shares available for grant under the Plan shall be
one million (1,000,000), constituting approximately three percent (3.0%) of the
Company's outstanding Shares as of the Effective Date. These Shares may be
either authorized but unissued or reacquired Shares. The grant of an Option
shall reduce the Shares available for grant under the Plan by the number of
Shares subject to such Option. To the extent that an Option is settled in cash
rather than in Shares, the authorized Share pool shall be reduced by the
appropriate number of Shares represented by the cash settlement of the Option,
as determined at the sole discretion of the Committee (subject to the limitation
set forth in Section 4.2 herein).
4.2 Lapsed Options. If any Option granted under this Plan is canceled,
terminates, expires, or lapses for any reason , any Shares subject to such
Option again shall be available for the grant of an Option under the Plan.
However, in the event that prior to the Option's cancellation, termination,
expiration, or lapse, the holder of the Option at any time received one or more
"benefits of ownership" pursuant to such Option (as defined by the Securities
and Exchange Commission, pursuant to any rule or interpretation promulgated
under Section 16 of the Exchange Act), the Shares subject to such Option shall
not be made available for regrant under the Plan.
4.3 Adjustments in Authorized Shares. In the event of any merger,
reorganization, consolidation, recapitalization, separation, liquidation, stock
dividend, split-up, Share combination, or other change in the corporate
structure of the Company affecting the Shares, such adjustment shall be made in
the number and class of Shares which may be granted under the Plan, and in the
number and class of and/or price of Shares subject to outstanding Options
granted under the Plan, as may be determined to be appropriate and equitable by
the Committee, in its sole discretion, to prevent dilution or enlargement of
rights; and provided that the number of Shares attributable to any Option shall
always be a whole number.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1 Eligibility. All full-time, active management-exempt (as determined
in accordance with the Company's compensation classification system) Employees
are eligible to be selected by the Committee to be granted Options. No Employee
shall have a right to be granted an Option, or, having been so selected, to be
granted future Options.
5.2 Actual Participation. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible Employees, those to
whom Options shall be granted and shall determine the nature and amount of each
Option.
ARTICLE 6. GRANT OF OPTIONS
6.1 Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to Employees at any time and from time to time as shall
be determined by the Committee. The Committee shall have discretion in
determining the number of Shares subject to Options granted to each Participant,
provided, however, that the maximum number of shares subject to
A-4
<PAGE> 39
Options which may be granted to any single Participant during the term of the
Plan is one hundred fifty thousand (150,000), representing fifteen percent (15%)
of the Shares available under the Plan as of the Effective Date. The Committee
may grant ISOs, NQSOs, or a combination thereof.
6.2 Option Agreement. Each Option grant shall be evidenced by an Option
Agreement that shall specify the Option Price, the duration of the Option, the
number of Shares to which the Option pertains, and such other provisions as the
Committee shall determine. The Option Agreement also shall specify whether the
Option is intended to be an ISO or a NQSO.
6.3 Duration of Options. Each Option shall expire at such time as the
Committee shall determine at the time of grant; provided, however, that no
Option shall be exercisable later than the tenth (10th) anniversary date of its
grant.
6.4 Exercise of Options. Unless the Committee, in its sole discretion,
designates otherwise, Options granted under the Plan shall be exercisable as
follows:
<TABLE>
<CAPTION>
PERCENT OF SHARES CUMULATIVE PERCENT
ANNIVERSARY OF UNDER OPTION WHICH OF EXERCISABLE SHARES
GRANT DATE BECOME EXERCISABLE UNDER OPTION
- -------------- ------------------ ---------------------
<S> <C> <C>
1st................................... 33 1/3% 33 1/3%
2nd................................... 33 1/3% 66 2/3%
3rd................................... 33 1/3% 100%
</TABLE>
Options shall be exercised by the delivery of a written notice of exercise
to the Company, setting forth the number of Shares with respect to which the
Option is to be exercised, accompanied by full payment for the Shares.
6.5 Payment. The Option Price upon exercise of any Option shall be
payable to the Company in full in cash or its equivalent. The Committee also may
allow cashless exercise as permitted under Federal Reserve Board's Regulation T,
subject to applicable securities law restrictions, or by any other means which
the Committee determines to be consistent with the Plan's purpose and applicable
law.
As soon as practicable after receipt of a written notification of exercise
and full payment, the Company shall deliver to the Participant, in the
Participant's name, Share certificates in an appropriate amount based upon the
number of Shares purchased under the Option(s).
6.6 Restrictions on Share Transferability. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option under
the Plan as shall be required under applicable Federal securities laws, under
the requirements of any stock exchange or market upon which such Shares are then
listed and/or traded and under any blue sky or state securities laws applicable
to such Shares.
6.7 Termination of Employment Due to Death, Disability, or Retirement.
(a) Termination by Death. In the event the employment of a
Participant is terminated by reason of death, all vested Options held by
the Participant shall remain exercisable at any time prior to their
expiration date, or for one (1) year after the date of death, whichever
period is shorter, by such person or persons as shall have been named as
the Participant's beneficiary, or by such persons that have acquired the
Participant's rights under the Option by will or by the
A-5
<PAGE> 40
laws of descent and distribution. Options which are not vested as of the
date of death shall be forfeited.
(b) Termination by Disability. In the event the employment of a
Participant is terminated by reason of Disability, all vested Options held
by the Participant shall remain exercisable at any time prior to their
expiration date, or for one (1) year after the date that the Committee
determines the definition of Disability to have been satisfied, whichever
period is shorter. Options which are not vested as of the date the
Committee determines the definition of Disability to have been satisfied
shall be forfeited.
(c) Termination by Retirement. In the event the employment of a
Participant is terminated by reason of Retirement, all vested Options held
by the Participant shall remain exercisable at any time prior to their
expiration date, or for three (3) years after the effective date of
Retirement, whichever period is shorter. Options which are not vested as of
the date of Retirement shall be forfeited.
(d) Employment Termination Followed by Death. In the event that a
Participant's employment terminates by reason of Disability or Retirement,
and within the exercise period following such termination the Participant
dies, then the remaining exercise period under outstanding Options shall
equal the longer of (i) one (1) year following death; or (ii) the remaining
portion of the exercise period which was triggered by the employment
termination; provided, however, the remaining exercise period shall in no
event extend beyond the expiration date of such Options. Such Options shall
be exercisable by such person or persons who shall have been named as the
Participant's beneficiary, or by such persons who have acquired the
Participant's rights under the Option by will or by the laws of descent and
distribution.
(e) Exercise Limitations on ISOs. In the case of ISOs, the tax
treatment prescribed under Section 422 of the Internal Revenue Code of
1986, as amended, may not be available if the Options are not exercised
within the Section 422 prescribed time periods after each of the various
types of employment termination.
6.8 Termination of Employment for Other Reasons. If the employment of a
Participant shall terminate for any reason other than the reasons set forth in
Section 6.7, all Options held by the Participant which are not vested as of the
effective date of employment termination immediately shall be forfeited to the
Company (and shall once again become available for grant under the Plan).
Options which are vested as of the effective date of employment termination
may be exercised by the Participant within the period beginning on the effective
date of employment termination, and ending thirty (30) days after such date. In
the event a Participant dies within such thirty (30) day period, then any
outstanding Options may be exercised within six (6) months after the date of
such Participant's death by such person or persons who shall have been named as
such Participant's beneficiary or by such persons who have acquired the
Participant's rights under the Options by will or by the laws of descent and
distribution; provided, however, the remaining exercise period shall in no event
extend beyond the expiration date of such Options.
If the employment of a Participant shall be terminated by the Company for
Cause, all Options held by the Participant immediately shall be forfeited to the
Company and no additional exercise period shall be allowed, regardless of the
vested status of the Options.
A-6
<PAGE> 41
For purposes of the Plan, transfer of employment of a Participant between
the Company and any one of its Subsidiaries (or between Subsidiaries) shall not
be deemed a termination of employment.
6.9 Nontransferability of Options. No Option may be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated by a Participant or
any other person, voluntarily or involuntarily, other than (i) by will or by the
laws of descent and distribution, or (ii) pursuant to a Qualified Domestic
Relations Order as provided for in Section 206(d)(3)(B) of the Employee
Retirement Income Security Act of 1974, as amended. Further, a Participant's
rights under the Plan shall be exercisable during the Participant's lifetime
only by the Participant or the Participant's legal representative.
ARTICLE 7. BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) who
will succeed to the Participant's rights hereunder in the event of the
Participant's death. Each such designation shall revoke all prior designations
by the same Participant, shall be in a form prescribed by the Company, and will
be effective only when filed by the Participant in writing with the Company
during the Participant's lifetime. In the absence of any such designation,
benefits remaining unpaid at the Participant's death shall be paid to the
Participant's estate.
The spouse of a married Participant domiciled in a community property
jurisdiction shall join in any designation of beneficiary or beneficiaries other
than the spouse.
ARTICLE 8. CHANGE IN CONTROL
Upon the occurrence of a Change in Control, unless otherwise specifically
prohibited by the terms of Section 13 herein:
(a) Any and all Options granted hereunder shall become immediately
exercisable; and
(b) Subject to Article 9 herein, the Committee shall have the
authority to make any modifications to the Options as determined by the
Committee to be appropriate before the effective date of the Change in
Control.
ARTICLE 9. AMENDMENT, MODIFICATION, AND TERMINATION
9.1 Amendment, Modification and Termination. The Board may at any time
and from time to time, alter, amend, suspend or terminate the Plan in whole or
in part; provided, that no amendment which requires shareholder approval in
order for the Plan to continue to comply with Rule 16b-3 under the Exchange Act,
including any successor to such Rule, shall be effective unless such amendment
shall be approved by the requisite vote of shareholders of the Company entitled
to vote thereon.
9.2 Options Previously Granted. No termination, amendment or modification
of the Plan shall adversely affect in any material way any Option previously
granted under the Plan, without the written consent of the Participant holding
such Option.
A-7
<PAGE> 42
ARTICLE 10. WITHHOLDING
The Company shall have the power and the right to deduct and withhold from
any other compensation due the Participant from the Company, or require a
Participant to remit to the Company in such form as requested by the Company, an
amount sufficient to satisfy Federal, state, and local taxes (including the
Participant's FICA obligation) required by law to be withheld with respect to
any taxable event arising or as a result of this Plan.
ARTICLE 11. INDEMNIFICATION
Each person who is or shall have been a member of the Committee, or of the
Board, shall be indemnified and held harmless by the Company against and from
any loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by such person in connection with or resulting from any claim, action,
suit, or proceeding to which such person may be a party or in which such person
may be involved by reason of any action taken or failure to act under the Plan
and against and from any and all amounts paid by such person in settlement
thereof, with the Company's approval or paid by such person in satisfaction of
any judgment in any such action, suit, or proceeding against such person,
provided such person shall give the Company an opportunity, at its own expense,
to handle and defend the same before such person undertakes to handle and defend
it on such person's own behalf. The foregoing right of indemnification shall not
be exclusive of any other rights of indemnification to which such persons may be
entitled under the Company's Certificate of Incorporation or Bylaws, as a matter
of law, or otherwise, or any power that the Company may have to indemnify them
or hold them harmless.
ARTICLE 12. SUCCESSORS
All obligations of the Company under the Plan with respect to Options shall
be binding on any successor to the Company, whether the existence of such
successor is the result of a direct or indirect purchase, merger, consolidation,
or otherwise, of all or substantially all of the business and/or assets of the
Company.
ARTICLE 13. MISCELLANEOUS
13.1 Employment. Nothing in the Plan shall interfere with or limit in any
way the right of the Company to terminate any Participant's employment at any
time, nor confer upon any Participant any right to continue in the employ of the
Company.
13.2 Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
13.3 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
13.4 Requirements of Law. The granting of Options and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required. Notwithstanding any other provision set
forth in the Plan, if required by the then-current Section 16 of the Exchange
Act,
A-8
<PAGE> 43
any "derivative security" or "equity security" granted pursuant to the Plan to
any Insider may not be sold or transferred for at least six (6) months after the
date of grant of such Option. The terms "equity security" and "derivative
security" shall have the meanings ascribed to them in the then-current Rule
16(a) under the Exchange Act.
13.5 Securities Law Compliance. With respect to Insiders, transactions
under this Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the Exchange Act. To the extent any provision of
the plan or action by the Committee fails to so comply, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the Committee.
13.6 Governing Law. To the extent not preempted by Federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with and governed
by the laws of the State of Delaware.
A-9
<PAGE> 44
EXHIBIT B
1994 RELIANCE ELECTRIC COMPANY
OUTSIDE DIRECTORS STOCK OPTION PLAN
TO BE EFFECTIVE APRIL 21, 1994
<PAGE> 45
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Article 1. Definitions................................................................ B-1
Article 2. Establishment, Purpose, and Duration....................................... B-2
Article 3. Shares Subject to the Plan................................................. B-2
Article 4. Grant of Options........................................................... B-3
Article 5. Beneficiary Designation.................................................... B-5
Article 6. Change In Control.......................................................... B-5
Article 7. Amendment, Modification, and Termination................................... B-5
Article 8. Withholding................................................................ B-6
Article 9. Indemnification............................................................ B-6
Article 10. Successors................................................................. B-6
Article 11. Miscellaneous.............................................................. B-6
</TABLE>
<PAGE> 46
1994 RELIANCE ELECTRIC COMPANY
OUTSIDE DIRECTORS STOCK OPTION PLAN
ARTICLE 1. DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings set
forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Change in Control" shall be deemed to have occurred upon:
(i) The acquisition of beneficial ownership of thirty percent (30%)
of the Company's Shares by a person or group of persons under common
control unless such acquisition is approved by the Board; or
(ii) A change in the membership of the Board at any time during any
twelve (12) month period such that, following such change, at least
thirty percent (30%) of the members of the Board were not members of the
Board at the start of such twelve (12) month period but only if the
election of such new members of the Board was not approved by at least
three-quarters ( 3/4) of the Directors who were either sitting at the
beginning of such twelve (12) month period or elected to the Board
during such twelve (12) month period with the approval of three-quarters
( 3/4) of the Directors who were sitting at the beginning of such twelve
(12) month period.
(c) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(d) "Company" means Reliance Electric Company, a Delaware corporation,
or any successor thereto.
(e) "Director" means a member of the Board.
(f) "Disability" means a Participant's inability, due to a physical or
mental condition, to continue to serve as a member of the Board, as
determined by the Board pursuant to written certification of such
Disability from a physician acceptable to the Board.
(g) "Effective Date" means April 21, 1994, subject to ratification by
an affirmative vote of a majority of Shares entitled to vote thereon.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor thereto.
(i) "Fair Market Value" means (a) if the Shares are listed on a
nationally recognized stock exchange or the NASDAQ National Market System,
the closing price of the Shares on the date the fair market value of the
Shares is being determined, or (b) in all other circumstances, the value
determined by the Board after obtaining an appraisal by one or more
independent appraisers meeting the requirements of regulations issued under
Section 170(a)(1) of the Code.
(j) "Option" means an option to purchase Shares granted under Article
4 herein.
(k) "Option Agreement" means an agreement, in the form of Exhibit A
attached hereto, setting forth the terms and provisions applicable to an
Option.
<PAGE> 47
(l) "Option Price" shall be equal to one hundred percent (100%) of the
Fair Market Value of a Share at the close of the date the Option is
granted.
(m) "Outside Director" means a Director who is not employed by the
Company or a Subsidiary.
(n) "Participant" means an Outside Director who has been granted an
Option.
(o) "Plan" means the 1994 Reliance Electric Company Outside Directors
Stock Option Plan.
(p) "Shares" means the shares of the $.01 par value Class A common
stock of the Company.
(q) "Subsidiary" means any corporation, at least fifty percent (50%)
of the common stock of which is owned directly or indirectly by the
Company.
ARTICLE 2. ESTABLISHMENT, PURPOSE, AND DURATION
2.1 Establishment of the Plan. The Company hereby establishes the Plan as
set forth herein.
2.2 Purpose of the Plan. The purpose of the Plan is to provide the
Outside Directors with greater incentive to serve and promote the interests of
the Company and its shareholders. The premise of the Plan is that, if such
Outside Directors acquire a proprietary interest in the Company or increase such
proprietary interest as they may already hold, then the incentive of such
Outside Directors to work toward the Company's continued success will be
commensurately increased. Accordingly, the Company will, from time to time
during the effective period of the Plan, grant to the Outside Directors Options
on the terms and subject to the conditions set forth in the Plan.
2.3 Duration of the Plan. The Plan shall commence on the Effective Date
and shall remain in effect until the date the last Shares have been purchased
pursuant to the exercise of an Option or the last Option has expired. In no
event shall the Company grant any Option after April 21, 1998.
ARTICLE 3. SHARES SUBJECT TO THE PLAN
3.1 Number of Shares. Subject to adjustment as provided in Section 3.3
herein, the total number of Shares available for grant under the Plan shall be
Fifty Thousand (50,000). These Shares may be either authorized but unissued or
reacquired Shares. The grant of an Option shall reduce the Shares available for
grant under the Plan by the number of Shares subject to such Option. To the
extent that an Option is settled in cash rather than in Shares, the authorized
Share pool shall be reduced by the appropriate number of Shares represented by
the cash settlement of the Option, as determined by the Board (subject to the
limitation set forth in Section 3.2 herein).
3.2 Lapsed Options. If any Option granted under this Plan is canceled,
terminates, expires or lapses for any reason, any Shares subject to such Option
again shall be available for the grant of an Option under the Plan. However, in
the event that prior to the Option's cancellation, termination, expiration, or
lapse, the holder of the Option at any time received one or more "benefits of
ownership" pursuant to such Option (as defined by the Securities and Exchange
Commission, pursuant to any rule or interpretation promulgated under Section 16
of the Exchange Act), the Shares subject to such Option shall not be made
available for regrant under the Plan.
B-2
<PAGE> 48
3.3 Adjustments in Authorized Shares. In the event of any merger,
reorganization, consolidation, recapitalization, separation, liquidation, stock
dividend, split-up, share combination, or other change in the corporate
structure of the Company affecting the Shares, such adjustment shall be made in
the number and class of Shares which may be granted under the Plan, and in the
number and class of and/or price of Shares subject to outstanding Options
granted under the Plan, as may be determined to be appropriate and equitable by
the Board, in its sole discretion, to prevent dilution or enlargement of rights;
and provided that the number of Shares attributable to any Option shall always
be a whole number.
ARTICLE 4. GRANT OF OPTIONS
4.1 Grant of Options to Outside Directors. On the Effective Date and on
each anniversary of the Effective Date through and including April 21, 1998,
each Outside Director shall be granted an Option to purchase One Thousand
(1,000) Shares at the Option Price. The terms of each such Option shall be set
forth in an Option Agreement which shall be executed by the Outside Director and
the Company.
4.2 Duration of Options. Each Option shall expire on the tenth (10th)
anniversary date of its grant.
4.3 Exercise of Options. Options granted under the Plan shall be
exercisable as follows:
<TABLE>
<CAPTION>
PERCENT OF SHARES CUMULATIVE PERCENT
ANNIVERSARY OF UNDER OPTION WHICH OF EXERCISABLE SHARES
GRANT DATE BECOME EXERCISABLE UNDER OPTION
- -------------- ------------------ ---------------------
<S> <C> <C>
1st................................... 33 1/3% 33 1/3%
2nd................................... 33 1/3% 66 2/3%
3rd................................... 33 1/3% 100%
</TABLE>
Options shall be exercised by the delivery of a written notice of exercise
to the Company, setting forth the number of Shares with respect to which the
Option is to be exercised, accompanied by full payment for the Shares.
4.4 Payment. The Option Price upon exercise of any Option shall be
payable to the Company in full in cash or its equivalent. The Board also may
allow cashless exercise as permitted under Federal Reserve Board's Regulation T,
subject to applicable securities law restrictions, or by any other means which
the Board determines to be consistent with the Plan's purpose and applicable
law.
As soon as practicable after receipt of a written notification of exercise
and full payment, the Company shall deliver to the Participant, in the
Participant's name, Share certificates in an appropriate amount based upon the
number of Shares purchased under the Option(s).
4.5 Restrictions on Share Transferability. The Board may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option under
the Plan as shall be required under applicable Federal securities laws, under
the requirements of any stock exchange or market upon which such Shares are then
listed and/or traded and under any blue sky or state securities laws applicable
to such Shares.
B-3
<PAGE> 49
4.6 Ceasing to be a Director Due to Death, Disability, or After Attainment
of Age 65.
(a) Death. In the event a Participant ceases to be a Director by
reason of death, all vested Options held by the Participant shall remain
exercisable at any time prior to their expiration date, or for one (1) year
after the date of death, whichever period is shorter, by such person or
persons as shall have been named as the Participant's beneficiary, or by
such persons that have acquired the Participant's rights under the Option
by will or by the laws of descent and distribution. Options which are not
vested as of the date of death shall be forfeited.
(b) Disability. In the event a Participant ceases to be a Director by
reason of Disability prior to attaining age sixty-five (65), all vested
Options held by the Participant shall remain exercisable at any time prior
to their expiration date, or for one (1) year after the date that the Board
determines the definition of Disability to have been satisfied, whichever
period is shorter. Options which are not vested as of the date the Board
determines the definition of Disability to have been satisfied shall be
forfeited.
(c) After Attainment of Age 65. In the event a Participant ceases to
be a Director after his attainment of age sixty-five (65) for some reason
other than death, all vested Options held by the Participant shall remain
exercisable at any time prior to their expiration date, or for three (3)
years after the effective date of Retirement, whichever period is shorter.
Options which are not vested as of the date a Participant ceases to be a
Director pursuant to the preceding sentence shall be forfeited.
(d) Death After Ceasing to be a Director. In the event that a
Participant ceases to be a Director by reason of Disability or after
attainment of age sixty-five (65), and within the exercise period following
such termination the Participant dies, then the remaining exercise period
under outstanding Options shall equal the longer of (i) one (1) year
following death; or (ii) the remaining portion of the exercise period which
was triggered by his ceasing to be a Director; provided, however, the
remaining exercise period shall in no event extend beyond the expiration
date of such Options. Such Options shall be exercisable by such person or
persons who shall have been named as the Participant's beneficiary, or by
such persons who have acquired the Participant's rights under the Option by
will or by the laws of descent and distribution.
4.7 Ceasing to be a Director for Other Reasons. If a Participant ceases
to be a Director for any reason other than the reasons set forth in Section 4.6,
all Options held by the Participant which are not vested as of the date he
ceases to be a Director shall immediately be forfeited to the Company.
Options which are vested as of the date a Participant ceases to be a
Director for any reason other than the reasons set forth in Section 4.6 may be
exercised within the period beginning on the date the Participant ceases to be a
Director, and ending thirty (30) days after such date. In the event the
Participant dies within such thirty (30) day period, then any outstanding
Options may be exercised within six (6) months after the date of such
Participant's death by such person or persons who shall have been named as such
Participant's beneficiary or by such person who has acquired the Participant's
rights under the Options by will or by the laws of descent and distribution;
provided, however, the remaining exercise period shall in no event extend beyond
the expiration date of such Options.
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<PAGE> 50
4.8 Nontransferability of Options. No Option may be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated by a Participant or
any other person, voluntarily or involuntarily, other than (i) by will or by the
laws of descent and distribution or (ii) pursuant to a Qualified Domestic
Relations Order as provided for in Section 206(d)(3)(B) of the Employee
Retirement Income Security Act of 1974, as amended. Further, a Participant's
rights under the Plan shall be exercisable during the Participant's lifetime
only by the Participant or the Participant's legal representative.
ARTICLE 5. BENEFICIARY DESIGNATION
Each Participant may, from time to time, name any beneficiary or
beneficiaries (who may be named contingently or successively) who will succeed
to the Participant's rights hereunder in the event of the Participant's death.
Each such designation shall revoke all prior designations by the same
Participant, shall be in a form prescribed by the Company, and will be effective
only when filed by the Participant in writing with the Company during the
Participant's lifetime. In the absence of any such designation, benefits
remaining unpaid at the Participant's death shall be paid to the Participant's
estate.
The spouse of a married Participant domiciled in a community property
jurisdiction shall join in any designation of beneficiary or beneficiaries other
than the spouse.
ARTICLE 6. CHANGE IN CONTROL
Upon the occurrence of a Change in Control, unless otherwise specifically
prohibited by the terms of Section 11.5 herein:
(a) Any and all Options granted hereunder shall become immediately
exercisable; and
(b) Subject to Article 7 herein, the Board shall have the authority to
make any modifications to the Options as determined by the Board to be
appropriate before the effective date of the Change in Control.
ARTICLE 7. AMENDMENT, MODIFICATION, AND TERMINATION
7.1 Amendment, Modification, and Termination. The Board may at any time
and from time to time, alter, amend, suspend or terminate the Plan in whole or
in part; provided, that the Plan shall not be amended more than once every six
(6) months, other than to conform it to changes in the Code, the Employee
Retirement Income Security Act of 1974, as amended, or the rules thereunder; and
provided, further that no amendment which requires shareholder approval in order
for the Plan to continue to comply with Rule 16b-3 under the Exchange Act,
including any successor to such Rule, shall be effective unless such amendment
shall be approved by the requisite vote of shareholders of the Company entitled
to vote thereon.
7.2 Options Previously Granted. No termination, amendment or modification
of the Plan shall adversely affect in any material way any Option previously
granted under the Plan, without the written consent of the Participant holding
such Option.
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<PAGE> 51
ARTICLE 8. WITHHOLDING
The Company shall have the power and the right to deduct and withhold from
any other compensation due the Participant from the Company, or require a
Participant to remit to the Company in such form as requested by the Company, an
amount sufficient to satisfy Federal, state, and local taxes required by law to
be withheld with respect to any taxable event arising from or as a result of
this Plan.
ARTICLE 9. INDEMNIFICATION
Each person who is or shall have been a member of the Board shall be
indemnified and held harmless by the Company against and from any loss, cost,
liability, or expense that may be imposed upon or reasonably incurred by such
person in connection with or resulting from any claim, action, suit, or
proceeding to which such person may be a party or in which such person may be
involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by such person in settlement thereof,
with the Company's approval or paid by such person in satisfaction of any
judgment in any such action, suit, or proceeding against such person, provided
such persons shall give the Company an opportunity, at its own expense, to
handle and defend the same before such person undertakes to handle and defend it
on such person's own behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be
entitled under the Company's Certificate of Incorporation or Bylaws, as a matter
of law, or otherwise, or any power that the Company may have to indemnify them
or hold them harmless.
ARTICLE 10. SUCCESSORS
All obligations of the Company under the Plan with respect to Options shall
be binding on any successor to the company, whether the existence of such
successor is the result of a direct or indirect purchase, merger, consolidation,
or otherwise, of all or substantially all of the business and/or assets of the
Company.
ARTICLE 11. MISCELLANEOUS
11.1 No Right to Continue as a Director. Nothing in this Plan or in any
Option Agreement shall confer upon any Outside Director any right to continue as
a Director, or to be entitled to receive any remuneration or benefits not set
forth in the Plan or such Option Agreement, or to interfere with or limit the
right of the shareholders of the Company to remove him as a Director with or
without cause.
11.2 Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
11.3 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
11.4 Requirements of Law. The granting of Options and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required. Notwithstanding any
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<PAGE> 52
other provision set forth in the Plan, if required by the then-current Section
16 of the Exchange Act, any "derivative security" or "equity security" granted
pursuant to the Plan to any Outside Director may not be sold or transferred for
at least six (6) months after the date of grant of such Option. The terms
"equity security" and "derivative security" shall have the meanings ascribed to
them in the then-current Rule 16(a) under the Exchange Act.
11.5 Securities Law Compliance. Transactions under this Plan are intended
to comply with all applicable conditions of Rule 16b-3 or its successors under
the Exchange Act. To the extent any provision of the Plan or action by the
Committee fails to so comply, it shall be deemed null and void, to the extent
permitted by law and deemed advisable by the Committee.
11.6 Governing Law. To the extent not preempted by Federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with and governed
by the laws of the State of Delaware.
11.7 Time for Taking Action. Any action that may be taken in respect of
the Plan within a certain number of days shall be taken within that number of
calendar days; provided, however, that if the last day for taking any such
action falls on a weekend or a holiday, the period during which such action may
be taken shall be extended until the next business day. If any action in respect
of the Plan is required to be taken on a day which falls on a weekend or a
holiday, such action shall be taken on the next business day.
11.8 Nonqualified Options. All Options granted under the Plan shall, for
purposes of the federal income tax, be nonqualified stock options.
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<PAGE> 53
EXHIBIT C
1994 RELIANCE ELECTRIC COMPANY
EXECUTIVE LONG TERM INCENTIVE PLAN
TO BE EFFECTIVE JANUARY 1, 1994
<PAGE> 54
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Article 1. Definitions................................................................ C-1
Article 2. Establishment, Purpose and Duration........................................ C-2
Article 3. Administration............................................................. C-3
Article 4. Maximum Award Payouts...................................................... C-3
Article 5. Eligibility and Participation.............................................. C-4
Article 6. Grant of Awards............................................................ C-4
Article 7. Beneficiary Designation.................................................... C-5
Article 8. Change in Control.......................................................... C-6
Article 9. Amendment, Modification, and Termination................................... C-6
Article 10. Withholding................................................................ C-6
Article 11. Indemnification............................................................ C-6
Article 12. Successors................................................................. C-7
Article 13. Miscellaneous.............................................................. C-7
</TABLE>
LIST OF APPENDICES
Appendix A -- Performance Goals
<PAGE> 55
1994 RELIANCE ELECTRIC COMPANY
EXECUTIVE LONG TERM INCENTIVE PLAN
ARTICLE 1. DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings set
forth below:
(a) "Award" means the right to receive an Award Payout upon
achievement of the applicable Performance Goals during the applicable
Performance Period.
(b) "Award Agreement" means an agreement entered into by each
Participant and the Company, setting forth the terms and provisions
applicable to an Award.
(c) "Award Payout" means payment of an amount equal to a percentage
(as determined by the Committee) of Participant's base salary on the last
day of the applicable Performance Period.
(d) "Board of Directors" means the Board of Directors of the Company.
(e) "Change in Control" shall be deemed to have occurred upon:
(i) The acquisition of beneficial ownership of thirty percent (30%)
of the Company's Shares by a person or group of persons under common
control unless such acquisition is approved by the Board of Directors;
or
(ii) A change in the membership of the Board of Directors at any
time during any twelve (12) month period such that, following such
change, at least thirty percent (30%) of the members of the Board of
Directors were not members of the Board of Directors at the start of
such twelve (12) month period but only if the election of such new
members of the Board of Directors was not approved by at least
three-quarters ( 3/4) of the Directors who were either sitting at the
beginning of such twelve (12) month period or elected to the Board of
Directors during such twelve (12) month period with the approval of
three-quarters ( 3/4) of the Directors who were sitting at the beginning
of such twelve (12) month period.
(f) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(g) "Committee" means the committee designated to administer the Plan
in accordance with Article 3 herein.
(h) "Company" means Reliance Electric Company, a Delaware corporation,
or any successor thereto.
(i) "Director" means any individual who is a member of the Board of
Directors.
(j) "Disability" shall have the meaning ascribed to such term in the
Reliance Electric Company Long Term Disability Plan.
(k) "Effective Date" shall mean January 1, 1994, subject to
ratification by an affirmative vote of a majority of Shares entitled to
vote thereon.
(l) "Employee" means any person who is employed by the Company or any
of the Company's Subsidiaries. Directors who are otherwise employed by the
Company or a Subsidi-
<PAGE> 56
ary of the Company shall be considered Employees under this Plan. Directors
who are not otherwise employed by the Company shall not be considered
Employees under this Plan.
(m) "Exchange Act"' means the Securities Exchange Act of 1934, as
amended from time to time, or any successor Act thereto.
(n) "Fair Market Value" shall mean (a) if the Shares are listed on a
nationally recognized stock exchange or the NASDAQ National Market System,
the closing price of the Shares on the date the fair market value of the
Shares is being determined, or (b) in all other circumstances, the value
determined by the Committee after obtaining an appraisal by one or more
independent appraisers meeting the requirements of regulations issued under
Section 170(a)(1) of the Code.
(o) "Insider" shall mean an Employee who is, on the relevant date,
subject to Section 16, or any successor thereto, of the Exchange Act.
(p) "Participant" means an Employee who has been granted an Award.
(q) "Performance Goals" means the levels of performance of the Company
that must be met during the Performance Period to trigger an Award Payout,
as determined by the Committee prior to commencement of the applicable
Performance Period (except for the Performance Goals for the initial
Performance Period which shall be determined by the Committee prior to
April 1, 1994). The material terms of the Performance Goals set forth in
Appendix A, attached hereto and incorporated herein, are for the initial
Performance Period and all subsequent Performance Periods unless changed by
the Committee as provided under Section 3.2 herein.
(r) "Performance Period" means a three (3) year period of time (or
such other period of time as determined by the Committee provided that with
respect to Insiders the period may not be less than six (6) months) during
which the Performance Goals shall be measured. The initial Performance
Period shall be January 1, 1994 through December 31, 1996.
(s) "Plan" means the Reliance Electric Company Executive Long Term
Incentive Plan.
(t) "Retirement" shall mean a Participant's retirement under either
the early retirement or normal retirement provisions of the Reliance
Electric Company Retirement Plan, or any successor thereto.
(u) "Shares" means the shares of the $.01 par value Class A common
stock of the Company.
(v) "Share Equivalent" means the cash paid by the Company as an Award
Payout divided by the Fair Market Value of a Share on the date of such
Award Payout.
(w) "Subsidiary" means any corporation, at least fifty percent (50%)
of the common stock of which is owned directly or indirectly by the
Company.
ARTICLE 2. ESTABLISHMENT, PURPOSE, AND DURATION
2.1 Establishment of the Plan. The Company hereby establishes the Plan as
set forth herein.
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<PAGE> 57
2.2 Purpose of the Plan. The purpose of the Plan is to promote the
success and enhance the value of the Company by more closely linking the
personal interests of Participants to those of Company shareholders, and by
providing Participants with an incentive for outstanding performance. The Plan
is further intended to provide flexibility to the Company in its ability to
motivate, attract, and retain the services of Participants upon whose judgment,
interest, and special effort the successful conduct of its operation largely is
dependent.
2.3 Duration of the Plan. The Plan shall commence on the Effective Date
and shall remain in effect until the later of December 31, 1998 or the date the
last Award Payout is made by the Company. In no event shall the Company grant
any Award(s) after December 31, 1998.
ARTICLE 3. ADMINISTRATION
3.1 The Committee. The Plan shall be administered by a Committee
appointed by the Board of Directors consisting of not less than three (3)
Directors, including but not limited to the Compensation Committee of the Board
of Directors. The members of the Committee shall be appointed from time to time
by, and shall serve at the discretion of, the Board of Directors. The Committee
shall be comprised solely of Directors who qualify as "outside directors" under
Section 162(m) of the Code and who are eligible to administer the Plan pursuant
to Rule 16b-3(c)(2), or any successor thereto, under the Exchange Act. If for
any reason the Committee does not meet the requirements of Section 162(m) of the
Code or Rule 16b-3(c)(2) of the Exchange Act, the Board of Directors may appoint
a new Committee so as to comply with such requirements.
3.2 Authority of the Committee. The Committee shall have full power,
except as limited by law or by the Certificate of Incorporation or Bylaws of the
Company and subject to the provisions herein, to determine the size and types of
Awards and Award Payouts; to determine the Performance Goals, Performance
Periods and other applicable terms and conditions of such Awards and Award
Payouts in a manner consistent with the Plan; to construe and interpret the Plan
and any agreement or instrument entered into under the Plan; to establish,
amend, or waive rules and regulations for the Plan's administration; and to
amend the terms and conditions of any outstanding Awards to the extent such
terms and conditions are within the discretion of the Committee as provided in
the Plan. To the extent the Committee changes a material term of the Performance
Goals after such Performance Goals have been approved by the shareholders, such
material terms of the Performance Goals must be disclosed and reapproved by the
shareholders no later than the first shareholder meeting that occurs in the
fifth year following the year in which the shareholders previously approved the
Performance Goals. Further, the Committee shall make all other determinations
which may be necessary or advisable for the administration of the Plan. As
permitted by law, the Committee may delegate its authorities as identified
hereunder.
3.3 Decisions Binding. Subject to the provisions of the Plan, all
determinations and decisions made by the Committee and all related orders or
resolutions of the Board of Directors shall be final, conclusive, and binding on
all persons, including the Company, its stockholders, Employees, Participants,
and their estates and beneficiaries.
ARTICLE 4. MAXIMUM AWARD PAYOUTS
4.1 Shares and Share Equivalents. Subject to adjustment as provided in
Section 4.2 herein, the maximum number of Shares and Share Equivalents used for
Award Payouts shall not exceed
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<PAGE> 58
five-hundred thousand (500,000). The maximum number of Shares available is two
hundred fifty thousand (250,000), constituting approximately eight-tenths of a
percent (0.8%) of the Company's outstanding Shares as of the Effective Date.
These Shares may be either authorized but unissued or reacquired Shares.
Notwithstanding any other provision of the Plan, no Award Payout will be made
after the total of all Award Payouts equals 500,000 Shares and Share
Equivalents.
4.2 Adjustments to Maximum Shares and Share Equivalents. In the event of
any merger, reorganization, consolidation, recapitalization, separation,
liquidation, stock dividend, split-up, Share combination, or other change in the
corporate structure of the Company affecting the Shares, such adjustment shall
be made in the maximum number of Shares and Share Equivalents available for
Award Payouts under the Plan, as may be determined to be appropriate and
equitable by the Committee, in its sole discretion, to prevent dilution or
enlargement of rights; and provided that the number of Shares attributable to
any Award Payout shall always be a whole number.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1 Eligibility. All full-time, active management-exempt (as determined
in accordance with the Company's compensation classification system) Employees
are eligible to be selected by the Committee to receive Awards under the Plan.
No Employee shall have a right to be selected to receive an Award, or, having
been so selected, to be selected to receive future Awards.
5.2 Actual Participation. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible Employees, those to
whom Awards shall be granted and shall determine the nature and amount of each
Award.
ARTICLE 6. GRANT OF AWARDS
6.1 Grant of Awards. An Award may be granted to any eligible Employee at
anytime and from time to time, as shall be determined by the Committee prior to
commencement of the applicable Performance Period (except for Awards applicable
to the initial Performance Period which shall be granted by the Committee not
later than April 1, 1994, subject to shareholder ratification of the Plan). The
Committee shall have complete discretion in determining the nature and amount of
each Award, as well as those eligible Employees who are selected to receive an
Award; provided, however, that the maximum number of Shares and Share
Equivalents which may be paid or payable to a single Participant during the term
of the Plan is seventy-five thousand (75,000), representing fifteen percent
(15%) of the total of Shares and Share Equivalents available under the Plan as
of the Effective Date.
6.2 Award Agreement. Each Award shall be evidenced by an Award Agreement
that shall specify the Award Payout, the Performance Period, the Performance
Goals and such other provisions as the Committee shall determine.
6.3 Earning of Award Payout. After the applicable Performance Period has
ended, a Participant shall be entitled to receive the Award Payout to the extent
the Performance Goals have been met.
6.4 Form and Timing of Award Payout. Within sixty (60) calendar days
following the close of the applicable Performance Period, the Committee shall
certify in writing whether the Performance Goals for the applicable Performance
Period have been met. The Award Payout, if any, resulting
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<PAGE> 59
from the achievement of the Performance Goals during such Performance Period
shall be made by the Company to a Participant within thirty (30) calendar days
following the date of such written certification by the Committee. Not less than
fifty percent (50%) of the value of the Award Payout shall be paid in cash. The
remaining fifty percent (50%) of the value of the Award Payout may be paid in
cash or Shares, in the sole discretion of the Committee.
6.5 Restrictions on Transfers of Shares. All Shares issued to a
Participant under this Plan shall not be transferable by the Participant for two
(2) years from the date of issuance. Notwithstanding the preceding sentence, a
Participant may, at any time during the two (2) year restriction period,
transfer such Shares to a trust for the benefit of a Participant or his spouse,
children or grandchildren, provided the Shares transferred to such trust shall
continue to be subject to the restrictions on transfer set forth in this Section
6.5. Further, a Participant may, at any time during the two (2) year restriction
period, request in writing that the Committee authorize the lapse of
restrictions on transfer of the Shares if (i) the Participant's employment with
the Company or any Subsidiary of the Company has been voluntarily or
involuntarily terminated, or (ii) the Participant has an unusual financial
hardship. The Committee may, in its sole discretion, agree to allow a lapse of
the restrictions for all or any portion of the Shares held by the Participant.
6.6 Termination of Employment Due to Death, Disability, or Retirement. In
the event the employment of a Participant is terminated by reason of death,
Disability or Retirement during a Performance Period, the Participant shall
receive a prorated Award Payout. The prorated Award Payout shall be based upon
the length of time that the Participant held the Award during the Performance
Period, and the achievement of the Performance Goals during the Performance
Period.
Any Award Payout pursuant to this Section 6.6 shall be made at the same
time as all other Award Payouts are made to Participants who did not terminate
employment during the applicable Performance Period.
6.7 Termination of Employment for Other Reasons. In the event that a
Participant's employment terminates for any reason other than those reasons set
forth in Section 6.6 above, any outstanding Award shall be cancelled as of the
date of termination. For purposes of the Plan, transfer of employment of a
Participant between the Company and any one of its Subsidiaries (or between
Subsidiaries) shall not be deemed a termination of employment.
6.8 Nontransferability. Any Award or Award Payout may not be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated by a
Participant or any other person, voluntarily or involuntarily, other than (i) by
will or by the laws of descent and distribution, or (ii) pursuant to a Qualified
Domestic Relations Order as provided for in Section 206(d)(3)(B) of the Employee
Retirement Income Security Act of 1974, as amended. Further, a Participant's
rights under the Plan shall be exercisable during the Participant's lifetime
only by the Participant or the Participant's legal representative.
ARTICLE 7. BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) who
will succeed to the Participant's rights hereunder in the event of the
Participant's death. Each such designation shall revoke all prior designations
by the same Participant, shall be in a form prescribed by the Company, and will
be
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<PAGE> 60
effective only when filed by the Participant in writing with the Company during
the Participant's lifetime. In the absence of any such designation, benefits
remaining unpaid at the Participant's death shall be paid to the Participant's
estate.
The spouse of a married Participant domiciled in a community property
jurisdiction shall join in any designation of beneficiary or beneficiaries other
than the spouse.
ARTICLE 8. CHANGE IN CONTROL
Upon the occurrence of a Change in Control, unless otherwise specifically
prohibited by the terms of Section 13 herein:
(a) The Award Payout attainable under any outstanding Award shall be
deemed to have been fully earned for the entire Performance Period as of
the effective date of the Change in Control, and there shall be paid out in
cash to Participants within thirty (30) days following the effective date
of the Change in Control the full amount of such Award Payout as would have
been paid if the Performance Period had elapsed as of such effective date
of the Change in Control and the Performance Goals had been achieved; and
(b) Subject to Article 9 herein, the Committee shall have the
authority to make any modifications to the Awards deemed by the Committee
to be appropriate before the effective date of the Change in Control.
ARTICLE 9. AMENDMENT, MODIFICATION, AND TERMINATION
9.1 Amendment, Modification, and Termination. The Board of Directors may
at any time and from time to time, alter, amend, suspend or terminate the Plan
in whole or in part; provided, that no amendment which requires shareholder
approval in order for the Plan to continue to comply with Rule 16b-3 under the
Exchange Act, including any successor to such Rule, shall be effective unless
such amendment shall be approved by the requisite vote of shareholders of the
Company entitled to vote thereon.
9.2 Awards Previously Granted. No termination, amendment, or modification
of the Plan shall adversely affect in any material way any Award previously
granted under the Plan, without the written consent of the Participant holding
such Award.
ARTICLE 10. WITHHOLDING
The Company shall have the power and the right to deduct and withhold from
the Award Payouts or any other compensation due the Participant from the
Company, or require a Participant to remit to the Company in such form as
requested by the Company, an amount sufficient to satisfy Federal, state, and
local taxes (including the Participant's FICA obligation) required by law to be
withheld with respect to any taxable event arising or as a result of this Plan.
ARTICLE 11. INDEMNIFICATION
Each person who is or shall have been a member of the Committee, or of the
Board of Directors, shall be indemnified and held harmless by the Company
against and from any loss, cost, liability, or expense that may be imposed upon
or reasonably incurred by such person in connection with or resulting from any
claim, action, suit, or proceeding to which such person may be a party or
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<PAGE> 61
in which such person may be involved by reason of any action taken or failure to
act under the Plan and against and from any and all amounts paid by such person
in settlement thereof, with the Company's approval or paid by such person in
satisfaction of any judgment in any such action, suit, or proceeding against
such person provided such person shall give the Company an opportunity, at its
own expense, to handle and defend the same before such person undertakes to
handle and defend it on such person's own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification to
which such persons may be entitled under the Company's Certificate of
Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the
Company may have to indemnify them or hold them harmless.
ARTICLE 12. SUCCESSORS
All obligations of the Company under the Plan with respect to Awards
granted hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.
ARTICLE 13. MISCELLANEOUS
13.1 Employment. Nothing in the Plan shall interfere with or limit in any
way the right of the Company to terminate any Participant's employment at any
time, nor confer upon any Participant any right to continue in the employ of the
Company.
13.2 Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
13.3 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
13.4 Requirements of Law. The granting of Awards, the payment of Award
Payouts and the issuance of Shares under the Plan shall be subject to all
applicable laws, rules, and regulations and to such approvals by any
governmental agencies or national securities exchanges as may be required.
Notwithstanding any other provision set forth in the Plan, if required by the
then-current Section 16 of the Exchange Act any "derivative security" or "equity
security" granted pursuant to the Plan to any Insider may not be sold or
transferred for at least six (6) months after the date of grant of such Award.
The terms "equity security" and "derivative security" shall have the meanings
ascribed to them in the then-current Rule 16(a) under the Exchange Act.
13.5 Securities Law Compliance. With respect to Insiders, transactions
under this Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the Exchange Act. To the extent any provision of
the plan or action by the Committee fails to so comply, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the Committee.
13.6 Governing Law. To the extent not preempted by Federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with and governed
by the laws of the State of Delaware.
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<PAGE> 62
APPENDIX A
The Performance Goals for the Performance Periods shall be based on the
measures return on capital employed and earnings growth.
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<PAGE> 63
To: Securities and Exchange Commission
From: Reliance Electric Company
Subject: Memorandum of Differences between the EDGAR filing and the printed
Proxy Statement
A picture of each director appears next to his biography on pages 5
through and including 7.
<PAGE> 64
RELIANCE ELECTRIC COMPANY STOCK FUND
PLEASE VOTE YOUR SHARES
The Annual Meeting of Stockholders of Reliance Electric Company is scheduled
for April 21, 1994.
On March 10, 1994, Annual Meeting information was mailed to participants of the
Reliance Electric Company Savings and Investment Plan (Plan) who own shares of
Reliance Electric Company Class A Common Stock in the Reliance Stock Fund. The
mailing will contain a 1993 Reliance Electric Company Annual Report, a Proxy
Statement, a Direction Card, Advance Registration Form, and a postage paid
return envelope. Stockholders are being asked to vote on the election of
directors, the appointment of Price Waterhouse as independent auditors for
1994, and to approve Company stock option and incentive plans. You are also
being asked to permit the Trustee to vote in its discretion on any other
matters that may properly come before the Annual Meeting of Stockholders.
YOUR COMPLETED DIRECTION CARD SHOULD BE MAILED DIRECTLY TO SOCIETY NATIONAL
BANK, THE PLAN TRUSTEE, IN THE POSTAGE PRE-PAID RETURN ENVELOPE PROVIDED.
The Savings and Investment Plan holds approximately 6% of the outstanding
Reliance Class A Common Stock. Participant stockholders, as a group, are the
third largest stockholder and are therefore, encouraged to direct the Plan
Trustee to vote their shares. The Company encourages you to exercise your right
to vote by promptly returning your completed Direction Card to the Trustee.
Please return your completed Direction Card to the Trustee using the postage
pre-paid return envelope provided. PLEASE RETURN YOUR DIRECTION CARDS PROMPTLY.
Post: March 11, 1994
Take Down: April 21, 1994
<PAGE> 65
ANNUAL MEETING OF STOCKHOLDERS -- APRIL 21, 1994
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby (i) appoints JOHN C. MORLEY, JOHN D.
HUTSON and WILLIAM R. NORTON, and each of them, as Proxy holders and
attorneys, with full power of substitution to appear and vote all of
the shares of Class A Common Stock of Reliance Electric Company,
P which the undersigned shall be entitled to vote at the Annual Meeting
of Stockholders of the Company, to be held on April 21, 1994, at 9:30
R A.M. (EDT), and at any adjournments or postponements thereof,
hereby revoking any and all proxies heretofore given, and (ii)
O authorizes and directs said Proxy holders to vote all of the shares of
Class A Common Stock of the Company represented by this Proxy as
X follows, with the understanding that if no directions are given below,
said shares will be voted FOR the election of the six Directors
Y nominated by the Board of Directors, FOR the approval and
adoption of the 1994 Reliance Electric Company Executive Stock Option
Plan, FOR the approval and adoption of the 1994 Reliance Electric
Company Outside Directors Stock Option Plan, FOR the approval
and adoption of the 1994 Reliance Electric Company Executive Long Term
Incentive Plan, FOR the ratification of Price Waterhouse as the
Company's independent accountants for 1994, and to vote in accordance
with their discretion on such matters as may properly come before the
meeting.
<TABLE>
<S> <C>
Election of Directors, Nominees: (change of address)
ANTHONY C. HOWKINS, JOHN C. MORLEY, ______________________________
ALFRED M. RANKIN, JR., DUDLEY P. ______________________________
SHEFFLER, H. VIRGIL SHERRILL and E. MANDELL de WINDT ______________________________
______________________________
(If you have written in the
above space, please mark the
corresponding box on the
reverse side of this card.)
</TABLE>
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE
BOXES, SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH
TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS.
THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS
CARD.
SEE REVERSE
SIDE
<PAGE> 66
/ X/ PLEASE MARK YOUR SHARES IN YOUR NAME
VOTES AS IN THIS
EXAMPLE.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Election of FOR WITHHELD 2. Approve and adopt FOR AGAINST ABSTAIN 4. Approve and adopt FOR AGAINST ABSTAIN
Directors / / / / 1994 Reliance / / / / / / 1994 Reliance / / / / / /
(see reverse) Electric Company Electric Company
Executive Stock Executive Long
Option Plan Term Incentive
Plan
For, except vote 3. Approve and adopt
withheld from 1994 Reliance / / / / / /
the following Electric Company
nominee(s): Outside Directors
Stock Option Plan
5. Ratify appointment / / / / / /
of Price Waterhouse
as the Company's
independent
accountants
for the year
ending
December 31,
1994.
Change / /
of
Address
6. In their discretion
to act on any other
matter or matters
which may properly
come before the
Annual Meeting
</TABLE>
SIGNATURE(S) ___________________________________________ DATE ____________
SIGNATURE(S) ___________________________________________ DATE ____________
NOTE: Please sign exactly as name appears
hereon. Joint owners should each sign.
When signing as attorney, executor,
administrator, trustee or guardian, please
give full title as such.
<PAGE> 67
RELIANCE ELECTRIC COMPANY SAVINGS AND INVESTMENT PLAN
TO: SOCIETY NATIONAL BANK, SAVINGS
AND INVESTMENT PLAN TRUSTEE
The undersigned hereby directs Society National Bank, Savings and
Investment Plan Trustee, to vote shares of Class A Common Stock held for
P the undersigned's Savings and Investment Plan account at the Annual
Meeting of Stockholders to be held at 9:30 A.M. (EDT) on April 21, 1994,
R or any adjournments or postponements thereof, as specified, or, if no
specification is made, FOR the election of the six Directors nominated
O by the Board of Directors, FOR the approval and adoption of the 1994
Reliance Electric Company Executive Stock Option Plan, FOR the approval
X and adoption of the 1994 Reliance Electric Company Outside Directors
Stock Option Plan, FOR the approval and adoption of the 1994 Reliance
Y Electric Company Executive Long Term Incentive Plan, FOR the
ratification of Price Waterhouse as the Company's independent
accountants for 1994, and to vote in accordance with its discretion on
such other matters as may properly come before the meeting.
<TABLE>
<S> <C>
Election of Directors, (change of address)
Nominees:
ANTHONY C. HOWKINS, JOHN C. MORLEY, ______________________________________
ALFRED M. RANKIN, JR. DUDLEY P. SHEFFLER ______________________________________
H. VIRGIL SHERRILL and E. MANDELL de WINDT ______________________________________
(If you have written in the above space,
please mark the corresponding box on
the reverse side of this card.)
</TABLE>
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE
BOXES, SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH
TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS.
THE TRUSTEE CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS
CARD.
SEE REVERSE
SIDE
<PAGE> 68
/ X/ PLEASE MARK YOUR SHARES IN YOUR NAME
VOTES AS IN THIS
EXAMPLE.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Election of FOR WITHHELD 2. Approve and adopt FOR AGAINST ABSTAIN 4. Approve and adopt FOR AGAINST ABSTAIN
Directors / / / / 1994 Reliance / / / / / / 1994 Reliance / / / / / /
(see reverse) Electric Company Electric Company
Executive Stock Executive Long
Option Plan Term Incentive
Plan
For, except vote 3. Approve and adopt
withheld from 1994 Reliance / / / / / /
the following Electric Company
nominee(s): Outside Directors
Stock Option Plan
5. Ratify appointment / / / / / /
of Price Waterhouse
as the Company's
independent
accountants
for the year
ending
December 31,
1994.
Change / /
of
Address
6. In its discretion
to act on any other
matter or matters
which may properly
come before the
Annual Meeting
</TABLE>
SIGNATURE(S) ___________________________________________ DATE ____________
NOTE: Please sign exactly as name appears
hereon. When signing as attorney, executor,
administrator, trustee or guardian, please
give full title as such.
