SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11( c ) or Rule 14a-12
REGAL - BELOIT CORPORATION
(Name of Registrant as Specified In Its Charter)
_________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required
[ ] Fee computed on the 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 (Set forth the amount on which the filing fee is calculated
and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify
the filing for which the offsetting fee was paid previously.
Identify the previous filing by registration
statement number, or the Form or Schedule and the date of
its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
REGAL-BELOIT CORPORATION
---------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 21, 1998
To the Shareholders of Regal-Beloit Corporation:
Notice is hereby given that the Annual Meeting of Shareholders of
Regal-Beloit Corporation, a Wisconsin Corporation (the "Company")
will be held at the Company Headquarters, 200 State Street, Beloit,
Wisconsin 53511-6254, on Tuesday, April 21, 1998, at 10:30 A.M. Central
Daylight Time for the following purposes:
1. To elect three Class B Directors for a term of three years.
2. To ratify the appointment of Arthur Andersen LLP as independent public
accountants for the Company for the year ending December 31, 1998.
3. To approve the Company's 1998 Stock Option Plan.
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors does not have plans to bring any other business before
the meeting, and has not been advised that any other business will be brought
before the meeting.
Only shareholders of record at the close of business on February 27, 1998,
are entitled to notice of and to vote at this meeting.
To assure your representation at the meeting, you are urged to promptly
complete, date, sign and return the enclosed proxy which is being solicited
on behalf of the Board of Directors, whether or not you expect to attend the
Annual Meeting in person. A return envelope is provided. You may revoke your
proxy at any time prior to the voting thereof by written notice filed with the
Secretary of the Company. If you attend the Annual Meeting in person, you may
revoke your proxy at any time prior to the voting thereof, even if you already
returned your proxy.
A copy of the 1997 Annual Report of the Company accompanies this Notice and
attached Proxy Statement.
By Order of the Board of Directors
/s/ Kenneth F. Kaplan
-------------------
Kenneth F. Kaplan
Vice President, Chief Financial Officer, Secretary
REGAL-BELOIT CORPORATION
Beloit, Wisconsin
March 13, 1998
<PAGE>1
REGAL-BELOIT CORPORATION
200 STATE STREET
BELOIT, WISCONSIN 53511-6254
--------------------------
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS, APRIL 21, 1998
SOLICITATION AND VOTING
The enclosed proxy for the Annual Meeting of Shareholders (the "Annual
Meeting") to be held April 21, 1998, and any and all adjournments thereof,
is solicited on behalf of the Board of Directors of the Company. This Proxy
Statement, Notice of Meeting and accompanying proxy card are first being
mailed to shareholders on or about March 13, 1998.
The Company will bear the expense of this solicitation of proxies. It is
expected that only solicitations by mail will be used, except that Directors,
Officers or regular employees of the Company may solicit proxies personally,
by telephone or by facsimile. The Company may pay brokers and other
custodians, nominees and fiduciaries their reasonable expenses for sending
proxy material to principals and obtaining their proxies.
On December 31, 1997, the outstanding voting securities of Regal-Beloit
Corporation consisted of 20,830,226 shares of $0.01 par value Common Stock,
each share of which is entitled to one vote. Only shareholders of record at
the close of business on February 27, 1998, will be entitled to vote at the
meeting.
A proxy may be revoked at any time prior to the voting thereof by notice in
writing filed with the Secretary of the Company or by withdrawal in person at
the registration desk at the Annual Meeting. Properly executed proxies will be
voted as specified, unless revoked. In the absence of such specification(s),
shares will be voted FOR the election of all three Class B nominees for the
Board of Directors, FOR the ratification of Arthur Andersen LLP as the
Company's independent certified public accountants for the year ending
December 31, 1998, and FOR approval of the Company's 1998 Stock Option Plan
(the "1998 Plan").
A majority of the shares entitled to vote, present in person or represented
by proxy, shall constitute a quorum at the Annual Meeting. Abstentions and
broker non-votes are counted for purposes of determining the presence or
absence of a quorum.
If a quorum is present, Directors are elected by a plurality of the votes
cast by the holders of Company Common Stock entitled to vote in the election
at the Annual Meeting. "Plurality" means that the individuals who receive the
largest number of votes are elected as directors up to the maximum number of
directors to be chosen at the meeting. An abstention or broker non-vote will
have no effect on the election of directors under Wisconsin law. To approve
the 1998 Plan, the affirmative vote of a majority of the shares present or
represented and entitled to vote is required. Abstentions will have the effect
of votes against the proposal to approve the 1998 Plan. Broker non-votes
will have no effect on the outcome of the proposal. As to any other matter
which properly comes before the meeting, approval is required by a majority
of the shares represented at the meeting if a quorum of those shares is
present. Abstentions in regard to such other matters will have the same
effect as a negative vote. However, broker non-votes, which will not be
counted as shares entitled to vote, will have no effect.
<PAGE>2
PROPOSAL 1: ELECTION OF DIRECTORS
The current three-year term of the Class B Directors expires at the
forthcoming Annual Meeting. Unless otherwise directed, proxies will be voted
at the Annual Meeting for the election of nominees, John M. Eldred,
John A. McKay, and G. Frederick Kasten, Jr. as Class B Directors for a
three-year term until the 2001 annual shareholder meeting and until their
successors are duly elected. All are currently serving as Directors.
Management has no reason to believe that any of the foregoing nominees is not
available or will not serve if elected, but if any of them should become so
unavailable to serve as a Director, full discretion is reserved to the persons
named as proxies to vote for such other persons as may be nominated.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH NAMED NOMINEE.
The following sets forth certain information (furnished by them to the
Company) concerning each nominee and each Director whose term of office
continues after the Annual Meeting.
<TABLE>
<CAPTION>
Beneficial Ownership of
Company Stock As of
December 31, 1997
----------------
Principal Occupation, Business Director Number of Percent of
Name and Age Experience and Other Directorships Since Shares Class
- ------------------- ----------------------------------- ---------- ------------ -----------
Nominees for Election:
Class B Directors
Term Expires in 2001:
<S> <C> <C> <C> <C>
JOHN M. ELDRED - 67 President, The First National Bank & Trust 1965 46,828 *
(1) (3) Company of Beloit; Director, The First
National Bank & Trust Company of Beloit.
JOHN A. MCKAY - 64 Former President & COO, Harnischfeger 1992 9,904 *
(2) Industries, Inc.; former Chairman and
CEO, Beloit Corporation; Director,
Sandusky International Inc., The First
National Bank & Trust Company of Beloit.
G. FREDERICK KASTEN, JR. - 58 Chairman & CEO, Robert W. Baird & Co., Inc., 1995 34,288 *
(2) Director, Robert W. Baird & Co., Inc.
Directors Continuing in Office:
Class C Directors
Term Expires in 1999:
J. REED COLEMAN - 64 Chairman, Madison-Kipp Corporation; 1981 71,054 *
(1) Director, Madison-Kipp Corporation,
Xeruca Corp., Lunar Corporation and
NIBCO, Inc.
</TABLE>
<PAGE>3
<TABLE>
<CAPTION>
Beneficial Ownership of
Company Stock As of
December 31, 1997
------------------------
Principal Occupation, Business Director Number of Percent of
Name and Age Experience and Other Directorships Since Shares Class
______________ ---------------------------------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
FRANK E. BAUCHIERO - 63 President, Walbro Corporation; former 1993 9,366 *
(2) President, Industrial, Dana North America;
former President, Warner Electric Division
of Dana Corporation; Director, Walbro
Corporation, Rockford Products
Corporation, M & I Bank of Beloit, and
Madison-Kipp Corporation.
STEPHEN N. GRAFF - 63 Retired Milwaukee Office Managing 1996 3,400 *
(2) Partner, Arthur Andersen LLP and
Andersen Worldwide S.C.; Director, Super
Steel Products Inc., Northwestern Mutual
Series Fund, Inc., Mason Street Funds, Inc.,
Northwestern Mutual Life Insurance Co.,
Super Steel Schenectady, Inc.
Class A Directors
Term Expires in 2000:
WILLIAM W. KEEFER - 72 Former Chairman, Warner Electric Division 1985 48,528 *
(1) of Dana Corporation.
JAMES L. PACKARD - 55 Chairman, President and Chief Executive 1980 495,680 2.4
(3) (4) (5) (6) Officer of the Company, employed with the
Company since 1979. President and
Director since 1980. Chief Executive
Officer since 1984. Chairman since 1986.
Director, The First National Bank & Trust
Company of Beloit.
HENRY W. KNUEPPEL - 49 Executive Vice President, employed 1987 241,790 1.2
(4) (5) (6) with the Company since 1979. Director
and Executive Vice President since
1987. President, Marathon Electric
Manufacturing Corporation since 1997.
Total Directors As A Group 953,932 4.6
</TABLE>
[FN]
* Represents less than 1% of the Common Stock
</FN>
<PAGE>4
[FN]
(1) The amounts shown for Messrs. Coleman, Eldred, and Keefer include 6,454
shares each for which they have vested but unexercised nonqualified stock
options. The amount shown for Mr. Eldred includes 200 shares held in an
Individual Retirement Account (the "IRA") and 500 shares in a Keogh Plan.
(2) The amounts shown for Messrs. McKay, Bauchiero, Kasten and Graff include
9,704 shares, 7,366 shares, 4,288 shares and 1,200 shares, respectively, for
which they have vested but unexercised options.
(3) The amounts shown for Messrs. Eldred and Packard include 6,206 shares
and 1,416 shares, respectively, held by their spouses as to which they
disclaim beneficial ownership.
(4) The amounts shown for Messrs. Packard and Knueppel include 158,000 shares
and 101,000 shares, respectively, for which they have vested but unexercised
options, but which could be exercised within 60 days pursuant to outstanding
option grants.
(5) The amounts shown for Messrs. Packard and Knueppel include 316,136 shares,
and 120,930 shares, respectively, as to which they share voting and
investment power with a spouse.
(6) The amounts shown for Messrs. Packard and Knueppel include 20,128 shares
and 16,320 shares, respectively, as to shares held in trust under the Company's
Employee Profit Sharing Plan and Trust, the Company's Personal Savings Plan
(401K) and an IRA.
</FN>
1997 Committees Of The Board
The standing committees of the Board of Directors are the Audit Committee,
the Compensation Committee and the Nominating Committee.
Audit Committee. The current Audit Committee members are Directors
J. Reed Coleman, Chairman, William W. Keefer and Frank E. Bauchiero.
James L. Packard is an ex-officio member. The committee is appointed by and
receives its authority and assignments from and reports to the Board of
Directors. Its responsibilities include, but are not limited to,
recommendations of the appointment of the public accountants, review of the
scope and results of the public accountants' audit activities and the fees
proposed and charged therefore, and review of the Company's accounting
controls and policies, financial reporting practices and the internal audit
control procedures and related reports of the Company. The committee held
three meetings in 1997.
Compensation Committee. The current Compensation Committee consists of
Directors John A. McKay, Chairman, John M. Eldred, and Stephen N. Graff. The
committee is appointed by and reports to the Board of Directors. Among its
duties are to recommend to the Board of Directors the annual compensation of
the directors and principal corporate officers (the "Officers" or the
"Named Executive Officers") and executives and to review, formulate, recommend
and administer short and long range compensation programs for Officers and Key
Employees. The committee held three meetings during 1997.
Nominating Committee. Directors who serve on the Nominating Committee are
John M. Eldred, Chairman, G. Frederick Kasten, Jr., and William W. Keefer.
This committee is responsible for recommending to the Board candidates to fill
interim and expiring Board and Officer vacancies. Nominees are selected on
the basis of outstanding professional and business achievements, character and
their ability to make useful contributions in the best interests of the
Company. The committee will consider nominees suggested by shareholders. It
is suggested that any such nominees be brought to the attention of the
Secretary. No meetings were held during 1997.
<PAGE>5
Other Information About The Board
The Board of Directors has the responsibility to elect the Officers, establish
corporate policies and to oversee the overall performance of the Company.
Members of the Board are kept informed by written reports and financial data
sent to them each month, as well as by oral and written operating, planning
and financial reports given to them by Company Officers and others at Board and
committee meetings.
Directors' Compensation. Each Outside Director of the Company (currently
Messrs. Coleman, Bauchiero, Eldred, Keefer, McKay, Graff and Kasten) receives
an annual fee of $15,000 plus $1,000 and expenses for each Board meeting
attended in person or $750 if attended telephonically. The Audit,
Compensation and Nominating Committee Chairmen each receive an additional
$1,250 annual fee. There are four regularly scheduled Board of Directors
meetings per year. In 1997, two special Board Meetings were held. Outside
Directors serving on committees of the Board of Directors receive an
additional $1,000 if attended in person or $750 if attended telephonically,
plus expenses for each committee meeting attended. In addition, the Company
provides Directors with travel and accident insurance benefits.
During fiscal 1997, no incumbent Board Member attended fewer than seventy-five
percent (75%) of the aggregate of (i) the total number of meetings of the
Board held during the period for which he was a Director and (ii) the total
number of meetings of all committees of the Board on which he served during
the period that he served.
Outside Directors Non-Qualified Stock Option Grant. On January 23, 1992,
the Board of Directors granted to each non-employee member of the Board of
Directors a non-qualified stock option grant of 20,000 shares of Common Stock,
at an option price of $7.50 per share, which price was equal to the closing
price of a share of Regal-Beloit Corporation's Common Stock on the date of
grant, as adjusted to reflect the August 1994 two-for-one stock split. The
options granted would terminate five (5) years from the date of grant or one
year following the Director's death, but in any event prior to the expiration
date of the option. The grant was exercisable as to one-quarter of the shares
granted on the date of grant and one-quarter on each anniversary date
thereafter. The limitation on exercisability was to be removed immediately
upon death, ceasing to be a member of the Board or a change in control. All
outstanding stock option grants were exercised in 1996 and 1997.
<PAGE>6
Regal-Beloit Corporation's 1991 Flexible Stock Incentive Plan. Effective
April 24, 1996, under the Regal-Beloit Corporation 1991 Flexible Stock
Incentive Plan, as amended, (the "1991 Plan"), each individual Outside Director
was, and will be annually, granted stock options, stock appreciation rights
or any combination thereof in the amount of 800 shares of Common Stock at the
fair market value as of the date corresponding to the Annual Shareholders'
Meeting, except that the first grant to an initially elected Outside Director
shall be 2,400 shares granted on the date corresponding to the Annual
Shareholders' Meeting at which the Outside Director is initially elected.
The right to exercise any grant given to Directors shall vest immediately upon
grant. Unexercised Grants to Outside Directors shall terminate the earlier of
ten (10) years after the date of grant or one (1) year after the date of the
death of the Outside Director. Any Outside Director who is terminated for
cause and has not effectively exercised his options prior to termination shall
have such unexercised options lapse immediately upon termination as an Outside
Director. "Cause" is defined as a serious or willful act of misconduct
detrimental to the business or reputation of Regal-Beloit Corporation or its
subsidiaries.
Grants to an Outside Director are controlled by the terms and conditions of
the 1991 Plan and the rules, regulations, agreements, guidelines, instruments
and interpretations issued by the Compensation Committee, except where
inconsistent with the limitations set forth in Section 4 of the 1991 Plan.
Certain Relationships and Related Transactions. Director John M. Eldred is
the President, and he and Directors Packard and McKay are Directors of The
First National Bank & Trust Company of Beloit (the "Bank"), Beloit, Wisconsin.
During 1997, Regal-Beloit Corporation had business transactions with the Bank.
All transactions were in the ordinary course of business and it is anticipated
that like transactions will continue. As of December 31, 1997, the Company had
an outstanding letter of credit with the Bank in the aggregate amount of
$125,000. Director G. Frederick Kasten, Jr. is the Chairman and Chief Executive
Officer of Robert W. Baird & Co., Inc. ("Baird"). During 1997, Regal-Beloit
Corporation had business transactions with Baird. All transactions were in the
ordinary course of business and it is anticipated that like transactions will
continue.
<PAGE>7
SECURITY OWNERSHIP
OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of December 31, 1997, as to
each person (including any "Group" as that term is used in Section 13d-3 of
the Securities Exchange Act) known to the Company to be the beneficial owner of
more than 5% of the Common Stock, shares beneficially owned by each Named
Executive Officer, and Directors and Named Executive Officers as a group.
Except as indicated in the footnotes, all persons listed have sole voting and
investment power.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership Of Class
- ----------------------------------------------------------------------------------
<S> <C> <C>
FMR Corporation 1,561,600 7.5%
(Fidelity Investments)
82 Devonshire Street
Boston, MA 02109-3614
The Prudential Insurance Company 1,512,120 7.3%
of America
751 Broad Street
Newark, NJ 07102-3777
Kenneth F. Kaplan (2) (3) 1,438 *
Henry W. Knueppel (1) (2) (3) 241,790 1.2%
James L. Packard (1) (2) (3) (4) 495,680 2.4%
Total Directors & Officers as a Group 955,370 4.6%
</TABLE>
[FN]
* Represents less than 1% of the Common Stock
(1) The amounts shown for Messrs. Packard and Knueppel include 158,000 shares
and 101,000 shares, respectively, for which they have vested but unexercised
options, but which could be exercised within 60 days pursuant to outstanding
option grants.
(2) The amounts shown for Messrs. Packard and Knueppel includes 316,136
shares, and 120,930 shares, respectively, as to which they share voting and
investment power with a spouse.
(3) The amounts shown for Messrs. Packard, Knueppel and Kaplan include 20,128
shares, 16,320 shares and 338 shares, respectively, as to shares held in
trust under the Company's Employee Profit Sharing Plan and Trust, the Company's
Personal Savings Plan (401K) and an IRA.
(4) The amount shown for Mr. Packard includes 1,416 shares held by his spouse
as to which he disclaims beneficial ownership.
</FN>
<PAGE>8
COMPENSATION
Report of Compensation Committee on Annual Compensation
The Compensation Committee of the Board of Directors (the "Committee") as
described above is composed entirely of independent Non-Employee Directors.
The Committee is responsible for setting and administering the policies which
govern both annual compensation and stock option programs. The following is an
overview of those compensation policies.
Overall Policy for Named Executive Officers' Compensation. The Compensation
Committee of the Board of Directors maintains executive salary and benefits
at a level that will permit the Company to attract and retain the highest
quality individual in its key executive positions, taking into consideration
the prevailing competitive job market, the current and projected size of the
Company, its ability to pay and the relationship of the resulting executive
compensation to other non-executive compensation in the Company.
Named Executive Officers' compensation overall for 1997 consisted of a cash
salary and a performance bonus. No Named Executive Officer received a Stock
Option Grant.
Named Executive Officers' Incentive Plan. The Company's Named Executive
Officers' Incentive Plan (the "Bonus"), an annual performance bonus program,
is used as an incentive to reward positive results to the Named Executive
Officers. The Bonus is based exclusively on "Return On Average Shareholders'
Equity" (the "ROE"). Payment is on a sliding scale dependent upon the
Company's average ROE. Bonuses are earned only after ROE equals or exceeds 10%.
The Bonus is maximized upon reaching ROE of 20%. Benefits are further
factored depending upon a job responsibility factor. In addition,
discretionary bonuses may also be granted by the Board of Directors.
General Measures Used to Determine Compensation for the Chief Executive
Officer. The cash salary compensation, bonus and stock option programs are
determined by annually comparing the Chief Executive Officer's position to
those of similar chief executive officers for companies of comparable size
and type as reported in one or more representative management compensation
studies, taking into consideration geographic location, inflation and the
responsibilities commensurate with the position.
Criteria Used in Determining Compensation of the Named Executive Officers,
other than the Chief Executive Officer. The criteria for determining the
cash salary, annual performance bonus and stock options for the other Named
Executive Officers is basically the same as outlined above for the Chief
Executive Officer except that the annual performance bonus payouts are factored
down depending on position responsibility. Option grants may also vary and
contain fewer restrictions.
Stock Option Philosophy. Stock options for Named Executive Officers,
including the Chief Executive Officer, have been historically granted on a
periodic basis to accomplish a diverse set of goals, namely, to advance the
Company's growth and success by attracting well-qualified Executives upon whose
judgment the Company is dependent for the successful conduct of its operations
and to provide such Executives with incentives to put forth maximum effort for
the long-term success of the Company's business. The size and term are based
on competitive practice and position levels to ensure retention and alignment
of these Named Executive Officers' long-range interests with those of the
shareholders and the opportunity for those Named Executive Officers to build
a meaningful stake in the Company.
<PAGE>9
The above overview of the Company's compensation policies has been presented
by the following named Directors comprising the Compensation Committee for the
fiscal year ending December 31, 1997.
John A. McKay, Chairman
John M. Eldred
Stephen N. Graff
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consisted of John A. McKay, Chairman,
John M. Eldred and Stephen N. Graff. Mr. Packard, the Company's Chief
Executive Officer, Mr. Eldred, and Mr. McKay, who are Directors of the
Company, serve on the Board of Directors of the Bank, and participate in
decisions by the Bank's compensation committee regarding compensation of its
executives. During the past fiscal year, the Company had business transactions
with the Bank. All transactions were in the ordinary course of business and
it is anticipated that like transactions will continue. As of December 31,
1997, the Company had one outstanding letter of credit with the Bank in the
amount of $125,000.
Comparison of Five Year Cumulative Total Return
The following graph compares the hypothetical total shareholder return
(including reinvestment of dividends) on an investment in (1) the Company's
Common Stock (2) AMEX Market Value Index and (3) the Standard & Poor's
Manufacturing Diversified Industrials Index ("S&P") for the period
January 1, 1993 through December 31, 1997. In each case, the graph assumes the
investment of $100.00 on December 31, 1992. Regal-Beloit Corporation and the
S & P data were supplied by S & P Compustat Services, Inc. AMEX data was
supplied by the American Stock Exchange Equity Research and Development
Department.
<TABLE>
<CAPTION>
Five Year Cumulative Performance Graph
<S> <C> <C> <C> <C> <C>
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
Regal-Beloit Corporation 126 133 218 202 309
AMEX Market Value Index 120 109 137 146 177
S&P Manufacturing Diversified Industrials 121 126 177 244 290
</TABLE>
<PAGE>10
<TABLE>
SUMMARY COMPENSATION TABLE
Annual Compensation (1) Long-Term Compensation
----------------------- ----------------------
Awards
-------------
$ Other $ Stock Long-Term $
$ Bonus Annual Restricted Options Incentive All Other
Name Principal Position Year Salary (2) Comp. (3) Stock (4) Payouts Comp. (5)
- --------------- ------------------ ---- ------ ------ --------- ----------- ------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
James L. Packard Chairman, President, 1997 375,000 295,000 (3) -0- -0- -0- 7,591
Chief Executive 1996 350,000 252,000 (3) -0- -0- -0- 7,850
Officer 1995 324,000 233,280 (3) -0- -0- -0- 7,261
Henry W. Knueppel Executive Vice 1997 230,000 141,120 (3) -0- -0- -0- 24,157
President 1996 215,000 123,840 (3) -0- -0- -0- 9,416
(6) 1995 200,000 115,200 (3) -0- -0- -0- 9,719
Kenneth F. Kaplan (1) Vice President, 1997 150,000 82,000 (3) -0- -0- -0- 16,440
Chief Financial Officer, 1996 49,629 25,000 (3) -0- 20,000 -0- 420
Secretary
</TABLE>
[FN]
(1) The table reflects compensation to Mr. Kaplan from September 16, 1996,
when he joined the Company. Effective October 25, 1996, Mr. Kaplan was
elected as Vice President, Chief Financial Officer replacing Mr. Robert C.
Burress as Chief Financial Officer. On April 24, 1997 Mr. Kaplan was
elected to the additional office of Secretary, a position previously
held by Mr. Burress, who retired effective April 30, 1997. From 1985
through 1996, Mr. Kaplan was employed with Gehl Company, a public
corporation, serving in the position of Vice President of Finance and
Treasurer.
(2) Includes amounts earned in fiscal year, whether or not deferred or payable.
(3) The Company also provides its Named Executive Officers certain additional
non-cash benefits that are not described in this Proxy Statement. Such
compensation is below the Securities and Exchange Commission's required
disclosure thresholds.
(4) No Named Executive Officer was granted a stock option in fiscal year 1997.
(5) Includes vested and non-vested contributions to the Company's Employee
Profit Sharing Plan and Trust, premiums for term life insurance, and
allowances for moving expenses.
(6) In 1997, in addition to his position as Executive Vice President,
Mr. Knueppel was appointed to the office of President of Marathon
Electric Manufacturing Corporation.
</FN>
<PAGE>11
Ownership Of Company Stock And Stock Equivalents By Named Executive Officers
To encourage growth in shareholder value, the Company believes that the Named
Executive Officers who are in a position to make a substantial contribution to
the long-term success of the Company should have a significant stake in its
on-going success through stock ownership. This focuses attention on managing
the Company as an owner with an equity position in the business.
Stock Option Plans
In order to provide long-term incentives to Directors, Officers and Key
Employees of the Company, stock option plans have been adopted by the Board
of Directors and previously approved by the Shareholders.
Prior to its expiration in 1992, the Company's 1982 Incentive Stock Plan
(the "1982 Plan") provided stock options for Officers and Key Employees.
The Compensation Committee of the Board of Directors administered the 1982
Plan. The Committee recommended the eligible persons to whom options could be
granted, the number and price of shares to be optioned, and limitations which
included the date such options became exercisable. As of December 31, 1997,
3,600 shares of Common Stock subject to outstanding options previously granted
remain exercisable by Key Employees.
The Company also maintains a 1987 Stock Option Plan (the "1987 Plan")
which provided for the grant of stock options to Officers and Key Employees on
terms substantially similar to the 1982 Plan (except for certain federal income
tax treatment). The 1987 Plan expired in 1997. As of December 31, 1997,
214,350 shares of Common Stock subject to outstanding options previously
granted remain exercisable.
The Regal-Beloit Corporation 1991 Flexible Stock Incentive Plan, as amended,
(the "1991 Plan") provides long-term incentives to eligible Directors,
Officers and Key Employees of the Company. The 1991 Plan is administered by
the Board of Directors or a committee of Outside Directors. The committee
selects the eligible participants, determines the size, the time and terms of
grants to be given, except grants to Outside Directors are limited by the
1991 Plan. Grants may be made in the form of Deferred Stock, Restricted Stock,
Stock Options, Performance Shares, Stock Appreciation Rights, or a combination
thereof. The committee determines the amount, the form of and combination
to be received by the participant. The maximum number of shares of
Common Stock available for distribution under the 1991 Plan is 1,000,000 shares
(adjusted for the August 1994 two-for-one stock split). As of December 31,
1997, 689,732 shares of Common Stock subject to outstanding options previously
granted remain exercisable.
Option Grants in Fiscal 1997
Pursuant to the stock option plans stated above, options to purchase Common
Stock of the Company are granted to the Named Executive Officers, Directors and
Key Employees of the Company and its subsidiaries. Stock options totaling
238,250 shares were granted to Key Employees and 5,600 shares were granted to
Non-Employee Directors in fiscal year 1997.
<PAGE>12
Aggregated Option Shares Exercised in 1997 Fiscal Year and Year-End Values
The following table contains information concerning stock options exercised
during fiscal year 1997 and fiscal year-end value of unexercised options with
respect to the Named Executive Officers.
<TABLE>
<CAPTION>
Total Number of Total Value of
Number Of Unexercised Options Held Unexercised, In-The-Money
Shares At Fiscal Year-End Options Held at Fiscal Year-End
Acquired On Value ------------------ --------------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable (1) Unexercisable (1)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
James L. Packard 16,136 $203,404 158,000 80,000 $3,552,255 $1,789,960
Henry W.Knueppel 9,750 125,250 101,000 48,000 2,268,672 1,073,976
Kenneth F. Kaplan ----- ----- ----- 20,000 ----- 241,250
</TABLE>
[FN]
(1) Total value of exercisable and unexercisable options is based on the
difference between the fair market value ($29 9/16 as of December 31, 1997) of
the Company's stock and the exercise price of the options on the date of Grant
or at fiscal year-end.
[FN]
SUMMARY OF BENEFIT PLANS
The Company has certain plans which provide, or may provide, compensation
and benefits to Named Executive Officers of the Company, which are described
herein. These plans are principally the Company's Profit Sharing Plan,
Target Supplemental Retirement Plan and Supplemental Disability Insurance.
Profit Sharing Plan
The Company makes an annual discretionary contribution to its tax-qualified
Profit Sharing Plan which covers certain hourly and salaried employees,
including the Named Executive Officers. Eligible employees become participants
in the Profit Sharing Plan on the first January 1 or July 1 after completing
twelve (12) months of service and being credited with at least 1,000 hours of
service. The Company's contribution to the Profit Sharing Plan is allocated
to participants in accordance with a formula pursuant to the Internal Revenue
Code of 1986, as amended (the "Code") based upon participant compensation and
years of service with the Company. Under the Code, the amount of compensation
that may be taken into account with respect to any highly compensated
Participant, including all Named Executive Officers, is limited to $160,000 for
taxable years beginning after 1996 and to $150,000 for 1995. In addition, the
Code further limits annual contributions to highly compensated Participants
according to a formula based upon contributions made by the Company to
non-highly compensated eligible Participants for the taxable year.
A participant must be employed on the last day of the year and be credited
with 1,000 hours of service during the year to be eligible for an allocation.
Company contributions vest at 20% per year beginning after the completion of
three years of service. Participants have the option to direct the investment
of their accounts in 10% increments. Options include a fixed income fund, a
bond fund, a balanced fund, two equity funds and a Regal-Beloit Corporation
stock fund. Distributions from the plan are made generally upon termination of
service for any reason in the form of a single sum payment in cash or in
Regal-Beloit Corporation stock, provided a participant's vested interest
includes a minimum of 100 shares.
<PAGE>13
The amount allocated is included in the cash compensation of each employee.
Amounts allocated to the Company's Named Executive Officers for 1997 are
included in the Summary Compensation Table.
Target Supplemental Retirement Plan
The Target Supplemental Retirement Plan ("TSRP") limits participants to
Officers and selected Key Employees who are designated by the Compensation
Committee.
All individuals named in the Summary Compensation Table participate in the
TSRP. Under the TSRP, participants are entitled, upon normal or approved early
retirement, to receive a target supplemental retirement benefit, which,
together with social security and a hypothetical profit sharing plan balance
annuitized over fifteen (15) years, equals the lesser of two percent (2%) of the
final five (5) years average salary times years of service with the Company, up
to a maximum of 30 years or 60% income replacement. Consequently, unless
reduced as described below, the estimated annual target supplemental retirement
benefits to TSRP participants will approximate those shown in the column of the
following table which sets forth estimated benefits for participants with
various years of credited service.
These benefits will be reduced by the Social Security payment and the
amortized hypothetical profit sharing balance.
<TABLE>
<CAPTION>
Average Annual
Earnings For The
Final Five Years Years of Credited Service
Of Service -------------------------
10 15 20 25 30
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$100,000 $20,000 $30,000 $40,000 $50,000 $60,000
200,000 40,000 60,000 80,000 100,000 120,000
300,000 60,000 90,000 120,000 150,000 180,000
400,000 80,000 120,000 160,000 200,000 240,000
500,000 100,000 150,000 200,000 250,000 300,000
</TABLE>
The TSRP participant needs a minimum of 15 years of continuous service and
have reached the age of 62 to qualify for early retirement benefits. The
Compensation Committee may grant a participant additional years of service to
qualify for benefits.
The TSRP is designed to provide a participant a retirement benefit that is
comparable in replacement income percentage provided to lower paid employees.
The TSRP does this by supplementing retirement income which is lost to higher
paid employees due to social security caps and limits on income considered for
the Company's Qualified Retirement Plans.
<PAGE>14
Supplemental Disability
The Company also provided supplemental disability insurance for Named
Executive Officers and salaried employees during 1997. The Plan provides
compensation to a disabled Named Executive Officer at the rate of 100% of
his normal salary for the first 12 months of total disability and 60%
thereafter. Other salaried employees receive 100% of their normal salary for
the first 6 months of total disability and 60% thereafter. None of the
Company's Named Executive Officers received disability benefits during 1997.
Employment Contracts and Executive Termination Benefits Agreement
The Company has no employment contracts with any Named Executive Officers of
the Company. However, the Company has termination benefits agreements
(the "Agreements") with the three Named Executive Officers of the Company.
The benefits provided by the Agreements are triggered by the termination of the
individual who is a party to an Agreement within three years following a change
in control of the Company, if the individual's employment with the Company is
terminated not for cause or if the individual terminates his or her employment
with "good reason". If the individual's employment is terminated for cause, or
as a consequence of death or disability, the Agreement is not triggered. The
employment period is three years commencing with the change in control. The
Agreement provides that upon such termination, the termination payment shall be
a severance payment equal to the sum of the individual's annual salary then in
effect plus the amount of the individual's highest annual bonus award during
the previous three years, multiplied by the number of years (or fractional
portion of a year) remaining in the employment period, but not less than one
year's annual salary and bonus award. The individual may elect to receive such
payment in a lump sum or monthly installments. In addition, the individual, at
no cost, shall continue to participate in the Company's medical and dental
benefit plan for the remainder of the employment period. The termination
payments and benefits described above may be reduced if necessary to comply
with Internal Revenue Code limits concerning "golden parachutes".
SECTION 16(a)
BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Officers and Directors, and persons who own more than ten percent (10%) of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and the American Stock Exchange. Officers, Directors and greater than ten
percent (10%) shareholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by the
Company or written representation from certain reporting persons, the Company
believes that its Officers, Directors, and greater than ten percent (10%)
beneficial owners complied with all applicable filing requirements.
PROPOSAL 2: SELECTION OF AUDITORS
The Board of Directors, in accordance with the recommendation of its Audit
Committee, has appointed Arthur Andersen LLP as the Company's independent
public accountants for the year ending December 31, 1998 and is submitting
the selection of auditors for approval by the shareholders at the forthcoming
Annual Meeting. Representatives of Arthur Andersen LLP will be present at the
Annual Meeting and will be available to respond to appropriate questions and to
make a statement if they desire to do so.
<PAGE>15
In addition to services performed in connection with their audit function
(which services included examination of the annual financial statements,
assistance and consultation in connection with filing the 10-K annual report
with the Securities and Exchange Commission and auditing the Company's Profit
Sharing Plan and Personal Savings Plan), Arthur Andersen LLP provided other
non-audit services during the year ended December 31, 1997. The Audit
Committee concluded that the performance of such services does not impair the
independence of Arthur Andersen LLP as Regal-Beloit Corporation's auditors.
In the event the shareholders do not ratify the appointment of Arthur Andersen
LLP or if for any reason that firm shall cease to act as auditors for
Regal-Beloit Corporation, the Board of Directors will appoint other independent
public accountants as auditors.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPOINTMENT OF ARTHUR
ANDERSEN LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR FISCAL 1998.
PROPOSAL 3: APPROVAL OF 1998 STOCK OPTION PLAN
The complete text of the 1998 Stock Option Plan (the "1998 Plan") is set
forth in Exhibit A. The following summarizes the material features of the 1998
Plan.
On January 23, 1998, the Board of Directors adopted the 1998 Plan. Subject to
shareholder approval, the 1998 Plan will become effective on April 21, 1998.
The purpose of the 1998 Plan is to both attract and retain Directors, Officers,
key executives and other management employees by granting stock options for the
Company's Common Stock, thereby providing long-term incentives tied to the
success of the Company.
The aggregate number of shares of Common Stock subject to the 1998 Plan is
1,000,000 shares, $0.01 par value. The 1998 Plan will terminate on
April 20, 2008. The Board of Directors may terminate or amend the 1998 Plan in
whole or in part at any time. However, the Board may not, without approval of
a majority of the shareholders, increase the maximum number of shares reserved
under the 1998 Plan, extend the maximum 10-year period during which stock
option Grants (the "Grant") may be granted under the 1998 Plan or reduce the
price per share at which Incentive Stock Options may be granted below 100% of
the fair market value of the Common Stock on the date of Grant.
Eligible Participants. Persons eligible to participate in the 1998 Plan shall
be all Directors, Officers, key executives and other management employees of
the Company and its subsidiaries who are responsible for or contribute to the
management, growth and/or profitability of the Company (the "Participants").
Administration. The 1998 Plan will be administered by the Board of Directors
or a Committee consisting of two or more Non-Employee Outside Directors
(the "Non-Employee Directors") (hereinafter collectively called the
"Committee"). Among the powers vested in the Committee is the exclusive
authority to select eligible Participants, to determine the type, size and
terms of Grants to be made to each Participant selected, to determine the
time when Grants will be granted and to establish objectives and conditions,
if any, relating to such Grants. The Committee shall have full power and
authority to administer and interpret the 1998 Plan and to adopt such rules,
regulations, agreements, guidelines and instruments for the administration of
the 1998 Plan.
Non-Employee Director Grants. The Committee will not have the discretion to
determine Grants with respect to Non-Employee Directors. The 1998 Plan shall
supersede the 1991 Flexible Stock Incentive Plan, as amended, as to
Non-Employee Director Grants only, effective April 21, 1998. Under the
1998 Plan, each individual Non-Employee Director will be annually granted stock
options, stock appreciation rights or any combination thereof at 100% of the
<PAGE>16
fair market value at the closing sale price as of the date corresponding to the
Annual Shareholders' Meeting. For the years 1998 and 1999, each individual
Non-Employee Director shall be granted 800 shares. For the years 2000 and 2001,
each individual Grant will be increased to 900 shares. For the years 2002
through 2008, each individual Grant will be increased to 1,000 shares.
However, the first Grant to each Non-Employee Director who is initially elected
as a Non-Employee Director or is initially appointed subsequent to the date of
the Annual Shareholders' Meeting of the Company and prior to the date of the
next succeeding Annual Shareholders' Meeting shall be three times the number of
shares granted to each individual Non-Employee Director during such applicable
year. Such initial Grant shall be at 100% of the fair market value at the
closing sale price on the date that he or she becomes a director of the Company.
Grants to Non-Employee Directors shall vest immediately upon grant.
Unexercised Grants to Non-Employee Directors shall terminate the earlier of
ten (10) years after the date of grant or ninety (90) days after the
Non-Employee Director ceases to be a member of the Company's Board of Directors,
unless terminated for Cause.
Vesting. The Committee, in its sole discretion, shall determine any vesting
requirements applicable to each Grant.
Grants. Grants under the 1998 Plan refer to shares of the Company's Common
Stock. Grants include Incentive Stock Options ("ISO"), Nonqualified Stock
Options ("NSO"), Restricted Stock, Deferred Stock, Stock Appreciation Rights or
any combination thereof. The option price per share under ISO Grants shall be
100% of the fair market value of the stock at the closing sale price on the date
the option is granted. If there is no sale on the date of grant, the fair
market value of the stock shall be the closing sale price of the stock on
the preceding business day. Except as otherwise provided by the Committee,
Grants under the 1998 Plan or any rights or interest shall not be assigned or
transferred except by will or the laws of descent and distribution during the
lifetime of the Participant.
Termination of Employment. In the event a Participant terminates his or her
employment with the Company, whether voluntarily or otherwise but not by reason
of death, disability or retirement, each prior unexpired or uncanceled Grant to
the extent exercisable as of the date of termination, shall terminate thirty
(30) days after the Participant's date of termination or as determined by the
Committee.
If a Participant's employment or service as a Non-Employee Director is
terminated for Cause, each unexpired or uncanceled Grant, to the extent not
previously exercised by him or her, shall terminate immediately. The term
"Cause" is defined as: (i) the commission by a Participant of any act or
omission that would constitute a felony under federal, state or equivalent
foreign law, or (ii) fraud, dishonesty, theft, embezzlement, disclosure of
trade secrets or confidential information or other acts or omissions that result
in a breach of any fiduciary duty to the Company.
Federal Income Tax Consequences. The following brief discussion is a summary
of the Company's understanding of the Federal Income Tax consequences based
upon the applicable provisions of the Code in effect on the date hereof. The
summary is not exhaustive and does not explain foreign, state or local tax
consequences.
Incentive Stock Options. In general, neither a Participant nor the Company
will realize federal income tax consequences at the time an ISO is granted or
exercised. However, to the extent that the amount by which the fair market
value of the shares acquired upon the exercise of any ISO exceeds the option
price as of the date of exercise, Participants may be subject to the alternative
minimum tax. If a Participant holds shares for a minimum of two years from the
date of the grant of the option and a minimum of one year from the date of
exercise, then (a) any gain upon the subsequent disposition of the shares will
be taxed to the Participant as a long-term capital gain, and any loss sustained
will be a long-term loss, and (b) no deduction will be allowed to the Company
for federal income tax purposes.
If a Participant disposes of shares acquired upon the exercise of an ISO before
the expiration of the holding periods described above, then generally (a) the
Participant will be taxed as if compensation income had been received in the
year of disposition in an amount equal to the excess, if any, of the fair market
value of the shares on the exercise date (or, if less, the amount realized on
<PAGE>17
the disposition of the shares) over the option price paid for such shares, and
(b) the Company will generally be entitled to a corresponding deduction in that
year.
Nonqualified Stock Options. Generally, neither a Participant nor the Company
will recognize taxable income at the time an NSO is granted. At the time of
exercise of the NSO, taxable income will be realized. The Company will generally
be entitled to a deduction. The amount of income and the Company's deduction
will be equal to the difference between the NSO exercise price and the fair
market value of the shares on the date of exercise. The income realized will
be taxed at ordinary income tax rates for federal income tax purposes.
Upon a subsequent disposition of the shares acquired upon exercise of the NSO,
short or long-term capital gain or loss, as determined by the holding period of
the shares, will be realized in an amount of the difference between the proceeds
of sale and the fair market value of the shares on the date of exercise.
Using stock to exercise options. A Participant may use previously owned shares
of Common Stock of the Company to pay all or part of the exercise price of an
ISO or NSO. By using previously owned stock, a Participant defers the
recognized gain on the surrendered shares for tax purposes. Such a Grant
exercise is treated as a "tax-free exchange" with respect to the number of
shares received on the Grant exercised which equals the number of shares
surrendered. The Participant's basis in these shares is the same as the basis
in the shares surrendered. The capital gain holding period on these shares
continues from the date when the surrendered shares were acquired. Additional
shares received on the exercise will trigger ordinary income taxation equal to
the fair market value of the additional shares over the consideration paid by
the Participant in connection with the exercise of an NSO Grant. The
Participant's basis in the additional shares is equal to their fair market
value on the date the shares were received. The capital gain holding period on
such shares commences on that date. By using previously owned stock to pay the
exercise price of an ISO, a Participant defers tax recognition of gain on the
surrendered shares. However, if a Participant surrenders previously owned
stock to pay for all or part of the exercise price of an ISO which has not been
held for the statutory holding period, the surrendered stock will be treated as
a disqualifying disposition of the prior ISO with the tax consequences
described above and complex tax rules apply, especially regarding a
Participant's basis in the shares received on the exercise.
Compliance with applicable laws. The Committee will comply with all applicable
laws, rules and regulations including the Internal Revenue Code of 1986, as
amended (the "Code") and the Securities Exchange Act of 1934, as amended
(the "Exchange Act") or any successor provisions or other regulatory
requirements. To the extent required, the 1998 Plan is designed to comply with
Section 162(m) of the Code to qualify future performance based compensation and
to qualify under Section 16 of the Exchange Act.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE
1998 STOCK OPTION PLAN.
<PAGE>18
SHAREHOLDER PROPOSALS
Shareholder proposals must be received by the Company no later than
November 13, 1998, in order to be considered for inclusion in next year's Annual
Meeting proxy statement.
The proponent of a proposal must be a record or beneficial owner of at least
one percent (1%) or $1,000 in market value of securities entitled to be voted at
the meeting and have held such securities for at least none year and shall
continue to own such securities through the date on which the meeting is held.
By Order of the Board of Directors
Kenneth F. Kaplan
------------------
Kenneth F. Kaplan
Vice President, Chief Financial Officer, Secretary
Beloit, Wisconsin
March 13, 1998
<PAGE>19
Exhibit A
REGAL-BELOIT CORPORATION
1998 STOCK OPTION PLAN
1. PURPOSES. The purpose of the 1998 Stock Option Plan (the "1998 Plan")
is to provide, on a basis competitive with industry practices, long-term
incentives through stock grants (the "Grants") to Directors, Officers,
key executives and other management employees of Regal-Beloit Corporation
and its subsidiaries (the "Company"), in order to assist the Company in
attracting and retaining experienced and capable Directors, Officers, key
executives and other management employees and to associate the interest
of such persons with those of the Company's Shareholders.
2. EFFECTIVE DATE. The 1998 Plan is effective as of April 21, 1998,
subject to the approval by the holders of at least a majority of the
outstanding shares of the Company's Common Stock, present, or
represented, and entitled to vote at the 1998 Annual Meeting of
Shareholders. Grants may be made under the 1998 Plan on and after its
effective date.
3. SHARES OF STOCK SUBJECT TO THE 1998 PLAN. The shares that may be
delivered or purchased or used for reference purposes under the 1998 Plan
shall not exceed an aggregate of 1,000,000 shares of the Company's
Common Stock, $0.01 par value, subject to adjustment as provided in
Section 19. The Committee may make any other type of Grant which it shall
determine is consistent with the objectives and limitations of the
1998 Plan.
4. ADMINISTRATION OF THE 1998 PLAN. The 1998 Plan shall be administered by
the Board of Directors of the Company or a Committee comprised of two
or more Non-Employee Directors, (hereinafter collectively called
"the Committee"). The Committee shall have all the powers vested in it
by the terms of the 1998 Plan, such powers to include exclusive authority
(within the limits described herein) to select the eligible Participants
(as hereinafter defined) to receive Grants under the 1998 Plan, to
determine the type, size and terms of Grants to be made to each
Participant selected, to determine the time when Grants will be granted
and to establish objectives and conditions, if any, relating to such
Grants. The Committee shall have full power and authority to administer
and interpret the 1998 Plan and to adopt such rules, regulations,
agreements, guidelines and instruments for the administration of the
1998 Plan and to make all other determinations which the Committee deems
necessary or advisable. The Committee's interpretation of the 1998 Plan
and all actions taken and determinations made by the Committee pursuant
to the powers vested in it hereunder, shall be conclusive and binding on
all parties concerned, including the Company, its Shareholders and
Participants in the 1998 Plan.
In administering the 1998 Plan, the term "Committee" shall mean
exclusively the Board of Directors where appropriate when interpreting
the 1998 Plan as it pertains to Non-Employee Directors. "Non-Employee
Directors" means those Outside Directors who are not officers or
employees of the Company.
5. ELIGIBLE PARTICIPANTS. The persons eligible to participate in the
1998 Plan shall be all Directors, Officers, key executives and other
management employees of the Company who are responsible for or contribute
to the management, growth and/or profitability of the business of the
Company (the "Participants").
6. NON-EMPLOYEE DIRECTOR GRANTS.
a. (i) The 1998 Plan shall supersede the 1991 Flexible Stock Incentive
Plan, as amended, as to Non-Employee Director grants only, effective
April 21, 1998.
<PAGE>20
(ii) Under the 1998 Plan, each individual Non-Employee Director
will be annually granted stock options, Stock Appreciation Rights or
any combination thereof of shares of Common Stock at 100 percent
(100%) of the fair market value as of the date corresponding to the
Annual Shareholders' Meeting. For the years 1998 and 1999, each
individual Non-Employee Director shall be granted 800 shares of
Common Stock. For the years 2000 and 2001, each individual Grant
will be increased to 900 shares. For the years 2002 through 2008,
each individual Grant will be increased to 1,000 shares. However,
the first Grant to each Non-Employee Director who is initially
elected as a Non-Employee Director or is initially appointed
subsequent to the date of the Annual Shareholders' Meeting of the
Company and prior to the date of the next succeeding Annual
Shareholders' Meeting, shall be three (3) times the number of shares
granted to each individual Non-Employee Director during such
applicable year at 100 percent (100%) of the fair market value at the
closing sale price on the date that he or she becomes a director of
the Company.
b. The right to exercise any Grant given to Non-Employee Directors shall
vest immediately upon Grant. Unexercised Grants to Non-Employee
Directors shall terminate the earlier of ten (10) years after the
date of Grant or ninety (90) days after the Non-Employee Director
ceases to be a member of the Company's Board of Directors, unless
terminated for Cause as provided in Section 18.
c. In all other respects, Grants to a Non-Employee Director under the
Plan shall be controlled by the terms and conditions of the 1998 Plan
and the rules, regulations, agreements, guidelines, instruments and
interpretations issued by the Committee, except where inconsistent
with the limitations set forth in this Section 6 of the 1998 Plan.
7. GRANTS.
a. Types. Grants under the 1998 Plan shall be made with reference to
shares of the Company's Common Stock and may include, but need not be
limited to Incentive Stock Options ("ISO"), Nonqualified Stock Options
("NSO"), Restricted Stock, Deferred Stock, Stock Appreciation Rights
or any combination thereof.
b. Vesting.
(i) The Committee, in its sole discretion, shall determine any
vesting (i.e., exercisability) requirements applicable to each
Grant.
(ii) The Committee may also determine that all or a portion of a
payment of Grants other than ISOs and NSOs to a Participant under
the 1998 Plan, whether it is to be made in cash, shares of the
Company's Common Stock or a combination thereof, shall be vested
at such times and upon such terms as may be selected by it in
its sole discretion.
c. Price. The option price per share of each option granted shall be
established by the Committee except that the option price shall not be
less than 100 percent (100%) of the fair market value of the stock at
the closing sale price on the date the option is granted. If there
is no sale on the date of Grant, the fair market value of the stock
shall be the closing sale price of the stock on the preceding business
day on which the Company's Common Stock was traded.
d. Performance Goals. The Committee may, but need not, establish
performance goals to be achieved within such performance periods as
may be selected by it in its sole discretion, using such measures of
the performance of the Company as it may select.
<PAGE>21
e. Guidelines. The Committee may adopt from time to time written
policies implementing the 1998 Plan. Such policies may include, but
need not be limited to the type, size and term of Grants to be made
to Participants and the conditions for payment of such Grants.
f. Maximum Grants. Participants may be granted multiple Grants under
the 1998 Plan. However, no one Participant shall be granted a Grant
if immediately after such Grant he or she is the owner or would be
deemed to be the owner of more than 10 percent (10%) of the total
combined voting power of all classes of stock of the Company, unless
the option price per share is at least 110 percent (110%) of the fair
market value and such Grant by its terms is not exercisable after the
expiration of five (5) years from the date such Grant is granted.
8. PAYMENT OF GRANTS.
The Committee shall determine the extent to which Grants other than ISOs
and NSOs shall be payable in cash, shares of the Company's Common Stock or
any combination thereof to a Participant. The Committee may determine
that all or a portion of a payment to a Participant under the 1998 Plan,
whether it is to be made in cash, shares of the Company's Common Stock or
a combination thereof shall be deferred. Deferrals shall be for such
periods and upon such terms as the Committee may determine in its sole
discretion.
9. EXERCISE OF ISOs AND NSOs. The price for shares may be paid in any
combination of cash, cashier's or certified check, personal check
acceptable to the Company, or shares of the Company's Common Stock,
including previously owned Common Stock.
10. RIGHTS OF SHAREHOLDERS. A Participant under the 1998 Plan shall have no
rights as a holder of the Company's Common Stock with respect to Grants
hereunder, unless and until certificates for shares of such stock are
issued to the Participant.
11. ASSIGNMENT OR TRANSFER. Except as otherwise provided by the Committee,
Grants under the 1998 Plan or any rights or interests therein shall not be
assignable or transferable except by will or the laws of descent and
distribution, or exercisable by anyone other than the Participant during
his or her lifetime.
12. AGREEMENTS. All Grants granted under the 1998 Plan shall be evidenced by
agreements in such form and containing such terms and conditions (not
inconsistent with the 1998 Plan) as the Committee shall adopt.
13. COMPLIANCE WITH LEGAL REGULATIONS.
a. The Committee may require each person purchasing shares pursuant to a
stock option or other Grant under the 1998 Plan to represent to and
agree with the Company in writing that the optionee or Participant is
acquiring the shares without a view to distribution thereof. The
certificates for such shares may include any legend which the
Committee deems appropriate to reflect any restrictions on transfer.
b. All certificates for shares of stock or other securities delivered
under the 1998 Plan shall be subject to such stock transfer orders and
other restrictions as the Committee may deem advisable under the
rules, regulations and other requirements of the Securities and
Exchange Commission, any stock exchange upon which the stock is then
listed, and any applicable federal or state securities law, and the
Committee may cause a legend or legends to be put on any such
certificate to make appropriate reference to such restrictions.
14. WITHHOLDING TAXES.
a. The Company shall have the right to deduct from all Grants hereunder
paid in cash any federal, state, local or foreign taxes required by
<PAGE>22
law to be withheld with respect to such Grants.
b. With respect to Grants paid by shares of the Company's Common Stock,
the Company shall also have the right to require the payment (through
withholding from the Participant's salary or otherwise) of any of the
taxes referenced above in Section 14a. An appropriate number of
shares of Common Stock may be withheld for such payment. If shares
are used to satisfy tax withholding requirements, the value of such
shares shall be based on the fair market value of the Common Stock on
the date when the tax withholding is required to be made.
c. The obligation of the Company to make delivery of Grants in cash or
the Company's Common Stock shall be subject to currency or other
restrictions imposed by any government.
15. NO RIGHTS TO GRANTS. No Participant or other person shall have any right
to receive a Grant under the 1998 Plan. Neither the 1998 Plan nor any
action taken hereunder shall be construed as giving any Participant any
right to be retained in the employ of the Company or any of its
subsidiaries or shall interfere with or restrict in any way the rights of
the Company, which are hereby reserved, to discharge the Participant at
any time for any reason whatsoever, with or without good cause.
16. COST AND EXPENSES. The cost and expense of administering the 1998 Plan
shall be borne by the Company and not charged to any Grant nor to any
Participant receiving a Grant.
17. TERMINATION OR EXPIRATION OF GRANTS. If any Grant under the 1998 Plan
terminates or expires, the shares allocable to the unexercised portion of
the Grant will be available for purposes of the 1998 Plan. In certain
circumstances where a Participant uses stock to exercise a Grant, only the
net shares issued to the Participant are counted against the number of
shares issued under the 1998 Plan. Certain stock issuances which are later
forfeited by the Participant do not count as grants under the 1998 Plan.
18. TERMINATION OF EMPLOYMENT.
a. (i) In the event a Participant's employment with the Company is
terminated, whether voluntarily or otherwise, but not by reason of
death, disability or retirement, each prior unexpired or uncancelled
Grant, to the extent exercisable as of the date of such termination
of employment or service, shall terminate thirty (30) days after the
Participant's date of termination or as determined by the Committee.
(ii) Notwithstanding the foregoing, if a Participant's employment or
service as a Non-Employee Director of the Company is terminated for
Cause (as defined below), each unexpired or uncancelled Grant, to the
extent not previously exercised by him or her, shall terminate
immediately.
b. The term "Cause" is defined as: (i) the commission by a Participant
of any act or omission that would constitute a felony under federal,
state or equivalent foreign law, (ii) fraud, dishonesty, theft,
embezzlement, disclosure of trade secrets or confidential information
or other acts or omissions that result in a breach of any fiduciary
duty to the Company.
c. In the event a Participant terminates his or her employment with the
Company as a result of death, disability, or retirement, the Committee
shall have the discretion to extend the period of exercisability of
each previously granted and unexpired or uncancelled Grant in
accordance with applicable statutes, rules and regulations and to
preserve ISO treatment, where necessary, unless the termination date
specified in the Grant occurs earlier. The Committee shall also have
discretion to determine whether such Grant(s) shall become immediately
exercisable in full.
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19. DILUTION AND OTHER ADJUSTMENTS. In the event of any change in the
outstanding shares of the Company's Common Stock by reason of any split,
stock dividend, recapitalization, merger, consolidation, combination or
exchange of shares or other similar corporate change, such equitable
adjustments shall be made in the 1998 Plan and the Grants thereunder as the
Committee determines are necessary or appropriate. If necessary, the
Committee may make any adjustments in the maximum number of shares referred
to in Section 3, in the number and option price of shares subject to
outstanding options, in the number and purchase price of shares subject to
outstanding stock purchase rights, and in the number of shares subject to
other Grants granted under the 1998 Plan. Such adjustment shall be
conclusive and binding for all purposes of the 1998 Plan.
20. AMENDMENTS AND TERMINATIONS.
a. Amendments. The Committee may terminate or amend the 1998 Plan in
whole or in part at any time, but no such action shall adversely
affect any rights or obligations with respect to any Grants
theretofore made under the 1998 Plan nor change the limitations as to
Non-Employee Directors as set forth in Section 6 hereof.
Unless the holders of at least a majority of the outstanding shares
of the Common Stock, present or represented, and entitled to vote at
a meeting of Shareholders shall have first approved thereof, no
amendment of the 1998 Plan shall be effective which would (i) increase
the maximum number of shares referred to in Section 3 of the 1998
Plan; (ii) extend the maximum period during which ISO Grants may be
granted under the 1998 Plan, or (iii) reduce the price per share at
which ISO Options may be offered under the 1998 Plan below
100 percent (100%) of the fair market value on the date of Grant.
For purposes of this Section 20a, subject to adjustment as provided
in Section 19, any (1) cancellation and reissuance or (2) repricing
of any Grants made under the 1998 Plan at a new option price as
provided in the 1998 Plan's rules relating to stock options and Stock
Appreciation Rights shall not constitute an amendment of this 1998
Plan.
With the consent of the Participant affected, the Committee or the
Board of Directors, where applicable, may amend outstanding agreements
evidencing Grants under the 1998 Plan in a manner not inconsistent
with the terms of the 1998 Plan.
b. Termination. Unless the 1998 Plan shall heretofore have been
terminated as above provided, the 1998 Plan shall terminate on and no
Grants shall be granted after April 20, 2008. Any Grants outstanding
under the 1998 Plan at the time of the termination of the 1998 Plan
shall remain in effect until such Grant shall have been exercised or
shall have expired according to its terms.
21. GOVERNING LAWS. The validity and construction of the 1998 Plan and any
agreements entered into thereunder shall be governed by the laws of the
State of Wisconsin.
22. COMPLIANCE WITH APPLICABLE LAWS. The Committee will comply with all
applicable laws, rules and regulations including the Internal Revenue Code
of 1986, as amended (the"Code") and the Securities Exchange Act of 1934,
as amended (the "Exchange Act") or any successor provisions or other
regulatory requirements. To the extent required, the 1998 Plan is
designed to comply with Section 162(m) of the Code to qualify future
performance based compensation and to qualify under Section 16 of the
Exchange Act. To the extent any provision of the 1998 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.
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