<PAGE>
SCHEDULE 14A
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 [ ] 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 materials
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
American Power Conversion Corporation
(Name of Registrant as Specified in Its Charter)
American Power Conversion Corporation
(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 table below per Exchange Act Rules 14a-
6(i)(1) 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 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>
American Power Conversion Corporation
P.O. Box 278
132 Fairgrounds Road
West Kingston, RI 02892
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
______________________
To the Shareholders:
The Annual Meeting of Shareholders of American Power Conversion
Corporation, a Massachusetts corporation (the "Company"), will be
held on Monday, April 21, 1997 at 10:00 a.m., local time, in the
Plantations Ballroom of the Radisson Airport Hotel located at
2081 Post Road, Warwick, Rhode Island 02886 for the following
purposes:
1. To fix the number of directors at five.
2. To elect a Board of Directors for the ensuing year.
3. To approve the adoption of the 1997 Non-Employee
Director Stock Option Plan.
4. To approve the adoption of the 1997 Stock Option Plan.
5. To approve the adoption of the 1997 Employee Stock
Purchase Plan.
6. To consider and act upon the shareholder proposal set
forth on pages 29 to 30 in the accompanying Proxy
Statement if such proposal is properly presented by the
proponent or the proponent's qualified representative
for action at the Meeting, which proposal is opposed by
the Board of Directors. The Company's statement in
opposition to such proposal is set forth on pages 30 to
31 of the accompanying Proxy Statement.
7. To transact such other business as may properly come
before the meeting and any adjournments thereof.
Shareholders of record at the close of business on March 14,
1997 will be entitled to vote at the meeting or any adjournments
thereof.
By Order of the Board of Directors,
Emanuel E. Landsman,
Clerk
March 21, 1997
SHAREHOLDERS ARE REQUESTED TO SIGN THE ENCLOSED PROXY CARD AND
RETURN IT IN THE ENCLOSED STAMPED ENVELOPE BY RETURN MAIL.
1
<PAGE>
AMERICAN POWER CONVERSION CORPORATION
P.O. Box 278
132 Fairgrounds Road
West Kingston, RI 02892
____________________
PROXY STATEMENT FOR THE ANNUAL MEETING OF SHAREHOLDERS
To Be Held on April 21, 1997
_____________________
Proxies in the form enclosed with this proxy statement are
solicited by the Board of Directors of American Power Conversion
Corporation, a Massachusetts corporation (the "Company"), for use
at the Annual Meeting of Shareholders to be held on Monday, April
21, 1997 at 10:00 a.m., local time, in the Plantations Ballroom
of the Radisson Airport Hotel located at 2081 Post Road, Warwick,
Rhode Island 02886 (the "Meeting").
Only shareholders of record as of the close of business on
March 14, 1997 will be entitled to vote at the Meeting and any
adjournments thereof. As of that date, approximately 94,856,916
shares of Common Stock, par value $.01 per share, of the Company
were issued and outstanding. Each share of the Company's Common
Stock outstanding as of the record date will be entitled to one
vote, and shareholders may vote in person or by proxy. Execution
of a proxy will not in any way affect a shareholder's right to
attend the Meeting and vote in person. Any shareholder giving a
proxy has the right to revoke it by written notice to the Clerk
of the Company at any time before it is exercised or by
delivering a later executed proxy to the Clerk of the Company at
any time before the original proxy is exercised.
Each of the persons named as proxies in the proxy is a director
and officer of the Company. All properly executed proxies
returned in time to be cast at the Meeting will be voted. With
respect to the election of a Board of Directors, any shareholder
submitting a proxy has the right to withhold authority to vote
for any individual nominee to the Board of Directors by writing
the name of such individual or group in the space provided on the
proxy. The proxies will be voted as stated below under "Number
and Election of Directors." In addition to the election of
directors, the shareholders will consider and vote upon proposals
(i) to fix the number of directors at five; (ii) to approve the
adoption of the 1997 Non-Employee Director Stock Option Plan;
(iii) to approve the adoption of the 1997 Employee Stock Purchase
Plan; (iv) to approve the adoption of the 1997 Stock Option Plan;
and (v) to consider and act upon the shareholder proposal set
forth on pages 29 to 30. Where a choice has been specified on
the proxy with respect to the foregoing matters, the shares
represented by the proxy will be voted in accordance with the
specification contained therein. In the absence of
specifications, a proxy will be voted FOR the five nominees for
director named herein, FOR approval of the 1997 Non-Employee
Director Stock Option Plan, FOR the 1997 Employee Stock Purchase
Plan, FOR the 1997 Stock Option Plan, AGAINST the shareholder
proposal set forth in the Notice of Annual Meeting of
Shareholders if it is properly presented by the proponent or the
proponent's qualified representative for action at the Meeting,
and according to the discretion of the proxies on any other
matters that properly come before the Meeting.
The representation in person or by proxy of at least a majority
of the outstanding shares of Common Stock entitled to vote at the
Meeting is necessary to establish a quorum for the transaction of
business. Votes withheld from any nominee, abstentions and
broker non-votes are counted as present or represented for
purposes of determining the presence or absence of a quorum at
the Meeting. A "non-vote" occurs when a broker holding shares
for a beneficial owner votes on one proposal, but does not vote
on another proposal because, with respect to such other proposal,
the broker does not have discretionary voting power and has not
received instructions from the beneficial owner. Directors are
elected by a plurality of the votes cast by shareholders entitled
to vote at the Meeting. All other matters being submitted to
shareholders require the affirmative vote of the majority of
shares present in person or represented by proxy at the Meeting.
An automated system administered by the Company's transfer agent
tabulates the votes. The vote on each matter submitted to
shareholders is tabulated separately. Abstentions are included
in the number of shares present or represented and voting on each
matter. Broker "non-votes" are not so included.
2
<PAGE>
The Board of Directors knows of no other matter to be presented
at the Meeting. If any other matter should be presented at the
Meeting upon which a vote may be properly taken, shares
represented by all proxies received by the Board of Directors
will be voted with respect thereto in accordance with the
judgment of the persons named as attorneys in the proxies.
An Annual Report to Shareholders, containing financial
statements for the fiscal year ended December 31, 1996, is being
mailed together with this Proxy Statement to all shareholders
entitled to vote. This Proxy Statement and the accompanying
proxy were first mailed to shareholders on or about March 21,
1997.
MANAGEMENT AND PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth as of March 14, 1997 certain
information regarding beneficial ownership of the Company's
Common Stock (i) by each person who, to the knowledge of the
Company, beneficially owned more than 5% of the
outstanding shares of Common Stock of the Company outstanding at
such date, (ii) by each director or nominee for director of the
Company, (iii) by each executive officer named in the Summary
Compensation Table included in this Proxy Statement, and (iv) by
all directors, nominees for director and executive officers of
the Company as a group.
<TABLE>
<CAPTION>
Amount and
Nature of Percentage of
Name and Address Beneficial Common Stock
of Beneficial Owner Ownership(1) Outstanding(2)
<S> <C> <C>
State of Wisconsin 7,009,000 (3) 7.4%
Investment
Board
P.O. Box 7842
Madison, WI 53707
Rodger B. Dowdell, 9,854,002(4) 10.4%
Jr.
American Power
Conversion
Corporation
P.O. Box 278
132 Fairgrounds Road
West Kingston, RI
02892
Neil E. Rasmussen 5,379,510(5) 5.7%
APC America, Inc.
755 Middlesex
Turnpike
Billerica, MA 01862
Emanuel E. Landsman 1,886,188(6) 1.9%
APC America, Inc.
755 Middlesex
Turnpike
Billerica, MA 01862
James D. Gerson 283,488(7) *
Fahnestock & Co.
110 Wall Street
New York, NY 10005
Ervin F. Lyon 762,790(8) *
270 North Haverhill
Road
Kensington, NH
03833-5503
Edward W. Machala 702,530(9) *
APC America, Inc.
P.O. Box 278
132 Fairgrounds Road
West Kingston, RI
02892
3
<PAGE>
Donald M. Muir 9,375(10) *
APC America, Inc.
P.O. Box 278
132 Fairgrounds Road
West Kingston, RI
02892
David P. Vieau 45,121(11) *
American Power
Conversion
Corporation
P.O. Box 278
132 Fairgrounds Road
West Kingston, RI
02892
All directors and 19,247,056(12) 20.3%
executive officers
as a group (11 persons)
</TABLE>
________________________
*Less than 1.0%
(1) Unless otherwise indicated, the named person possesses sole
voting and investment power with respect to the shares
listed.
(2) The number of shares of Common Stock deemed outstanding on
March 14, 1997 includes (i) approximately 94,856,916 shares
outstanding on such date and (ii) all options that are
currently exercisable or will become exercisable within
60 days thereafter by the person or group in question.
(3) This information was obtained from filings made with the
Securities and Exchange Commission pursuant to Sections
13(d) or 13(g) of the Securities Exchange Act of 1934, as
amended.
(4) Includes 374,490 shares of Common Stock currently allocated
to Mr. Dowdell under the Company's Employee Stock Ownership
Plan (the "ESOP"). Does not include any shares held by the
ESOP other than the shares allocated to Mr. Dowdell's
account. The ESOP currently holds an aggregate of
5,025,546 shares. Mr. Dowdell is a trustee of the ESOP and
as such, may be deemed to be a beneficial owner of the
shares currently held by it. Mr. Dowdell disclaims
beneficial ownership of such shares, other than the shares
allocated to him.
(5) Includes 302,426 shares of Common Stock currently allocated
to Mr. Rasmussen under the Company's ESOP. Does not include
any shares held by the ESOP other than the shares allocated
to Mr. Rasmussen's account. The ESOP currently holds an
aggregate of 5,025,546 shares. Mr. Rasmussen is a trustee
of the ESOP and as such, may be deemed to be a beneficial
owner of the shares currently held by it. Mr. Rasmussen
disclaims beneficial ownership of such shares, other than
the shares allocated to him.
(6) Includes 250,188 shares of Common Stock currently allocated
to Dr. Landsman under the Company's ESOP. Does not include
25,000 shares held by a trust for the benefit of certain
family members or 225,000 shares held by the Landsman
Charitable Trust. Dr. Landsman disclaims beneficial
ownership of the shares held by such trusts.
(7) Includes 20,000 shares of Common Stock issuable to Mr.
Gerson pursuant to options which may be exercised within the
next sixty days. Does not include 4,000 shares held by
Mr. Gerson's wife for the benefit of his children.
Mr. Gerson disclaims beneficial ownership of the shares held
by his wife for the benefit of his children.
(8) Includes 20,000 shares of Common Stock issuable to Dr. Lyon
pursuant to options which may be exercised within the next
sixty days. Does not include 4,800 shares held by
Dr. Lyon's daughter. Dr. Lyon disclaims beneficial
ownership of the shares held by his daughter. Does not
include 49,742 shares held by a trust for the benefit of Dr.
Lyon's daughter. Dr. Lyon disclaims beneficial ownership of
the shares held by such trust.
(9) Includes 45,330 shares of Common Stock currently allocated
to Mr. Machala under the Company's ESOP. Does not include
any shares held by the ESOP other than shares allocated to
Mr. Machala's account. The ESOP currently holds an
aggregate of 5,025,546 shares. Mr. Machala is a trustee of
the ESOP and as such, may be deemed to be a beneficial owner
of the shares currently held by it. Mr. Machala disclaims
4
<PAGE>
beneficial ownership of such shares, other than the shares
allocated to him.
(10) Includes 9,375 shares of Common Stock issuable to Mr. Muir
pursuant to options which may be exercised within the next
sixty days.
(11) Includes 7,121 shares of Common Stock currently allocated to
Mr. Vieau under the Company's ESOP.
(12) Includes (i) 101,375 shares issuable to certain officers and
directors of the Company pursuant to options which may be
exercised within the next 60 days, and (ii) 1,017,527 shares
allocated to the accounts of the officers of the Company
under the Company's ESOP. Also see footnotes (4) through
(11).
PROPOSAL NOS. 1 AND 2 - NUMBER AND ELECTION OF DIRECTORS
At the Meeting, the shareholders will vote on fixing the number
of directors at five and electing the entire Board of Directors.
The directors of the Company are elected annually and hold office
until the next annual meeting of shareholders and until their
successors shall have been elected and qualified.
Shares represented by all proxies received by the Company and
not so marked as to oppose or abstain from voting on fixing the
number of directors will be voted for fixing the number of
directors for the ensuing year at five. The Board of Directors
recommends a vote FOR fixing the number at five.
Shares represented by all proxies received by the Company and
not so marked as to withhold authority to vote for any individual
director or for all directors will be voted (unless one or more
nominees is unable or unwilling to serve) for the election of the
nominees named in the table below. The Board of Directors knows
of no reason why any such nominee should be unable or unwilling
to serve, but if such should be the case, proxies will be voted
for the election of some other person or for fixing the number of
directors at a lesser number. The Board of Directors recommends
a vote FOR electing all of the nominees named in the table below
as a director of the Company.
All of the nominees are currently directors of the Company and
were elected at the Annual Meeting of Shareholders held on June
13, 1996. The following table sets forth the year each nominee
first became a director of the Company and the positions each
nominee currently holds with the Company.
Nominee's or Director's
Name and Year Nominee or Position(s) Held
Director First Became a with Company
Director
Rodger B. Dowdell, Jr. -- 1985 President, Chairman of the
Board of Directors, Chief
Executive Officer
Emanuel E. Landsman -- 1981 Vice President, Clerk and
Director
Neil E. Rasmussen -- 1981 Vice President and Director
Ervin F. Lyon -- 1981 Director
James D. Gerson -- 1988 Director
Meetings of the Board of Directors and Committees
The Board of Directors met four times and took action by
unanimous written consent one time during the fiscal year ended
December 31, 1996.
The Company's Compensation and Stock Option Committee, which
during 1996 was comprised of Messrs. Dowdell, Gerson and Lyon,
met two times and took action by unanimous written consent one
time during the fiscal year ended December 31, 1996. Effective
as of January 1, 1997, Mr. Dowdell resigned from the Compensation
and Stock Option Committee. The Compensation and Stock Option
Committee makes recommendations to the Board of Directors
regarding compensation and benefits for employees, consultants
5
<PAGE>
and directors of the Company, determines the compensation of
executive officers and is responsible for the administration of
the Company's 1987 Stock Option Plan and will be responsible for
the administration of the Company's 1997 Stock Option Plan and
the 1997 Employee Stock Purchase Plan which plans are the subject
of Proposal Nos. 4 and 5 in this Proxy Statement.
The Company's Audit Committee, comprised of Messrs. Gerson and
Lyon, met once during the fiscal year ended December 31, 1996.
The Audit Committee oversees the accounting, tax and financial
functions of the Company, including matters relating to the
appointment and activities of the Company's auditors.
The Company does not currently have a standing Nominating
Committee.
During the fiscal year ended December 31, 1996, all of the
directors attended at least 75% of the total number of meetings
held by the Board of Directors, and all of the members of the
Compensation and Stock Option Committee and the Audit Committee
attended all of the meetings of such committees.
Compensation of Directors
As compensation for serving on the Board of Directors, each non-
employee director is paid $20,000 per year and $1,500 for each
meeting attended. Non-employee directors are also reimbursed for
reasonable expenses incurred while attending meetings.
On February 25, 1993, the Board of Directors of the Company
adopted the 1993 Non-Employee Director Stock Option Plan (the
"1993 Director Plan"), subject to approval by the Company's
shareholders, which approval was granted on May 20, 1993. The
1993 Director Plan authorized the grant on February 25, 1993 of a
stock option for 20,000 shares of Common Stock to each member of
the Company's Board of Directors who is neither an employee nor
officer of the Company. An option was granted to each of
Messrs. Gerson and Lyon, the two members of the Board of
Directors entitled to participate in the 1993 Director Plan.
Such options have an exercise price of $12.00 per share, the
fair market value on the date of grant. Each director can
currently exercise an option to purchase up to 20,000 shares of
Common Stock.
On February 12, 1997, the Board of Directors of the Company
adopted the 1997 Non-Employee Director Stock Option Plan (the
"1997 Director Plan"), subject to approval by the Company's
shareholders at this Meeting. The 1997 Director Plan authorizes
the grant of an option to purchase 10,000 shares of Common Stock
on the date of shareholder approval of the 1997 Director Plan and
on February 12th of each year thereafter, to each member of the
Company's Board of Directors who is neither an employee nor
officer of the Company. The 1997 Director Plan is the subject of
Proposal No. 3 and is described under the heading, Proposal No. 3
- - "Approval of the Adoption of the 1997 Non-Employee Director
Stock Option Plan."
Occupations of Directors
The following table sets forth the names of all nominees for
directors and all current directors, their ages and present
position(s) with the Company.
Name Age Position(s)
Rodger B. Dowdell, 47 President, Chief
Jr. Executive Officer
and Chairman of the
Board of Directors
Emanuel E. Landsman 60 Vice President,
Clerk and Director
Neil E. Rasmussen 42 Vice President and
Director
Ervin F. Lyon (1)(2) 61 Director
James D. Gerson 53 Director
(1)(2)
______________________
(1) Member, Compensation and Stock Option Committee
(2) Member, Audit Committee
6
<PAGE>
The By-Laws of the Company provide that each director is
elected to hold office until the next annual meeting of
shareholders, and until his successor is chosen and qualified.
The officers of the Company are elected annually at the first
meeting of the Board of Directors following the annual meeting of
shareholders, and hold office until their respective successors
are chosen and qualified.
Rodger B. Dowdell, Jr. joined the Company in August 1985 and
has been President and a Director since that time. From January
to August 1985, Mr. Dowdell worked for the Company as a
consultant, developing a marketing and production strategy for
UPS products. From 1978 to December 1984 he was President of
Independent Energy, Inc., a manufacturer of electronic
temperature controls.
Emanuel E. Landsman has been Vice President, Clerk and Director
of the Company since its inception. From 1966 to 1981, Dr.
Landsman worked at Massachusetts Institute of Technology's
Lincoln Laboratory ("M.I.T."), where he was in the Space
Communications Group from 1966 to 1977 and the Energy Systems
Engineering Group from 1977 to 1981.
Neil E. Rasmussen has been Vice President and a Director of the
Company since its inception. From 1979 to 1981, Mr. Rasmussen
worked in the Energy Systems Engineering Group at M.I.T.'s
Lincoln Laboratory.
Ervin F. Lyon has been a Director of the Company since its
inception. From September 1986 to March 1993, Dr. Lyon worked
for M.I.T's Lincoln Laboratory, from which he retired in March
1993. From the inception of the Company through August 1985, Dr.
Lyon was President and Chairman of the Company. From 1977 to
1981, Dr. Lyon was a member of the technical staff at M.I.T's
Lincoln Laboratory.
James D. Gerson has been a Director of the Company since August
1988. Since March 1993, Mr. Gerson has been Senior Vice
President of Fahnestock & Co. From January 1992 to March 1993,
Mr. Gerson was Managing Director of Corporate Finance of Reich &
Co., Inc. Mr. Gerson is also a member of the Board of Directors
of Ag Services of America, Inc., Conceptronic, Inc., Energy
Research Corporation, Hilite Industries, Inc. and Computer
Outsourcing Services, Inc.
There are no family relationships between directors and
executive officers of the Company, except that Mr. Dowdell is the
uncle of Aaron L. Davis, Vice President of Marketing
Communications.
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term
compensation for services in all capacities to the Company for
the fiscal years ended December 31, 1996, 1995 and 1994, of those
persons who were at December 31, 1996 (i) the chief executive
officer and (ii) the other four most highly compensated executive
officers of the Company (the "Named Officers"):
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
Awards (2)
Securities
Underlying All
Name and Principal Options/ Other
Position Year Salary Bonus($)(3) SARs Compensation SARs
<S> <C> <C> <C> <C> <C>
Rodger B. Dowdell, 1996 $398,000 $398,000 0 $24,980(4)
Jr.
Chief Executive 1995 392,000 216,000 0 22,728(4)
Officer,
President & 1994 392,000 360,000 0 30,180(4)
Director
Neil E. Rasmussen 1996 259,000 259,000 0 24,350(5)
Vice President, 1995 259,000 144,000 0 22,728(5)
Engineering
and Director 1994 259,000 240,400 0 30,180(5)
Edward W. Machala 1996 259,000 259,000 0 24,030(6)
Vice President, 1995 259,000 144,000 0 22,728(6)
Operations
and Treasurer 1994 259,000 240,400 0 30,180(6)
7
<PAGE>
Donald M. Muir 1996 165,000 165,000 0 47,852(7)
Chief Financial 1995 62,885 30,000 0 9,000(7)
Officer
David P. Vieau 1996 145,000 181,250 0 23,440(8)
Vice President, 1995 138,232 50,000 0 22,614(8)
Worldwide
Business 1994 170,000 155,700 0 30,180(8)
Development
</TABLE>
______________________________
(1) Excludes perquisites and other personal benefits, the
aggregate annual amount of which for each officer was less
than the lesser of $50,000 or 10% of the total salary and
bonus reported.
(2) The Company did not grant any restricted stock awards or
stock appreciation rights ("SARs") or make any long term
incentive plan payouts during the fiscal years ended
December 31, 1996, 1995 and 1994.
(3) Includes bonus payments earned by the Named Officers in the
year indicated, for services rendered in such year, which
were paid in the next subsequent year.
(4) Includes $22,500, $22,500 and $30,000, respectively, the
market value of the shares of Common Stock contributed to
the Employee Stock Ownership Plan on behalf of Mr. Dowdell
and $2,480, $228 and $180 respectively, in premiums on a
term life insurance policy for Mr. Dowdell's benefit for
fiscal years ended December 31, 1996, 1995 and 1994.
(5) Includes $22,500, $22,500 and $30,000, respectively, the
market value of the shares of Common Stock contributed to
the Employee Stock Ownership Plan on behalf of Mr. Rasmussen
and $1,850, $228 and $180, respectively, in premiums on a
term life insurance policy for Mr. Rasmussen's benefit for
fiscal years ended December 31, 1996, 1995 and 1994.
(6) Includes $22,500, $22,500 and $30,000, respectively, the
market value of the shares of Common Stock contributed to
the Employee Stock Ownership Plan on behalf of Mr. Machala
and $1,530, $228 and $180, respectively, in premiums on a
term life insurance policy for Mr. Machala's benefit for
fiscal years ended December 31, 1996, 1995 and 1994.
(7) Mr. Muir joined the Company on July 26, 1995 as Chief
Financial Officer. His compensation includes $22,500, the
market value of the shares of Common Stock contributed to
the Employee Stock Ownership Plan on behalf of Mr. Muir for
the fiscal year ending December 31, 1996 and $1,352 and
$250, respectively, in premiums on a term life insurance
policy for Mr. Muir's benefit for fiscal years ended
December 31, 1996, and 1995, and $24,000 and $8,750 of
relocation assistance for the fiscal years ending
December 31, 1996 and 1995.
(8) Mr. Vieau was appointed Vice President of Worldwide Business
Development in October 1995 after serving as Vice President
of Marketing from October 1991 through June 1995. His
compensation includes $22,500, $22,500 and $30,000,
respectively, the market value of the shares of Common Stock
contributed to the Employee Stock Ownership Plan on behalf
of Mr. Vieau and $940, and $228 and $180, respectively, in
premiums on a term life insurance policy for Mr. Vieau's
benefit for fiscal years ended December 31, 1996, 1995 and
1994.
OPTION GRANTS IN THE LAST FISCAL YEAR
The following table sets forth grants of stock options pursuant
to the Company's 1987 Stock Option Plan granted during the fiscal
year ended December 31, 1996 to the Named Officers. The Company
did not grant any stock appreciation rights to the Named Officers
during the fiscal year ended December 31, 1996.
8
<PAGE>
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Potential
Realizable
Value at
Assumed
Annual Rates
Individual Grants (1) of
Stock Price
Appreciation
for Option
Term (2)
Percent of
Option Total
Granted Options Exercise Expira-
(#) Granted or Base tion
Name to Price Date 5%($) 10%($)
Employees ($/Sh)
in
Fiscal Year
<S> <C> <C> <C> <C> <C> <C>
Rodger B.
Dowdell, -- -- -- -- -- --
Jr.
Neil E.
Rasmussen -- -- -- -- -- --
Edward W. 24,090 5.23% $9.125 7/16/06 138,244.31 350,338.42
Machala
Donald M. 13,950 3.02% $9.125 7/16/06 80,054.30 202,873.43
Muir
David P. 13,020 2.83% $9.125 7/16/06 74,717.34 189,348.54
Vieau
</TABLE>
- ---------------------------------
(1) All options were granted by the Compensation and Stock
Option Committee at "fair market value" determined as of the
last business day for which prices are available prior to the
date an option is granted and means the last reported sale
price (on that date) of the Common Stock on the NASDAQ Stock
Market.
(2) Amounts reported in these columns represent amounts that may
be realized upon exercise of the options immediately prior to
the expiration of their term assuming the specified compounded
rates of appreciation (5% and 10%) on the market value of the
Company's Common Stock on the date of option grant over the
term of the options. These numbers are calculated based on
rules promulgated by the Securities and Exchange Commission
and do not reflect the Company's estimate of future stock
price growth. Actual gains, if any, on stock option exercises
and Common Stock holdings are dependent on the timing of such
exercise and the future performance of the Company's Common
Stock. There can be no assurance that the rates of
appreciation assumed in this table can be achieved or that the
amounts reflected will be received by the individuals.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information with respect to
options to purchase the Company's Common Stock granted under the
1987 Stock Option Plan including (i) the number of shares
purchased upon exercise of options in 1996, (ii) the net value
realized upon such exercise, (iii) the number of unexercised
options outstanding at December 31, 1996 and (iv) the value of
such unexercised options at December 31, 1996:
9
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND DECEMBER 31, 1996 OPTION VALUES
Number of Value of
Shares Unexercised Unexercised In-
Acquired Value Options at the-Money
Name on Realized December 31, Options at
Exercise ($)(1) 1996 (#) December 31,
(#) Exercisable/ 1996 ($)(2)
Unexercisable Exercisable/
Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Rodger B. -- -- -- -- -- --
Dowdell, Jr.
Neil E. -- -- -- -- -- --
Rasmussen
Edward W. -- -- -- -- -- --
Machala
Donald M. Muir -- -- -- -- -- --
David P. Vieau 244,000 2,119,782 -- 13,020 -- 235,987.50
</TABLE>
___________________________
(1) Amounts disclosed in this column do not reflect amounts
actually received by the Named Officers, but are calculated
based on the difference between the fair market value of the
Company's Common Stock on the date of exercise and the
exercise price of the options. Named Officers will receive
cash only if and when they sell the Common Stock issued upon
exercise of options and the amount of cash received by such
individuals is dependent on the price of the Company's
Common Stock at the time of such sale.
(2) Value is based on the difference between option exercise
price and the fair market value at December 31, 1996 ($27.25
per share as quoted on the NASDAQ Stock Market) multiplied
by the number of shares underlying the option.
AMERICAN POWER CONVERSION CORPORATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by
the three-member Compensation and Stock Option of the Board of
Directors (the "Compensation Committee").1 Two members of the
Compensation Committee are non-employee directors. Pursuant to
the authority delegated by the Board of Directors, the
Compensation Committee establishes each year the compensation of
senior management.
Under the supervision of the Compensation Committee, the
Company has developed and implemented compensation policies. The
Compensation Committee's executive compensation policies are
designed to (i) enhance profitability of the Company and
shareholder value, (ii) integrate compensation with the Company's
annual and long-term performance goals, (iii) reward above-
average long-term corporate performance, (iv) recognize
individual initiative and achievement, as well as teamwork and
(v) assist the Company in attracting and retaining qualified
executive officers. Compensation under the executive
compensation program is comprised of cash compensation in the
form of annual base salary and performance-based bonuses, and
long term incentive compensation in the form of stock options.
In setting cash compensation levels for executive officers
(including the Chief Executive Officer), the Compensation
Committee prepares a salary plan annually. The base salaries are
fixed at levels comparable to the amounts paid to senior
executives with comparable qualifications, experience and
responsibilities at other companies of similar size and engaged
in a similar business to that of the Company. In addition, the
base salaries take into account the Company's relative financial
performance as compared to comparable companies. The financial
performance measures utilized include sales growth, return on
equity and pre-tax earnings levels. The Chief Executive
Officer's employment agreement provides that his cash
compensation shall be in accordance with the American Electronics
Association's (AEA) standards for chief executive officers of
similar size companies for salary and bonus. The AEA standards,
which are published annually, are used to determine the base
10
<PAGE>
salary of chief executive officers of companies in the
electronics industry which are of comparable size in terms of
annual revenues. The Compensation Committee has the discretion
to increase or decrease the AEA standards when arriving at
compensation levels for the Company's executives based upon its
comparison of the Company's performance to that of similar
companies, as well as its assessments of the Company's
achievement of established financial performance metrics and
strategic goals.
During fiscal 1996, the Compensation Committee referred to the
American Electronics Association's Executive Compensation Survey
(the "AEA Survey") results to establish annual salaries for
executives, including the Chief Executive Officer. The
Compensation Committee's assessment of the Company's relative
financial performance placed the Company above the 75th
percentile of similar companies participating in the AEA Survey.
Accordingly, the base salaries for the executive officers were
set at a level intended to be comparable with similar companies
above the 75th percentile.
The Compensation Committee relies on incentive compensation in
the form of performance-based bonuses and stock options to retain
and motivate executive officers. Incentive compensation in the
form of performance-based bonuses for the Chief Executive Officer
and the Company's other executive officers is based upon
management's success in meeting the Company's financial
performance metrics and strategic goals. Financial metrics
include sales growth, pre-tax profits, return on equity and cash
flow, while strategic goals focus on product development and
increasing market share. The Compensation Committee assigns
approximately equal weight to each of the financial performance
metrics and strategic goals. The Company also utilizes the AEA
Survey results to determine comparable amounts paid in the form
of incentive bonuses to executive officers, subject to adjustment
(upward or downward) based upon the Company's performance in
relation to the AEA Survey participants. The Compensation
Committee concluded that the Company's performance, on average,
was better than similar AEA Survey participants. As a result,
the Compensation Committee determined the 1996 cash bonus for the
Chief Executive Officer in an amount which, when combined with
base salaries, represented a total cash compensation award
intended to be comparable with similar companies above the 75th
percentile. The percentage relationship between cash bonus and
base salary for the Chief Executive Officer for 1996 was then
applied to the base salary of the Company's other executive
officers to determine their cash bonuses for 1996.
Incentive compensation in the form of stock options is designed
to provide long term incentives to executive officers and other
employees, to encourage the executive officers and other
employees to remain with the Company and to enable optionees to
develop and maintain a significant, long-term stock ownership
position in the Company's Common Stock. The Company's 1987 Stock
Option Plan, administered by the Compensation Committee, is the
vehicle for the granting of stock options.
The 1987 Stock Option Plan permits the Compensation Committee
to grant stock options to eligible employees, including executive
officers. During 1996, the Compensation Committee granted stock
options to various employees. Options become exercisable based
upon a vesting schedule tied to years of service. The value
realizable from exercisable options is dependent upon the extent
to which the Company's performance is reflected in the market
price of the Company's Common Stock at any particular point in
time.
During 1996, the Compensation Committee granted options
potentially exercisable for a combined total of 81,750 shares of
Common Stock to six executive officers. The exercise price was
equal to the stock market price on the date of grant. The
options granted to each executive officer become exercisable
ratably over the next six years subject to his continued
employment with the Company.
The Company also maintains an Employee Stock Ownership Plan
(the "ESOP") in which all executives participate on the same
terms as non-executive employees who meet applicable eligibility
criteria, subject to any legal limitations on the amounts that
may be contributed or the benefits that may be payable under the
ESOPs. The ESOP's assets are invested exclusively in the
Company's Common Stock so as to further align employees' and
shareholders' long-term financial interests. The Board of
Directors approves the contributions to the ESOP.
11
<PAGE>
The Compensation Committee is satisfied that the executive
officers of the Company are dedicated to achieving significant
improvements in the long-term financial performance of the
Company and that the compensation policies and programs
implemented and administered have contributed and will continue
to contribute towards achieving this goal.
Compensation paid to certain executive officers of the Company
will be subject to the $1 million limitation on deductibility of
compensation under Section 162(m) of the Internal Revenue Code.
It is not anticipated that any executive officer will receive
compensation during 1996 which will not be deductible by reason
of the limitation. This limitation will be considered by the
Compensation Committee when it determines the amounts of
compensation to be paid to executive officers in 1997 and
subsequent calendar years.
This report has been submitted by the members of the
Compensation Committee.
Rodger B. Dowdell, Jr.
(Chairman, President and Chief Executive Officer)
James D. Gerson
Ervin F. Lyon
PERFORMANCE GRAPH
The following graph illustrates a five year comparison of
cumulative total shareholder return among the Company, the
University of Chicago's Center for Research in Security i.e.
Prices ("CRSP") Index for the NASDAQ Stock Market and the CRSP
Index for NASDAQ Electronic Components Stocks (SIC 367, a peer
group index which includes electronic components companies). The
comparison assumes $100 was invested on December 31, 1991 in the
Company's Common Stock and in each of the foregoing indices and
assumes reinvestment of dividends, if any.
<TABLE>
<CAPTION>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG
THE COMPANY, THE NASDAQ STOCK MARKET AND NASDAQ ELECTRONIC
COMPONENTS STOCKS
[INSERT GRAPH HERE]
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
Broad Market Index(1) $100.00 $116.40 $133.60 $130.60 $184.70 $227.20
Peer Group Index(2) 100.00 156.40 214.70 237.20 392.80 678.70
APCC 100.00 209.30 355.10 244.90 142.10 407.50
</TABLE>
Assumes $100 invested on 12/31/91.
(1) CRSP Index for Nasdaq Stock Market
(2) CRSP Index for Nasdaq Electronic Components Stocks
12
<PAGE>
EMPLOYMENT CONTRACT
The Company has entered into an employment agreement with its
Chief Executive Officer. The agreement is automatically renewed
annually unless either party notifies the other 60 days prior to
the renewal date. Pursuant to the employment agreement, the
Company pays the Chief Executive Officer an annual salary and a
bonus which are based on the salaries and bonuses paid to Chief
Executive Officers of electronics companies having approximately
the same revenues as the Company. The Chief Executive Officer is
obligated under the agreement not to compete with the Company
while he is employed by the Company and for a period of one year
thereafter. The Company does not have employment agreements with
any other executive officers.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1996, Messrs. Dowdell, Lyon and Gerson served on the
Compensation Committee. The Compensation Committee was
responsible for determining the non-equity and equity
compensation of executive officers of the Company.
Rodger B. Dowdell, Jr., the President and Chief Executive Officer
of the Company, participated in deliberations concerning
executive officer compensation, but was not present during
discussions of and abstained from voting with respect to
decisions concerning his own compensation as Chief Executive
Officer. Effective as of January 1, 1997, Mr. Dowdell resigned
as a member of the Compensation Committee and the Board of
Directors of the Company reduced the number of committee members
from three to two. Messrs. Lyon and Gerson continue to serve on
the Compensation Committee.
PROPOSAL NO. 3 - APPROVAL OF THE ADOPTION OF THE
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
On February 12, 1997, the Board of Directors of the Company
adopted the 1997 Non-Employee Director Stock Option Plan (the
"1997 Director Plan"), subject to the approval of the Company's
shareholders. The Board of Directors has reserved a maximum of
200,000 shares of Common Stock for issuance under the 1997
Director Plan. Under the 1997 Director Plan, each non-employee
director will receive an option to purchase 10,000 shares of
Common Stock on February 12, 1998 and will automatically receive
an option to purchase an additional 10,000 shares on the same
date each year thereafter through and including February 12,
2007. Currently, two members of the Board of Directors are
entitled to participate in the 1997 Director Plan.
The affirmative vote of a majority of the shares of Common
Stock of the Company represented in person or by proxy at the
Meeting and entitled to vote will be required to approve the
adoption of the 1997 Director Plan. The Board of Directors
unanimously recommends a vote FOR the approval of the adoption of
the 1997 Director Plan.
The following is a summary description of the 1997 Director
Plan, which is qualified in its entirety by reference to the
complete text of the 1997 Director Plan which is attached as
Appendix A to this Proxy Statement.
Summary of the 1997 Director Plan
Purpose. The purpose of the 1997 Director Plan is to promote
the interests of the Company by providing an inducement to
obtain and retain the services of qualified persons who are not
employees or officers of the Company to serve as members of its
Board of Directors.
Administration. The 1997 Director Plan is administered by the
Board of Directors of the Company.
Shares Subject to the 1997 Director Plan. The Board of
Directors has reserved a maximum of 200,000 shares of Common
Stock for issuance under the 1997 Director Plan.
13
<PAGE>
Eligibility; Automatic Grant of Options under the 1997 Director
Plan. Subject to the availability of shares under the 1997
Director Plan, the 1997 Director Plan authorizes the automatic
grant of stock options only to members of the Board of Directors
who are neither employees nor officers of the Company
(individually, a "Non-Employee Director" and collectively, the
"Non-Employee Directors"). Under the 1997 Director Plan, each non-
employee director will receive an option to purchase 10,000
shares of Common Stock on the date of shareholder approval of the
1997 Director Plan and will automatically receive an option to
purchase an additional 10,000 shares on February 12th of each
year thereafter through and including February 12, 2007.
Option Price. The exercise price per share for all options
granted under the 1997 Director Plan will be 100% of the fair
market value per share of the Common Stock on the date of grant.
Option Duration. The term of each option will be for a
period of ten years from the date of grant. Options may not be
assigned or transferred except by will or by the laws of
descent and distribution or pursuant to a domestic relations
order and are exercisable only while the optionee is serving as
a director of the Company or within 90 days after the optionee
ceases to serve as a director of the Company (except that if a
director dies or becomes disabled while he or she is serving as
a director of the Company, the option automatically becomes
fully exercisable and may be exercised until the scheduled
expiration date of the option).
Exercisability of Shares. Options granted to Non-Employee
Directors under the 1997 Director Plan become exercisable over
four years in eight equal semi-annual installments beginning
two years from the date such options are granted. An option
shall be exercisable in whole or in part by giving written
notice to the Company, stating the number of shares with
respect to which the option is being exercised, accompanied by
payment in full for such shares.
Amendment and Termination. The Board of Directors may from
time to time adopt amendments, certain of which are subject to
shareholder approval, and may terminate the 1997 Director Plan at
any time (although such action shall not affect options
previously granted). Any shares subject to an option which for
any reason expires or terminates unexercised may again be
available for future grants under the 1997 Director Plan. No
options may be granted under the 1997 Director Plan after
February 12, 2007.
Federal Income Tax Consequences. The following discussion
summarizes certain U.S. federal income tax considerations for
directors receiving options under the 1997 Director Plan and
certain tax effects on the Company, based upon the provisions of
the Code as in effect on the date of this Proxy Statement,
current regulations and existing administrative rulings of the
Internal Revenue Service (the "IRS"). However, the summary is
not intended to be a complete discussion of all the federal
income tax consequences of these plans:
1. Options granted under the 1997 Director Plan do not
qualify as "Incentive Stock Options" under Section 422 of the
Code.
2. In general, a Non-Employee Director will not recognize
any taxable income upon the grant of an option under the 1997
Director Plan and the Company will not be entitled to a federal
income tax deduction by reason of such grant.
3. In general, a Non-Employee Director will recognize
ordinary compensation income at the time of exercise of the
option in an amount equal to the excess, if any, of the fair
market value of the shares on the date of exercise over the
exercise price. The Company may be required to withhold income
tax on this amount.
4. If a Non-Employee Director exercises an option by
delivering shares of Common Stock to the Company in payment of
the exercise price, special rules will apply.
5. When a Non-Employee Director sells the Common Stock
acquired upon exercise of an option, he or she generally will
recognize a capital gain or loss in an amount equal to the
difference between the amount realized upon sale of the stock
and his or her basis in the stock (generally, the exercise
price plus the amount, if any, taxed to the Non-Employee
Director as ordinary income as a result of his or her exercise
14
<PAGE>
of the option). If the Non-Employee Director's holding period
for the stock exceeds one year, the gain or loss will be long-
term capital gain or loss.
6. Generally, upon any grant or exercise of any option in
which a Non-Employee Director does not recognize ordinary
income, no federal income tax deduction will be allowed to the
Company. When a Non-Employee Director recognizes ordinary
income as a result of the exercise of an option under the 1997
Director Plan, the Company generally will be entitled to a
corresponding deduction for federal income tax purposes.
PROPOSAL NO. 4 - APPROVAL OF THE ADOPTION OF THE
1997 STOCK OPTION PLAN
On February 12, 1997, the Board of Directors adopted the 1997
Stock Option Plan (the "1997 Stock Plan"), subject to the
approval of the Company's shareholders. The 1997 Stock Plan
provides for the grant of incentive stock options to employees
and the grant of non-qualified stock options to employees,
consultants, directors and officers of the Company.
The Company's 1997 Stock Plan was adopted by the Board of
Directors of the Company to replace the Company's 1987 Stock Plan
which expires pursuant to its terms on June 18, 1997. The Board
of Directors voted to terminate the 1987 Stock Plan earlier in
the event that the shareholders approve the adoption of the 1997
Stock Plan. In such event, the 1987 Stock Plan shall be
terminated as to the grant of any new options thereunder
effective immediately upon the date of shareholder approval of
the 1997 Stock Plan. If the shareholders fail to approve the
adoption of the 1997 Stock Plan then the 1987 Stock Plan shall
remain in effect until such plan expires by its terms on June 18,
1997. As of March 1, 1997, options to purchase 9,670,809 shares
of Common Stock (net of cancellations) were issued under the 1987
Stock Plan of which options to purchase 1,598,428 shares of
Common Stock were outstanding. Information with respect to the
number of options granted to the Named Officers during 1996
appears under the heading "Option Grants in Last Fiscal Year."
Additional information regarding option grants may be found in
the table under the heading "Option Information" set forth below.
The affirmative vote of a majority of the shares of Common
Stock of the Company represented in person or by proxy at the
Meeting and entitled to vote will be required to approve the
adoption of the 1997 Stock Plan. The Board of Directors
unanimously recommends a vote FOR the approval of the adoption of
the 1997 Stock Plan.
The following is a summary description of the 1997 Stock Plan,
which is qualified in its entirety by reference to the complete
text of the 1997 Stock Plan which is attached as Appendix B to
this Proxy Statement.
Summary of the 1997 Stock Plan
Purpose. The purpose of the 1997 Stock Plan is to encourage
employees of the Company and other individuals who render
services to the Company by providing opportunities to purchase
stock of the Company pursuant to options granted under the 1997
Stock Plan.
Shares Subject to the 1997 Stock Plan. The Board of Directors
has reserved a maximum of 6,000,000 shares of Common Stock for
issuance under the 1997 Stock Plan.
Eligibility. The 1997 Stock Plan provides for the grant of
incentive stock options ("ISOs") within the meaning of Section
422 of the Code to employees of the Company and the grant of non-
qualified stock options ("NQSOs") to employees, consultants,
directors and officers of the Company. Currently, approximately
2,700 employees (including directors who are also employees and
officers of the Company) of the Company are eligible to
participate in the 1997 Stock Plan.
15
<PAGE>
Administration. The 1997 Stock Plan is administered by the
Compensation Committee of the Board of Directors, which currently
consists of Messrs. Gerson and Lyon, two non-employee directors
of the Company. Subject to the provisions of the 1997 Stock
Plan, the Compensation Committee has the authority to (i)
determine to whom options shall be granted, (ii) determine the
time at which options shall be granted, (iii) determine the
purchase price of shares subject to each option, (iv) determine
whether each option granted shall be and ISO or an NQSO, (v)
determine when each option shall become exercisable and the
duration of the exercise period, (vi) extend the period during
which outstanding options may be exercised and (vii) interpret
the 1997 Stock Plan and prescribe and rescind rules and
regulations relating to it.
Option Price and Duration. The Compensation Committee
determines the exercise price per share for NQSOs under the 1997
Stock Plan, so long as such exercise price is no less than the
minimum legal consideration required therefor under the laws of
any jurisdiction in which the Company may be organized. The
exercise price per share for each ISO granted under the 1997
Stock Plan may not be less than the fair market value per share
of Common Stock on the date of such grant. In the case of an ISO
to be granted to an employee owning stock possessing more than
ten percent (10%) of the total combined voting power of all
classes of stock of the Company, the price per share for such ISO
shall not be less than one hundred ten percent (110%) of the fair
market value per share of Common Stock on the date of grant. The
aggregate fair market value (determined at the time of grant) of
the shares of Common Stock subject to ISOs granted to an employee
and which first become exercisable during any calendar year
cannot exceed $100,000; any portion of an ISO grant that exceeds
such $100,000 limit will be treated for tax purposes as a NQSO.
ISOs are not transferable by the optionholder except by will or
by the laws of descent and distribution. NQSOs are transferable
to the extent determined by the Compensation Committee and as set
forth in the agreement relating to the grant of any such NQSOs.
Each option expires on the date specified by the Compensation
Committee, but not more than (i) ten years from the date of grant
in the case of options generally and (ii) five years from the
date of grant in the case of ISOs granted to an employee owning
stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company.
Exercisability of Shares. Options granted under the 1997
Stock Plan shall become exercisable over four years in eight
equal semi-annual installments beginning two years from the
date such options are granted. An option shall be exercisable
in whole or in part by giving written notice to the Company,
stating the number of shares with respect to which the option
is being exercised, accompanied by payment in full for such
shares.
Amendment and Termination. The Board of Directors may from
time to time adopt amendments, certain of which are subject to
shareholder approval, and may terminate the 1997 Stock Plan at
any time (although such action shall not affect options
previously granted). Generally, no ISO may be exercised more
than three months following termination of employment. However,
in the event that termination is due to death or disability, the
option is exercisable for a maximum of 180 days after such
termination. Any shares subject to an option which for any
reason expires or terminates unexercised may again be available
for future grants under the 1997 Stock Plan. No options may be
granted under the 1997 Stock Plan after February 11, 2007.
Federal Income Tax Consequences. The following discussion
summarizes certain U.S. federal income tax considerations for
persons receiving options under the 1997 Stock Plan and certain
tax effects on the Company, based upon the provisions of the Code
as in effect on the date of this Proxy Statement, current
regulations and existing administrative rulings of the IRS.
However, the summary is not intended to be a complete discussion
of all the federal income tax consequences of these plans:
Incentive Stock Options:
1.In general, no taxable income results to the optionee
upon the grant of an ISO or upon the issuance of shares
to him or her upon the exercise of the ISO, and the
Company is not entitled to a federal income tax
deduction upon either grant or exercise of an ISO.
2.If shares acquired upon exercise of an ISO are not
disposed of within (i) two years from the date the ISO
16
<PAGE>
was granted or (ii) one year from the date the shares
are issued to the optionee pursuant to the ISO exercise
(the "Holding Periods"), the difference between the
amount realized on any subsequent disposition of the
shares and the exercise price will generally be treated
as capital gain or loss to the optionee.
3.If shares acquired upon exercise of an ISO are disposed
and the optionee does not satisfy the Holding Periods (a
"Disqualifying Disposition"), then in most cases the
lesser of (i) any excess of the fair market value of the
shares at the time of exercise of the ISO over the
exercise price or (ii) the actual gain on disposition
will be treated as compensation to the optionee and will
be taxed as ordinary income in the year of such
disposition.
4.In any year that an optionee recognizes ordinary income
on a Disqualifying Disposition of stock acquired by
exercising an ISO, the Company generally will be
entitled to a corresponding federal income tax
deduction.
5.The difference between the amount realized by the
optionee as the result of a Disqualifying Disposition
and the sum of (i) the exercise price and (ii) the
amount of ordinary income recognized under the above
rules generally will be treated as capital gain or loss.
6.Capital gain or loss recognized by an optionee on a
disposition of shares will be long-term capital gain or
loss if the optionee's holding period for the shares
exceeds one year.
7.An optionee may be entitled to exercise an ISO by
delivering shares of the Company's Common Stock to the
Company in payment of the exercise price if the
optionee's ISO agreement so provides. If an optionee
exercises an ISO in such fashion, special rules will
apply.
8.In addition to the tax consequences described above, the
exercise of ISOs may result in an "alternative minimum
tax" under the Code. The Code provides that an
"alternative minimum tax" (at a rate of 26% or 28%) will
be applied against a taxable base which is equal to
"alternative minimum taxable income," generally reduced
by a statutory exemption. In general, the amount by
which the value of the shares received upon exercise of
the ISO exceeds the exercise price is included in the
optionee's alternative minimum taxable income. A
taxpayer is required to pay the higher of his or her
regular tax liability or the alternative minimum tax. A
taxpayer who pays alternative minimum tax attributable
to the exercise of an ISO may be entitled to a tax
credit against his or her regular tax liability in later
years.
9.Special rules apply if the shares acquired upon the
exercise of an ISO are subject to vesting, or are
subject to certain restrictions on resale under federal
securities laws applicable to directors, officers or 10%
shareholders.
Non-Qualified Options:
1.The optionee generally does not recognize any taxable
income upon the grant of a NQSO, and the Company is not
entitled to a federal income tax deduction by reason of
such grant.
2.The optionee generally will recognize ordinary income at
the time of exercise of a NQSO in an amount equal to the
excess, if any, of the fair market value of the shares
on the date of exercise over the exercise price. The
Company may be required to withhold income tax on this
amount.
3.When the optionee sells the shares acquired upon
exercise of a NQSO, he or she generally will recognize a
capital gain or loss in an amount equal to the
difference between the amount realized upon the sale of
the shares and his or her basis in the shares
(generally, the exercise price plus the amount taxed to
the optionee as ordinary income). If the optionee's
holding period for the shares exceeds one year, such
gain or loss will be a long-term capital gain or loss.
4.The Company generally should be entitled to a federal
income tax deduction when ordinary income is recognized
by the optionee.
5.An optionee may be entitled to exercise a NQSO by
delivering shares of the Company's Common Stock to the
Company in payment of the exercise price. If an
optionee exercises a NQSO in such fashion, special rules
will apply.
6.Special rules apply if the shares acquired upon the
exercise of an NQSO are subject to vesting, or are
subject to certain restrictions on resale under federal
securities laws applicable to directors, officers or 10%
shareholders.
Option Information
As of March 1, 1997 the Company had approximately 1,355
employees with outstanding option grants under the 1987 Stock
Plan.
The following table sets forth as of March 1, 1997, options
granted in the aggregate under the 1987 Stock Plan and the 1993
17
<PAGE>
Director Plan to (i) the Named Officers, (ii) each other person
who received five percent of such options, (iii) all executive
officers of the Company as a group, (iv) all current directors of
the Company who are not executive officers as a group and (v) all
employees, including all current officers who are not executive
officers, as a group:
Name Title No. of Options Granted
Rodger B. Dowdell, Jr. CEO, President & Director 0
Neil E. Rasmussen Vice President, Engineering & Director 0
Emanuel E. Landsman Vice President, Clerk & Director 0
Edward W. Machala Vice President, Operations & Director 804,090
Donald M. Muir Chief Financial Officer 38,950
David P. Vieau Vice President, Worldwide Business
Development 413,020
James D. Gerson Director 20,000
Ervin F. Lyon Director 20,000
All executive officers as a group...................................1,890,750
All current directors who are not executive officers as a group........40,000
All employees who are not executive officers as a group.............7,780,059
PROPOSAL NO. 5 - APPROVAL OF THE ADOPTION OF THE
1997 EMPLOYEE STOCK PURCHASE PLAN
The 1997 Employee Stock Purchase Plan (the "1997 Purchase
Plan") was adopted by the Board of Directors on February 12,
1997, subject to shareholder approval. It is intended that the
1997 Purchase Plan will constitute an "employee stock purchase
plan" within the meaning of Section 423(b) of the Code.
The affirmative vote of a majority of the shares of Common
Stock of the Company represented in person or by proxy at the
Meeting and entitled to vote will be required to approve the
adoption of the 1997 Purchase Plan. The Board of Directors
unanimously recommends a vote FOR the approval of the adoption of
the 1997 Purchase Plan.
The following is a summary description of the 1997 Purchase
Plan, which is qualified in its entirety by reference to the
complete text of the 1997 Purchase Plan which is attached as
Appendix C to this Proxy Statement.
Summary of the 1997 Purchase Plan
Purpose. The 1997 Purchase Plan is intended to encourage
stock ownership by all eligible employees of the Company and
participating subsidiaries so that they may share in the growth
of the Company by acquiring or increasing their proprietary
interest in the Company. The 1997 Purchase Plan is designed to
encourage eligible employees to remain in the employ of the
Company. Under the 1997 Purchase Plan, payroll deductions are
used to purchase the Company's Common Stock for eligible
participating employees through the exercise of stock options.
Shares Subject to the 1997 Purchase Plan. The 1997 Purchase
Plan authorizes the issuance of up to 1,000,000 shares of Common
Stock (subject to adjustment for capital changes) pursuant to the
exercise of nontransferable options granted to participating
employees. The Common Stock subject to the options under the
1997 Purchase Plan includes shares of the Company's authorized
but unissued Common Stock and shares of Common Stock reacquired
by the Company, including shares purchased in the open market.
Option holders are generally protected against dilution in the
event of certain capital changes such as a recapitalization,
stock split, merger, consolidation, reorganization, combination,
liquidation, stock dividend or similar transaction.
Eligibility. Employees of the Company (and participating
subsidiaries) whose customary employment with the Company or any
of its subsidiaries is more than 20 hours per week and for more
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than five months in any calendar year shall be eligible to
receive options under the 1997 Purchase Plan. Persons who are
eligible employees on or before the first day of any Payment
Period who elect to participate in the 1997 Purchase Plan shall
receive their options as of such day. An employee may not be
granted an option under the 1997 Purchase Plan, if after the
granting of the option such employee would be treated as owning
5% or more of the total combined voting power or value of all
classes of stock of the Company or its subsidiaries.
Administration. The 1997 Purchase Plan is administered by
the Compensation Committee. The Compensation Committee, subject
to the provisions of the 1997 Purchase Plan, has the power to
construe the 1997 Purchase Plan, to determine all questions
thereunder, and to adopt and amend such rules and regulations for
administration of the 1997 Purchase Plan as it may deem
appropriate.
Payment Periods; Payment for Shares of Common Stock. An
employee electing to participate in the 1997 Purchase Plan must
authorize an amount (a whole percentage not less than 1% nor more
than 10% of the employee's base pay or salary compensation) to be
deducted by the Company from the employee's base pay or salary
and applied toward the purchase of Common Stock under the 1997
Purchase Plan. A "Payment Period" commences on January 1st of
each year and ends on December 31st. The date of commencement of
the first Payment Period shall be January 1, 1998. On the first
business day of each Payment Period, the Company will grant to
each 1997 Purchase Plan participant an option to purchase shares
of Common Stock of the Company. On the last day of the Payment
Period, the employee will be deemed to have exercised this
option, at the option price, to the extent of such employee's
accumulated payroll deductions, on the condition that the
employee remains eligible to participate in the 1997 Purchase
Plan throughout the Payment Period. In no event, however, may
the employee exercise an option granted under the 1997 Purchase
Plan for more than 3,000 shares during a Payment Period. If the
amount of the accumulated payroll deductions exceeds the
aggregate purchase price of 3,000 shares, the excess of the
amount of accumulated payroll deductions over the aggregate
purchase price of the 3,000 shares will be promptly refunded to
the employee without interest. Furthermore, no employee may be
granted an option which permits the employee's right to purchase
shares of Common Stock under the 1997 Purchase Plan and all other
Section 423 plans of the Company and any subsidiary companies, to
accrue at a rate which exceeds $25,000 of fair market value of
such stock (determined on the respective date(s) of grant) for
each calendar year in which the option is outstanding. Any
excess accumulation of payroll deductions will be promptly
refunded to the employee without interest. Under the terms of
the 1997 Purchase Plan, the option price is an amount equal to
the lesser of (i) 85% of the average market price of the Common
Stock on the first business day of the Payment Period or (ii) 85%
of the average market price of the Common Stock on the last
business day of the Payment Period. The Company will accumulate
and hold for the employee's account the amounts deducted from his
pay. No interest will be paid on these amounts.
For purposes of the 1997 Purchase Plan, the term "average
market price" on any date means (i) the average (on that date) of
the high and low prices of the Common Stock on the principal
national securities exchange on which the Common Stock is traded,
if the Common Stock is then traded on a national securities
exchange; or (ii) the last reported sale price (on that date) of
the Common Stock on the NASDAQ Stock Market, if the Common Stock
is not then traded on a national securities exchange, or (iii)
the average of the closing bid and asked prices last quoted (on
that date) by an established quotation service for over-the-
counter securities, if the Common Stock is not reported on the
NASDAQ Stock Market; or (iv) if the Common Stock is not publicly
traded, the fair market value of the Common Stock as determined
by the Committee after taking into consideration all factors
which it deems appropriate, including, without limitation, recent
sale and offer prices of the Common Stock in private transactions
negotiated at arm's length. An employee may enter the 1997
Purchase Plan by delivering to the Company, at least 10 days
before the beginning date of the next succeeding Payment Period,
an authorization (i) stating the initial percentage to be
deducted from the employee's pay, (ii) authorizing the purchase
of shares of Common Stock for the employee in each Payment Period
in accordance with the terms of the 1997 Purchase Plan and (iii)
specifying the exact name or names in which shares purchased by
the employee are to be issued.
If an employee is not a participant in the 1997 Purchase
Plan on the last day of the Payment Period, the employee
generally is not entitled to exercise his option. An employee's
rights under the 1997 Purchase Plan generally terminate upon his
voluntary withdrawal from the 1997 Purchase Plan at any time, or
when he ceases employment because of retirement, resignation,
discharge, death or any other reason, except that employment
shall be treated as continuing intact while an employee is on
military leave, sick leave or other bona fide leave of absence,
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for up to 90 days, or for so long as the employee's right to
reemployment is guaranteed either by statute or by contract, if
longer.
Transferability. An employee's rights under the 1997 Purchase
Plan are the employee's alone and may not be transferred to,
assigned to, or availed of by any other person. Any option
granted to an employee may be exercised, during the employee's
lifetime, only by the employee.
Withdrawal from 1997 Purchase Plan. An employee may withdraw
from the 1997 Purchase Plan, in whole but not in part, at any
time prior to the last business day of each Payment Period by
delivering a withdrawal notice to the Company, in which event the
Company will refund, without interest, the entire balance of the
employee's deductions not previously used to purchase stock under
the 1997 Purchase Plan.
Amendments and Termination. The Compensation Committee may
from time to time adopt amendments to the 1997 Purchase Plan
provided that, without the approval of the Company's
shareholders, no amendment may increase the number of shares that
may be issued under the 1997 Purchase Plan or change the class of
the employees eligible to receive options under the 1997 Purchase
Plan or cause Rule 16b-3 under the Securities Exchange Act of
1934 to be inapplicable to the 1997 Purchase Plan. The 1997
Purchase Plan may be terminated at any time by the Compensation
Committee but such termination will not affect options then
outstanding under the 1997 Purchase Plan. If at any time shares
of Common Stock reserved for the purposes of the 1997 Purchase
Plan remain available for purchase but not in sufficient number
to satisfy all then unfilled purchase requirements, the available
shares will be apportioned among participants in proportion to
the amount of payroll deductions accumulated on behalf of each
participant that would otherwise be used to purchase stock, and
the 1997 Purchase Plan will terminate. Upon termination of the
1997 Purchase Plan, all payroll deductions not used to purchase
Common Stock will be refunded to 1997 Purchase Plan participants
without interest.
Federal Income Tax Consequences. The following discussion
summarizes certain U.S. federal income tax considerations for
persons receiving options under the 1997 Purchase Plan and
certain tax effects on the Company. Based upon the provisions of
the Code as in effect on the date of this Proxy Statement,
current regulations and existing administrative rulings of the
IRS. However, the summary is not intended to be a complete
discussion of all the federal income tax consequences of these
plans:
1. The amounts deducted from an employee's pay under the
1997 Purchase Plan will be included in the employee's
compensation subject to federal income tax. Subject to certain
requirements, generally no additional income will be recognized
by the employee either at the time options are granted pursuant
to the 1997 Purchase Plan or at the time the employee purchases
shares pursuant to the 1997 Purchase Plan.
2. If the employee disposes of shares purchased pursuant to
the 1997 Purchase Plan more than two years after the first
business day of the Payment Period in which the employee acquired
the shares, then upon such disposition the employee will
recognize ordinary income in an amount equal to the lesser of:
(a) the excess, if any, of the fair market value of
the shares at the time of disposition over the amount the
employee paid for the shares, or
(b) the excess of the fair market value of the shares
on the first business day of the Payment Period over the
option price.
In addition, the employee generally, will recognize
capital gain or loss in an amount equal to the difference between
the amount realized upon the sale of shares and the employee's
tax basis in the shares (generally the amount the employee paid
for the shares plus the amount, if any, taxed as ordinary
income). If the employee's holding period for the shares exceeds
one year, such gain or loss will be long-term capital gain or
loss.
3. If the employee disposes of shares purchased pursuant to
the 1997 Purchase Plan within two years after the first business
day of the Payment Period in which the employee acquired the
shares, then upon disposition the employee will recognize
ordinary income in an amount equal to the excess, if any, of the
fair market value of the shares on the last business day of the
applicable Payment Period over the amount the employee paid for
the shares.
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In addition, the employee generally, will recognize
capital gain or loss in an amount equal to the difference between
the amount realized upon the sale of the shares and the
employee's tax basis in the shares (generally the amount the
employee paid for the shares plus the amount, if any, taxed to
the employee as ordinary income). If the employee's holding
period for the shares is more than one year, such gain or loss
will be long-term capital gain or loss.
4. If the employee disposes of shares purchased pursuant to
the 1997 Purchase Plan more than two years after the first
business day of the Payment Period, the Company will not be
entitled to any federal income tax deduction with respect to the
options granted or the shares issued upon their exercise. If the
employee disposes of shares purchased pursuant to the 1997
Purchase Plan prior to the expiration of the two-year holding
period, the Company generally will be entitled to a federal
income tax deduction in an amount equal to the amount which is
treated as ordinary income to the employee as a result of the
disposition.
PROPOSAL NO. 6 - SHAREHOLDER PROPOSAL CONCERNING BOARD
COMPOSITION
A shareholder has indicated an intention to present the
following proposal for action by the shareholders:
WHEREAS: American Power Conversion Corporation (APC) has
grown into an international business operation,
with both sales and manufacturing facilities
inside and outside the United States; and
WHEREAS: The rapidly increasing size and complexity of the
business requires leadership with broad business
experience and judgment of the highest order; and
WHEREAS: The present Board of Directors is composed of only
five (5) members, four (4) of whom are individuals
with well respected technical/scientific
background, but not providing the diversity of
training and experience required to deal with
numerous other vital areas of the business; and
WHEREAS: The balance of stock ownership by members of the
Board of Directors and Officers has declined from
63.44% prior to the original public offering in
1988 to 21.15% reported in the Proxy Statement
dated May 10, 1996, and
WHEREAS: The same Board of Directors have consistently
renominated themselves annually for the past eight
(8) years, without appropriately increasing public
stockholder representation on the Board; and
WHEREAS: Stockholders now need additional, objective,
diversified, outside representation on the Board
of Directors; now
THEREFORE: The following motion is proposed for approval by
shareholders:
Members of the Board of Directors shall be
increased from five (5) to nine (9), no more than
three (3) of whom shall be officers or employees
of APC, nor any be a relative of a company officer
or Director.
STATEMENT BY THE BOARD OF DIRECTORS IN OPPOSITION TO THE
SHAREHOLDER PROPOSAL
The Board of Directors believes this proposal would not serve
the Company's best interests and recommends a vote AGAINST it.
The Board's opposition to this proposal is based upon the
following factors:
+ The Company is performing strongly - both for 1996 and in
the aggregate since it went public in 1988
+ The current Board works well as a team with senior management
+ The current Board is passionately committed to the long-term
health and success of the Company
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Company Performance
Under the current Board's direction, since going public in
1988, the Company has recorded nine consecutive years of record
revenues. Over the past five years the Company has achieved
compound annual growth rates for revenue and net income of 50%
and 43% respectively. In 1996, the Company achieved 37% revenue
growth, 33% net income growth and increased its industry-leading
market share position from approximately 33% to 37% worldwide.
Additionally, the Company ranked #2 among the NASDAQ 100 in share
price appreciation (187%) for 1996. In summary, the Company is
the largest, fastest growing and most profitable UPS manufacturer
in the industry for the 0-5kva worldwide market.
The Current Board Works Well
The five members of the current Board work well together as a
team and have a time-tested and candid working relationship with
the Company's officers and senior management. This mutual
respect and understanding has set the tone for the Company's
flexible, but tenacious, management style. In the eight years
since the Company went public, this five member Board has
successfully guided the Company through a controlled global
business expansion in an ever more complex international business
environment, which has resulted in the Company's worldwide
leadership role in its UPS markets.
Another factor contributing to the enduring business
effectiveness of the current Board has been its size and
composition, which allows for flexible and rapid response to a
constantly changing global market and consolidating international
competitors. While the Company's existing By-Laws already allow
additional Board members, the Board believes that increasing its
size to nine members could slow the decision making process and
diminish the Board's ability to respond to changing markets and
competitive threats. It is the Board's opinion that the
sustained long term growth enjoyed by the Company since it went
public, and thus cumulative benefit to shareholders, could
diminish in similar fashion.
The Board is Committed Long-Term
The current Board, through its significant stock ownership,
has a large personal stake in the long-term health and success of
the Company. The Company ranks in the top 15th percentile of the
NASDAQ 100 group of companies in the category of percentage of
outstanding share ownership by Directors and Officers. This long
term perspective assists the current Board in making decisions
that focus on the benefit to shareholders over the long haul, and
in resisting pressures which would push for short term gains at
the expense of the sustained growth experienced by the Company
since it went public in 1988. It would be exceedingly difficult
to secure four additional outside directors who would share this
magnitude of long- term investment in the Company, with the
result that their decisions would undoubtedly reflect the absence
of this stabilizing historical perspective. Changing the Board
from its current five members to the proposed nine members simply
offers no clear benefit. The Board does, however, recognize that
if at some future date it becomes advantageous to expand in size
or add a particular area of complementary expertise, it will do
so prudently and with a clear understanding of the benefits to be
derived.
For the reasons stated above, the Board of Directors
recommends a vote AGAINST the shareholder's proposal.
INDEPENDENT ACCOUNTANTS
The Company has retained KPMG Peat Marwick LLP as its
independent auditors for the fiscal year ending December 31,
1997. A representative of KPMG Peat Marwick LLP will be at the
Meeting and will be given an opportunity to make a statement if
so desired and will be available to respond to appropriate
questions from the stockholders.
SECTION 16 REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires the Company's directors and officers, and
persons who own more than 10% of a registered class of the
Company's equity securities, to file initial reports of ownership
and reports of changes in ownership with the Securities and
Exchange Commission (the "SEC"). Such persons are required by
SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
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Based solely on its review of the copies of such forms
received by it with respect to fiscal 1996, or written
representations from certain reporting persons, the Company
believes that all of its directors, officers and persons who
own more than 10% of a registered class of the Company's equity
securities complied with all filing requirements applicable to
them with respect to transactions during 1996 except that
Mr. Lucente and Mr. Lyon each filed one late Form 4 in
connection with one transaction per individual.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended for inclusion in the proxy
statement to be furnished to all shareholders entitled to vote at
the next annual meeting of the Company must be received at the
Company's principal executive offices no later than November 21,
1997. It is suggested that proponents submit their proposals by
Certified Mail - Return Receipt Requested.
EXPENSES AND SOLICITATION
The cost of solicitation of proxies will be borne by the
Company. In addition to soliciting shareholders by mail or by
its regular employees, the Company may request banks and brokers
to solicit their customers who have stock of the Company regis
tered in the name of a nominee and, if so, will reimburse such
banks and brokers for their reasonable out-of-pocket costs.
Solicitation by officers and employees of the Company, none of
whom will receive additional compensation therefor, may also be
made of some shareholders in person or by mail, telephone or
telegraph, following the original solicitation. The Company has
retained Morrow & Co. Incorporated to assist in the solicitation
of proxies, and will pay this company a fee of approximately
$6,000, plus expenses.
Appendix A
AMERICAN POWER CONVERSION CORPORATION
1997 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. Purpose. This Non-Qualified Stock Option Plan, to be
known as the 1997 Non-Employee Director Stock Option Plan
(hereinafter, this "Plan") is intended to promote the interests
of American Power Conversion Corporation (hereinafter, the
"Company") by providing an inducement to obtain and retain the
services of qualified persons who are not employees or officers
of the Company to serve as members of its Board of Directors (the
"Board").
2. Available Shares. The total number of shares of Common
Stock, par value $.01 per share, of the Company (the "Common
Stock") for which options may be granted under this Plan shall
not exceed 200,000 shares, subject to adjustment in accordance
with paragraph 10 of this Plan. Shares subject to this Plan are
authorized but unissued shares or shares that were once issued
and subsequently reacquired by the Company. If any options
granted under this Plan are surrendered before exercise or lapse
without exercise, in whole or in part, the shares reserved
therefor shall continue to be available under this Plan.
3. Administration. This Plan shall be administered by the
Board or by a committee appointed by the Board (the "Committee").
In the event the Board fails to appoint or refrains from
appointing a Committee, the Board shall have all power and
authority to administer this Plan. In such event, the word
"Committee" wherever used herein shall be deemed to mean the
Board. The Committee shall, subject to the provisions of the
Plan, have the power to construe this Plan, to determine all
questions hereunder, and to adopt and amend such rules and
regulations for the administration of this Plan as it may deem
desirable. No member of the Board or the Committee shall be
liable for any action or determination made in good faith with
respect to this Plan or any option granted under it.
4. Automatic Grant of Options. Subject to the availability
of shares under this Plan, each person who is a member of the
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Board and who is not an employee or officer of the Company (a
"Non-Employee Director") on the date of shareholder approval of
the Plan and on February 12th of each year thereafter shall be
automatically granted on such date, without further action by the
Board, an option to purchase 10,000 shares of the Common Stock.
Options to be granted under this paragraph 4 shall be the only
options ever to be granted at any time to any person under this
Plan. The number of shares covered by options granted under
this paragraph 4 shall be subject to adjustment in accordance
with the provisions of paragraph 10 of this Plan.
Notwithstanding anything to the contrary set forth herein, if
this Plan is not approved by a majority of the Company's
stockholders present, or represented, and voting on such matter
at the first meeting of Shareholders of the Company following the
Approval Date, then the Plan and the options granted pursuant to
this Section 4 shall terminate and become void, and no further
options shall be granted under this Plan.
5. Option Price. The purchase price of the stock covered by
an option granted pursuant to this Plan shall be 100% of the fair
market value of such shares on the day the option is granted.
The option price will be subject to adjustment in accordance with
the provisions of paragraph 10 of this Plan. For purposes of
this Plan, if, at the time an option is granted under the Plan,
the Company's Common Stock is publicly traded, "fair market
value" shall be determined as of the last business day for which
the prices or quotes discussed in this sentence are available
prior to the date such option is granted and shall mean (i) the
average (on that date) of the high and low prices of the Common
Stock on the principal national securities exchange on which the
Common Stock is traded, if the Common Stock is then traded on a
national securities exchange; or (ii) the last reported sale
price (on that date) of the Common Stock on the NASDAQ National
Market, if the Common Stock is not then traded on a national
securities exchange; or (iii) the closing bid price (or average
of bid prices) last quoted (on that date) by an established
quotation service for over-the-counter securities, if the Common
Stock is not reported on the NASDAQ National Market List.
6. Period of Option. Unless sooner terminated in accordance
with the provisions of paragraph 8 of this Plan, an option
granted hereunder shall expire on the date which is ten (10)
years after the date of grant of the option.
7. (a) Exercisability of Shares and Non-Transferability of
Options. Options granted under this Plan shall become
exercisable by the optionee in accordance with the following
schedule, provided that the optionee has continuously served as a
member of the Board through such date:
Percentage of Option
Shares for which
Option Will be Exercisable Date of Vesting
0% Less than two years from the
date of grant
25% Two years but less than two
and one-half years from the date
of grant
An additional 9.375% Every six months thereafter
The number of shares as to which options may be exercised
shall be cumulative, so that once the option shall become
exercisable as to any shares it shall continue to be exercisable
as to said shares, until expiration or termination of the option
as provided in this Plan.
(b) Non-transferability. Any option granted pursuant to
this Plan shall not be assignable or transferable other than by
will or the laws of descent and distribution or pursuant to a
domestic relations order and shall be exercisable during the
optionee's lifetime only by him or her.
8. Termination of Option Rights.
(a) In the event an optionee ceases to be a member of the
Board for any reason other than death or permanent disability,
any then unexercised portion of options granted to such optionee
shall, to the extent not then vested, immediately terminate and
become void; any portion of an option which is then vested but
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has not been exercised at the time the optionee so ceases to be a
member of the Board may be exercised, to the extent it is then
vested, by the optionee within 90 days of the date the optionee
ceased to be a member of the Board; and all options shall
terminate after such 90 days have expired.
(b) In the event that an optionee ceases to be a member of
the Board by reason of his or her death or permanent disability,
any option granted to such optionee shall be immediately and
automatically accelerated and become fully vested and all
unexercised options shall be exercisable by the optionee (or by
the optionee's personal representative, heir or legatee, in the
event of death) until the scheduled expiration date of the
option.
9. Exercise of Option. Subject to the terms and conditions
of this Plan and the option agreements, an option granted
hereunder shall, to the extent then exercisable, be exercisable
in whole or in part by giving written notice to the Company by
mail or in person addressed to American Power Conversion
Corporation at its principal executive offices, stating the
number of shares with respect to which the option is being
exercised, accompanied by payment in full for such shares.
Payment may be (a) in United States dollars in cash or by check,
(b) in whole or in part in shares of the Common Stock of the
Company already owned by the person or persons exercising the
option or shares subject to the option being exercised (subject
to such restrictions and guidelines as the Board may adopt from
time to time), valued at fair market value determined in
accordance with the provisions of paragraph 5 or (c) consistent
with applicable law, through the delivery of an assignment to the
Company of a sufficient amount of the proceeds from the sale of
the Common Stock acquired upon exercise of the option and an
authorization to the broker or selling agent to pay that amount
to the Company, which sale shall be at the participant's
direction at the time of exercise. There shall be no such
exercise at any one time as to fewer than one hundred (100)
shares or all of the remaining shares then purchasable by the
person or persons exercising the option, if fewer than one
hundred (100) shares. The Company's transfer agent shall, on
behalf of the Company, prepare a certificate or certificates
representing such shares acquired pursuant to exercise of the
option, shall register the optionee as the owner of such shares
on the books of the Company and shall cause the fully executed
certificate(s) representing such shares to be delivered to the
optionee as soon as practicable after payment of the option price
in full. The holder of an option shall not have any rights of a
stockholder with respect to the shares covered by the option,
except to the extent that one or more certificates for such
shares shall be delivered to him or her upon the due exercise of
the option.
10. Adjustments Upon Changes in Capitalization and Other
Events. Upon the occurrence of any of the following events, an
optionee's rights with respect to options granted to him or her
hereunder shall be adjusted as hereinafter provided:
(a) Stock Dividends and Stock Splits. If the shares of
Common Stock shall be subdivided or combined into a greater
or smaller number of shares or if the Company shall issue any
shares of Common Stock as a stock dividend on its outstanding
Common Stock, the number of shares of Common Stock
deliverable upon the exercise of options shall be
appropriately increased or decreased proportionately, and
appropriate adjustments shall be made in the purchase price
per share to reflect such subdivision, combination or stock
dividend.
(b) Recapitalization Adjustments. If the Company is to be
consolidated with or acquired by another entity in a merger,
sale of all or substantially all of the Company's assets or
otherwise, each option granted under this plan which is
outstanding but unvested as of the effective date of such
event shall become exercisable in full immediately prior to
the effective date of such event. In the event of a
reorganization, recapitalization, merger, consolidation, or
any other change in the corporate structure or shares of the
Company, to the extent permitted by Rule 16b-3 under the
Securities Exchange Act of 1934, adjustments in the number
and kind of shares authorized by this Plan and in the number
and kind of shares covered by, and in the option price of
outstanding options under this Plan necessary to maintain the
proportionate interest of the optionee and preserve, without
exceeding, the value of such option, shall be made.
Notwithstanding the foregoing, no such adjustment shall be
made which would, within the meaning of any applicable
provisions of the Internal Revenue Code of 1986, as amended,
constitute a modification, extension or renewal of any Option
or a grant of additional benefits to the holder of an Option.
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(c) Issuances of Securities. Except as expressly provided
herein, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any
class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares
subject to options. No adjustments shall be made for
dividends paid in cash or in property other than securities
of the Company.
(d) Adjustments. Upon the happening of any of the
foregoing events, the class and aggregate number of shares
set forth in paragraphs 2 and 4 of this Plan that are subject
to options which previously have been or subsequently may be
granted under this Plan shall also be appropriately adjusted
to reflect such events. The Board shall determine the
specific adjustments to be made under this paragraph 10 and
its determination shall be conclusive.
11. Restrictions on Issuance of Shares. Notwithstanding the
provisions of paragraphs 4 and 9 of this Plan, the Company shall
have no obligation to deliver any certificate or certificates
upon exercise of an option until one of the following conditions
shall be satisfied:
(i) The issuance of shares with respect to which the
option has been exercised is at the time of the issue of such
shares effectively registered under applicable Federal and
state securities laws as now in force or hereafter amended;
or
(ii) Counsel for the Company shall have given an opinion
that the issuance of such shares is exempt from registration
under Federal and state securities laws as now in force or
hereafter amended; and the Company has complied with all
applicable laws and regulations with respect thereto,
including without limitation all regulations required by any
stock exchange upon which the Company's outstanding Common
Stock is then listed.
12. Legend on Certificates. The certificates representing
shares issued pursuant to the exercise of an option granted
hereunder shall carry such appropriate legend, and such written
instructions shall be given to the Company's transfer agent, as
may be deemed necessary or advisable by counsel to the Company in
order to comply with the requirements of the Securities Act of
1933 or any state securities laws.
13. Representation of Optionee. If requested by the Company,
the optionee shall deliver to the Company written representations
and warranties upon exercise of the option that are necessary to
show compliance with Federal and state securities laws, including
representations and warranties to the effect that a purchase of
shares under the option is made for investment and not with a
view to their distribution (as that term is used in the
Securities Act of 1933).
14. Option Agreement. Each option granted under the
provisions of this Plan shall be evidenced by an option
agreement, which agreement shall be duly executed and delivered
on behalf of the Company and by the optionee to whom such option
is granted. The option agreement shall contain such terms,
provisions and conditions not inconsistent with this Plan as may
be determined by the officer executing it.
15. Termination and Amendment of Plan. Options may no longer
be granted under this Plan after February 12, 2007, and this Plan
shall terminate when all options granted or to be granted
hereunder are no longer outstanding. The Board may at any time
terminate this Plan or make such modification or amendment
thereof as it deems advisable; provided, however, that the Board
may not, without approval of the stockholders, (a) increase the
maximum number of shares for which options may be granted under
this Plan (except by adjustment pursuant to Section 10),
(b) materially modify the requirements as to eligibility to
participate in this Plan or (c) materially increase benefits
accruing to option holders under this Plan. Termination or any
modification or amendment of this Plan shall not, without consent
of a participant, affect his or her rights under an option
previously granted to him or her.
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16. Withholding of Income Taxes. Upon the exercise of an
option, the Company, in accordance with Section 3402(a) of the
Internal Revenue Code, may require the optionee to pay
withholding taxes in respect of amounts considered to be
compensation includable in the optionee's gross income.
17. Compliance with Regulations. It is the Company's intent
that the Plan comply in all respects with Rule 16b-3 under the
Securities Exchange Act of 1934 (or any successor or amended
provision thereof) and any applicable Securities and Exchange
Commission interpretations thereof. If any provision of this
Plan is deemed not to be in compliance with Rule 16b-3, the
provision shall be null and void.
18. Governing Law. The validity and construction of this Plan
and the instruments evidencing options shall be governed by the
laws of the Commonwealth of Massachusetts, without giving effect
to the principles of conflicts of law thereof.
Appendix B
AMERICAN POWER CONVERSION CORPORATION
1997 STOCK OPTION PLAN
1. Purpose. The purpose of this 1997 Stock Option Plan
(the "Plan") is to encourage employees of American Power
Conversion Corporation (the "Company") and of any present or
future parent or subsidiary of the Company (collectively,
"Related Corporations"), and other individuals who render
services to the Company or a Related Corporation, by providing
opportunities to purchase stock in the Company pursuant to
options granted hereunder which qualify as "incentive stock
options" ("ISOs") under Section 422(b) of the Internal Revenue
Code of 1986, as amended (the "Code") and options which do not
qualify as ISOs ("Non-Qualified Options"). Both ISOs and Non-
Qualified Options are referred to hereafter individually as an
"Option" and collectively as "Options." As used herein, the
terms "parent" and "subsidiary" mean "parent corporation" and
"subsidiary corporation," respectively, as those terms are
defined in Section 424 of the Code.
2. Administration of the Plan.
A. Board or Committee Administration. The Plan shall
be administered by the Board of Directors of the Company
(the "Board") or, subject to paragraph 2(D) (relating to
compliance with Section 162(m) of the Code), by a committee
appointed by the Board (the "Committee"). Hereinafter, all
references in this Plan to the "Committee" shall mean the
Board if no Committee has been appointed. Subject to
ratification of the grant or authorization of each Option by
the Board (if so required by applicable state law), and
subject to the terms of the Plan, the Committee shall have
the authority to (i) determine to whom (from among the class
of employees eligible under paragraph 3 to receive ISOs)
ISOs shall be granted, and to whom (from among the class of
individuals and entities eligible under paragraph 3 to
receive Non-Qualified Options) Non-Qualified Options may be
granted; (ii) determine the time or times at which Options
shall be granted; (iii) determine the exercise price of
shares subject to each Option, which price shall not be less
than the minimum price specified in paragraph 6;
(iv) determine whether each Option granted shall be an ISO
or a Non-Qualified Option; (v) determine (subject to
paragraph 7) the time or times when each Option shall become
exercisable and the duration of the exercise period; (vi)
extend the period during which outstanding Options may be
exercised; (vii) determine whether restrictions such as
repurchase options are to be imposed on shares subject to
Options and the nature of such restrictions, if any; and
(viii) interpret the Plan and prescribe and rescind rules
and regulations relating to it. If the Committee determines
to issue a Non-Qualified Option, it shall take whatever
actions it deems necessary, under Section 422 of the Code
and the regulations promulgated thereunder, to ensure that
such Option is not treated as an ISO. The interpretation
and construction by the Committee of any provisions of the
Plan or of any Option granted under it shall be final unless
otherwise determined by the Board. The Committee may from
time to time adopt such rules and regulations for carrying
out the Plan as it may deem advisable. No member of the
Board or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or
any Option granted under it.
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B. Committee Actions. The Committee may select one of
its members as its chairman, and shall hold meetings at such
time and places as it may determine. A majority of the
Committee shall constitute a quorum and acts by a majority
of the members of the Committee at a meeting at which a
quorum is present, or acts reduced to or approved in writing
by a majority of the members of the Committee (if consistent
with applicable state law), shall constitute the valid acts
of the Committee. From time to time the Board may increase
the size of the Committee and appoint additional members
thereof, remove members (with or without cause) and appoint
new members in substitution therefor, fill vacancies however
caused, or remove all members of the Committee and
thereafter directly administer the Plan.
C. Grant of Options to Board Members. Options may be
granted to members of the Board. All grants of Options to
members of the Board shall in all respects be made in
accordance with the provisions of this Plan applicable to
other eligible persons. Members of the Board who either
(i) are eligible to receive grants of Options pursuant to
the Plan or (ii) have been granted Options may vote on any
matters affecting the administration of the Plan or the
grant of any Options pursuant to the Plan, except that no
such member shall act upon the granting to himself or
herself of Options, but any such member may be counted in
determining the existence of a quorum at any meeting of the
Board during which action is taken with respect to the
granting to such member of Options.
D. Performance-Based Compensation. The Board, in its
discretion, may take such action as may be necessary to
ensure that Options granted under the Plan qualify as
"qualified performance-based compensation" within the
meaning of Section 162(m) of the Code and applicable
regulations promulgated thereunder ("Performance-Based
Compensation"). Such action may include, in the Board's
discretion, some or all of the following (i) if the Board
determines that Options granted under the Plan generally
shall constitute Performance-Based Compensation, the Plan
shall be administered, to the extent required for such
Options to constitute Performance-Based Compensation, by a
Committee consisting solely of two or more "outside
directors" (as defined in applicable regulations promulgated
under Section 162(m) of the Code), (ii) if any Non-Qualified
Options with an exercise price less than the fair market
value per share of Common Stock are granted under the Plan
and the Board determines that such Options should constitute
Performance-Based Compensation, such options shall be made
exercisable only upon the attainment of a pre-established,
objective performance goal established by the Committee, and
such grant shall be submitted for, and shall be contingent
upon shareholder approval and (iii) Options granted under
the Plan may be subject to such other terms and conditions
as are necessary for compensation recognized in connection
with the exercise or disposition of such Stock Right or the
disposition of Common Stock acquired pursuant to such Stock
Right, to constitute Performance-Based Compensation.
3. Eligible Employees and Others. ISOs may be granted only
to employees of the Company or any Related Corporation. Non-
Qualified Options may be granted to any employee, officer or
director (whether or not also an employee) or consultant of the
Company or any Related Corporation. The Committee may take into
consideration a recipient's individual circumstances in
determining whether to grant an ISO or a Non-Qualified Option.
The granting of any Option to any individual or entity shall
neither entitle that individual or entity to, nor disqualify such
individual or entity from, participation in any other grant of
Options.
4. Stock. The stock subject to Options shall be authorized
but unissued shares of Common Stock of the Company, par value
$.01 per share (the "Common Stock"), or shares of Common Stock
reacquired by the Company in any manner. The aggregate number of
shares which may be issued pursuant to the Plan is 6,000,000,
subject to adjustment as provided in paragraph 13. If any Option
granted under the Plan shall expire or terminate for any reason
without having been exercised in full or shall cease for any
reason to be exercisable in whole or in part or shall be
repurchased by the Company, the shares subject to such Option
shall again be available for grants of Options under the Plan.
No employee of the Company or any Related Corporation may
be granted Options to acquire, in the aggregate, more than
4,200,000 of the shares of Common Stock under the Plan during any
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fiscal year of the Company. If any Option granted under the Plan
shall expire or terminate for any reason without having been
exercised in full or shall cease for any reason to be exercisable
in whole or in part or shall be repurchased by the Company, the
shares subject to such Option shall be included in the
determination of the aggregate number of shares of Common Stock
deemed to have been granted to such employee under the Plan.
5. Granting of Options. Options may be granted under the
Plan at any time after February 12, 1997 and prior to February
12, 2007. The date of grant of an Option under the Plan will be
the date specified by the Committee at the time it grants the
Option; provided, however, that such date shall not be prior to
the date on which the Committee acts to approve the grant.
6. Minimum Option Price; ISO Limitations.
A. Price for Non-Qualified Options. Subject to
Paragraph 2(D) (relating to compliance with Section 162(m)
of the Code), the exercise price per share specified in the
agreement relating to each Non-Qualified Option granted
under the Plan may be less than the fair market value of the
Common Stock of the Company on the date of grant; provided
that in no event shall such exercise price be less than the
minimum legal consideration required therefor under the laws
of any jurisdiction in which the Company or its successors
in interest may be organized.
B. Price for ISOs. The exercise price per share
specified in the agreement relating to each ISO granted
under the Plan shall not be less than the fair market value
per share of Common Stock on the date of such grant. In the
case of an ISO to be granted to an employee owning stock
possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any
Related Corporation, the price per share specified in the
agreement relating to such ISO shall not be less than
one hundred ten percent (110%) of the fair market value
per share of Common Stock on the date of grant. For
purposes of determining stock ownership under this
paragraph, the rules of Section 424(d) of the Code shall
apply.
C. $100,000 Annual Limitation on ISO Vesting. Each
eligible employee may be granted Options treated as ISOs
only to the extent that, in the aggregate under this Plan
and all incentive stock option plans of the Company and any
Related Corporation, ISOs do not become exercisable for the
first time by such employee during any calendar year with
respect to stock having a fair market value (determined at
the time the ISOs were granted) in excess of $100,000. The
Company intends to designate any Options granted in excess
of such limitation as Non-Qualified Options, and the Company
shall issue separate certificates to the optionee with
respect to Options that are Non-Qualified Options and Option
that are ISOs.
D. Determination of Fair Market Value. If, at the time
an Option is granted under the Plan, the Company's Common
Stock is publicly traded, "fair market value" shall be
determined as of the date of grant or, if the prices or
quotes discussed in this sentence are unavailable for such
date, the last business day for which such prices or quotes
are available prior to the date of grant and shall mean
(i) the average (on that date) of the high and low prices of
the Common Stock on the principal national securities
exchange on which the Common Stock is traded, if the Common
Stock is then traded on a national securities exchange; or
(ii) the last reported sale price (on that date) of the
Common Stock on the NASDAQ National Market, if the Common
Stock is not then traded on a national securities exchange;
or (iii) the closing bid price (or average of bid prices)
last quoted (on that date) by an established quotation
service for over-the-counter securities, if the Common Stock
is not reported on the NASDAQ National Market. If the
Common Stock is not publicly traded at the time an Option is
granted under the Plan, "fair market value" shall be deemed
to be the fair value of the Common Stock as determined by
the Committee after taking into consideration all factors
which it deems appropriate, including, without limitation,
recent sale and offer prices of the Common Stock in private
transactions negotiated at arm's length.
7. Option Duration. Subject to earlier termination as
provided in paragraphs 9 and 10 or in the agreement relating to
such Option, each Option shall expire on the date specified by
the Committee, but not more than (i) ten years from the date of
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grant in the case of Options generally and (ii) five years from
the date of grant in the case of ISOs granted to an employee
owning stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or
any Related Corporation, as determined under paragraph 6(B).
Subject to earlier termination as provided in paragraphs 9 and
10, the term of each ISO shall be the term set forth in the
original instrument granting such ISO, except with respect to any
part of such ISO that is converted into a Non-Qualified Option
pursuant to paragraph 16.
8. Exercise of Option. Subject to the provisions of
paragraphs 9 through 12, each Option granted under the Plan shall
be exercisable as follows:
A. Vesting. The Option shall either be fully
exercisable on the date of grant or shall become exercisable
thereafter in such installments as the Committee may
specify.
B. Full Vesting of Installments. Once an installment
becomes exercisable it shall remain exercisable until
expiration or termination of the Option, unless otherwise
specified by the Committee.
C. Partial Exercise. Each Option or installment may be
exercised at any time or from time to time, in whole or in
part, for up to the total number of shares with respect to
which it is then exercisable.
D. Acceleration of Vesting. The Committee shall have
the right to accelerate the date on which any installment of
any Option becomes exercisable; provided that the Committee
shall not, without the consent of an optionee, accelerate
the permitted exercise date of any installment of any Option
granted to any employee as an ISO (and not previously
converted into a Non-Qualified Option pursuant to
paragraph 16) if such acceleration would violate the annual
vesting limitation contained in Section 422(d) of the Code,
as described in paragraph 6(C).
9. Termination of Employment. Unless otherwise specified
in the agreement relating to such ISO, if an ISO optionee ceases
to be employed by the Company and all Related Corporations other
than by reason of death or disability as defined in paragraph 10,
no further installments of his or her ISOs shall become
exercisable, and his or her ISOs shall terminate on the earlier
of (a) the passage of three months after the date of termination
of his or her employment, or (b) expiration dates, except to the
extent that such ISOs (or unexercised installments thereof) have
been converted into Non-Qualified Options pursuant to
paragraph 16. For purposes of this paragraph 9, employment shall
be considered as continuing uninterrupted during any bona fide
leave of absence (such as those attributable to illness, military
obligations or governmental service) provided that the period of
such leave does not exceed 90 days or, if longer, any period
during which such optionee's right to reemployment is guaranteed
by statute or by contract. A bona fide leave of absence with the
written approval of the Committee shall not be considered an
interruption of employment under this paragraph 9, provided that
such written approval contractually obligates the Company or any
Related Corporation to continue the employment of the optionee
after the approved period of absence. ISOs granted under the
Plan shall not be affected by any change of employment within or
among the Company and Related Corporations, so long as the
optionee continues to be an employee of the Company or any
Related Corporation. Nothing in the Plan shall be deemed to give
any optionee the right to be retained in employment or other
service by the Company or any Related Corporation for any period
of time.
10. Death; Disability.
A. Death. If an ISO optionee ceases to be employed by
the Company and all Related Corporations by reason of his or
her death, any ISO owned by such optionee may be exercised,
to the extent otherwise exercisable on the date of death, by
the estate, personal representative or beneficiary who has
acquired the ISO by will or by the laws of descent and
distribution, until the earlier of (i) the specified
expiration date of the ISO or (ii) 180 days from the date of
the optionee's death.
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B. Disability. If an ISO optionee ceases to be
employed by the Company and all Related Corporations by
reason of his or her disability, such optionee shall have
the right to exercise any ISO held by him or her on the date
of termination of employment, to the extent of the number of
shares with respect to which he or she could have exercised
it on that date, until the earlier of (i) the specified
expiration date of the ISO or (ii) 180 days from the date of
the termination of the optionee's employment. For the
purposes of the Plan, the term "disability" shall mean
"permanent and total disability" as defined in
Section 22(e)(3) of the Code or any successor statute.
11. Assignability. No ISO shall be assignable or
transferable by the optionee except by will or by the laws of
descent and distribution, and during the lifetime of an optionee
each Option shall be exercisable only by such optionee. Non-
Qualified Options shall be transferable to the extent set forth
in the agreement relating thereto.
12. Terms and Conditions of Options. Options shall be
evidenced by instruments (which need not be identical) in such
forms as the Committee may from time to time approve. Such
instruments shall conform to the terms and conditions set forth
in paragraphs 6 through 11 hereof and may contain such other
provisions as the Committee deems advisable which are not
inconsistent with the Plan, including restrictions applicable to
shares of Common Stock issuable upon exercise of Options. The
Committee may specify that any Non-Qualified Option shall be
subject to the restrictions set forth herein with respect to
ISOs, or to such other termination and cancellation provisions as
the Committee may determine. The Committee may from time to time
confer authority and responsibility on one or more of its own
members and/or one or more officers of the Company to execute and
deliver such instruments. The proper officers of the Company are
authorized and directed to take any and all action necessary or
advisable from time to time to carry out the terms of such
instruments.
13. Adjustments. Upon the occurrence of any of the
following events, an optionee's rights with respect to Options
granted to such optionee hereunder shall be adjusted as
hereinafter provided, unless otherwise specifically provided in
the written agreement between the optionee and the Company
relating to such Option:
A. Stock Dividends and Stock Splits. If the shares of
Common Stock shall be subdivided or combined into a greater
or smaller number of shares or if the Company shall issue
any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common
Stock deliverable upon the exercise of Options shall be
appropriately increased or decreased proportionately, and
appropriate adjustments shall be made in the purchase price
per share to reflect such subdivision, combination or stock
dividend.
B. Consolidations or Mergers. If the Company is to be
consolidated with or acquired by another entity in a merger
or other reorganization in which the holders of the
outstanding voting stock of the Company immediately
preceding the consummation of such event, shall, immediately
following such event, hold, as a group, less than a majority
of the voting securities of the surviving or successor
entity, or in the event of a sale of all or substantially
all of the Company's assets or otherwise (each, an
"Acquisition"), the Committee or the board of directors of
any entity assuming the obligations of the Company hereunder
(the "Successor Board"), shall, as to outstanding Options,
either (i) make appropriate provision for the continuation
of such Options by substituting on an equitable basis for
the shares then subject to such Options either (a) the
consideration payable with respect to the outstanding shares
of Common Stock in connection with the Acquisition,
(b) shares of stock of the surviving or successor
corporation or (c) such other securities as the Successor
Board deems appropriate, the fair market value of which
shall not materially exceed the fair market value of the
shares of Common Stock subject to such Options immediately
preceding the Acquisition; or (ii) upon written notice to
the optionees, provide that all Options must be exercised,
to the extent then exercisable or to be exercisable as a
result of the Acquisition, within a specified number of days
of the date of such notice, at the end of which period the
Options shall terminate; or (iii) terminate all Options in
exchange for a cash payment equal to the excess of the fair
market value of the shares subject to such Options (to the
extent then exercisable or to be exercisable as a result of
the Acquisition) over the exercise price thereof.
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C. Recapitalization or Reorganization. In the event of
a recapitalization or reorganization of the Company (other
than a transaction described in subparagraph B above)
pursuant to which securities of the Company or of another
corporation are issued with respect to the outstanding
shares of Common Stock, an optionee upon exercising an
Option shall be entitled to receive for the purchase price
paid upon such exercise the securities he or she would have
received if he or she had exercised such Option prior to
such recapitalization or reorganization.
D. Modification of ISOs. Notwithstanding the
foregoing, any adjustments made pursuant to subparagraphs A,
B or C with respect to ISOs shall be made only after the
Committee, after consulting with counsel for the Company,
determines whether such adjustments would constitute a
"modification" of such ISOs (as that term is defined in
Section 424 of the Code) or would cause any adverse tax
consequences for the holders of such ISOs. If the Committee
determines that such adjustments made with respect to ISOs
would constitute a modification of such ISOs or would cause
adverse tax consequences to the holders, it may refrain from
making such adjustments.
E. Dissolution or Liquidation. In the event of the
proposed dissolution or liquidation of the Company, each
Option will terminate immediately prior to the consummation
of such proposed action or at such other time and subject to
such other conditions as shall be determined by the
Committee.
F. Issuances of Securities. Except as expressly
provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of
stock of any class, shall affect, and no adjustment by
reason thereof shall be made with respect to, the number or
price of shares subject to Options. No adjustments shall be
made for dividends paid in cash or in property other than
securities of the Company.
G. Fractional Shares. No fractional shares shall be
issued under the Plan and the optionee shall receive from
the Company cash in lieu of such fractional shares.
H. Adjustments. Upon the happening of any of the
events described in subparagraphs A, B or C above, the class
and aggregate number of shares set forth in paragraph 4
hereof that are subject to Options which previously have
been or subsequently may be granted under the Plan shall
also be appropriately adjusted to reflect the events
described in such subparagraphs. The Committee or the
Successor Board shall determine the specific adjustments to
be made under this paragraph 13 and, subject to paragraph 2,
its determination shall be conclusive.
14. Means of Exercising Options. An Option (or any part or
installment thereof) shall be exercised by giving written notice
to the Company at its principal office address, or to such
transfer agent as the Company shall designate. Such notice shall
identify the Option being exercised and specify the number of
shares as to which such Option is being exercised, accompanied by
full payment of the purchase price therefor either (a) in United
States dollars in cash or by check, (b) at the discretion of the
Committee, through delivery of shares of Common Stock having a
fair market value equal as of the date of the exercise to the
cash exercise price of the Option, (c) at the discretion of the
Committee, by delivery of the optionee's personal recourse note
bearing interest payable not less than annually at no less than
100% of the lowest applicable Federal rate, as defined in
Section 1274(d) of the Code, (d) at the discretion of the
Committee and consistent with applicable law, through the
delivery of an assignment to the Company of a sufficient amount
of the proceeds from the sale of the Common Stock acquired upon
exercise of the Option and an authorization to the broker or
selling agent to pay that amount to the Company, which sale shall
be at the participant's direction at the time of exercise, or
(e) at the discretion of the Committee, by any combination of
(a), (b), (c) and (d) above. If the Committee exercises its
discretion to permit payment of the exercise price of an ISO by
means of the methods set forth in clauses (b), (c), (d) or (e) of
the preceding sentence, such discretion shall be exercised in
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writing at the time of the grant of the ISO in question. The
holder of an Option shall not have the rights of a shareholder
with respect to the shares covered by his Option until the date
of issuance of a stock certificate to such holder for such
shares. Except as expressly provided above in paragraph 13 with
respect to changes in capitalization and stock dividends, no
adjustment shall be made for dividends or similar rights for
which the record date is before the date such stock certificate
is issued.
15. Term and Amendment of Plan. This Plan was adopted by
the Board on February 12, 1997, subject, with respect to the
validation of ISOs granted under the Plan, to approval of the
Plan by the stockholders of the Company at the next Meeting of
Stockholders or, in lieu thereof, by written consent. If the
approval of stockholders is not obtained prior to February 11,
1998, any grants of ISOs under the Plan made prior to that date
will be rescinded. The Plan shall expire at the end of the day
on February 12, 2007 (except as to Options outstanding on that
date). Subject to the provisions of paragraph 5 above, Options
may be granted under the Plan prior to the date of stockholder
approval of the Plan. The Board may terminate or amend the Plan
in any respect at any time, except that, without the approval of
the stockholders obtained within 12 months before or after the
Board adopts a resolution authorizing any of the following
actions: (a) the total number of shares that may be issued under
the Plan may not be increased (except by adjustment pursuant to
paragraph 13); (b) the provisions of paragraph 3 regarding
eligibility for grants of ISOs may not be modified; (c) the
provisions of paragraph 6(B) regarding the exercise price at
which shares may be offered pursuant to ISOs may not be modified
(except by adjustment pursuant to paragraph 13) and (d) the
expiration date of the Plan may not be extended. Except as
otherwise provided in this paragraph 15, in no event may action
of the Board or stockholders alter or impair the rights of an
optionee, without such optionee's consent, under any Option
previously granted to such optionee.
16. Conversion of ISOs into Non-Qualified Options. Subject
to paragraph 13(D), without the prior written consent of the
holder of an ISO, the Committee shall not alter the terms of such
ISO (including the means of exercising such ISO) if such
alteration would constitute a modification (within the meaning of
Section 424(h)(3) of the Code). The Committee, at the written
request or with the written consent of any optionee, may in its
discretion take such actions as may be necessary to convert such
optionee's ISOs (or any installments or portions of installments
thereof) that have not been exercised on the date of conversion
into Non-Qualified Options at any time prior to the expiration of
such ISOs, regardless of whether the optionee is an employee of
the Company or a Related Corporation at the time of such
conversion. Such actions may include, but shall not be limited
to, extending the exercise period or reducing the exercise price
of the appropriate installments of such ISOs. At the time of
such conversion, the Committee (with the consent of the optionee)
may impose such conditions on the exercise of the resulting Non-
Qualified Options as the Committee in its discretion may
determine, provided that such conditions shall not be
inconsistent with this Plan. Nothing in the Plan shall be deemed
to give any optionee the right to have such optionee's ISOs
converted into Non-Qualified Options, and no such conversion
shall occur until and unless the Committee takes appropriate
action. Upon the taking of such action the Company shall issue
separate certificates to the optionee with respect to Options
that are Non-Qualified Options and Options that are ISOs.
17. Application Of Funds. The proceeds received by the
Company from the sale of shares pursuant to Options granted under
the Plan shall be used for general corporate purposes.
18. Notice to Company of Disqualifying Disposition. By
accepting an ISO granted under the Plan, each optionee agrees to
notify the Company in writing immediately after such optionee
makes a Disqualifying Disposition (as described in Sections 421,
422 and 424 of the Code and regulations thereunder) of any stock
acquired pursuant to the exercise of ISOs granted under the Plan.
A Disqualifying Disposition is generally any disposition
occurring on or before the later of (a) the date two years
following the date the ISO was granted or (b) the date one year
following the date the ISO was exercised.
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19. Withholding of Additional Income Taxes. Upon the
exercise of a Non-Qualified Option, the transfer of a Non-
Qualified Stock Option pursuant to an arm's length transaction,
the making of a Disqualifying Disposition (as defined in
paragraph 18), the vesting or transfer of restricted stock or
securities acquired on the exercise of a Option hereunder, or the
making of a distribution or other payment with respect to such
stock or securities, the Company may withhold taxes in respect of
amounts that constitute compensation includable in gross income.
The Committee in its discretion may condition (i) the exercise of
an Option (ii) the transfer of a Non-Qualified Stock Option, or
(iii) the vesting or transferability of restricted stock or
securities acquired by exercising an Option, on the optionee's
making satisfactory arrangement for such withholding. Such
arrangement may include payment by the optionee in cash or by
check of the amount of the withholding taxes or, at the
discretion of the Committee, by the optionee's delivery of
previously held shares of Common Stock or the withholding from
the shares of Common Stock otherwise deliverable upon exercise of
a Option shares having an aggregate fair market value equal to
the amount of such withholding taxes.
20. Governmental Regulation. The Company's obligation to
sell and deliver shares of the Common Stock under this Plan is
subject to the approval of any governmental authority required in
connection with the authorization, issuance or sale of such
shares.
Government regulations may impose reporting or other
obligations on the Company with respect to the Plan. For
example, the Company may be required to send tax information
statements to employees and former employees that exercise ISOs
under the Plan, and the Company may be required to file tax
information returns reporting the income received by optionees in
connection with the Plan.
21. Governing Law. The validity and construction of the
Plan and the instruments evidencing Options shall be governed by
the laws of The Commonwealth of Massachusetts, or the laws of any
jurisdiction in which the Company or its successors in interest
may be organized.
Appendix C
AMERICAN POWER CONVERSION CORPORATION
1997 EMPLOYEE STOCK PURCHASE PLAN
Article 1 - Purpose.
This 1997 Employee Stock Purchase Plan (the "Plan") is
intended to encourage stock ownership by all eligible employees
of American Power Conversion Corporation (the "Company"), a
Massachusetts corporation, and its participating subsidiaries (as
defined in Article 17) so that they may share in the growth of
the Company by acquiring or increasing their proprietary interest
in the Company. The Plan is designed to encourage eligible
employees to remain in the employ of the Company and its
participating subsidiaries. The Plan is intended to constitute
an "employee stock purchase plan" within the meaning of
Section 423(b) of the Internal Revenue Code of 1986, as amended
(the "Code").
Article 2 - Administration of the Plan.
The Plan may be administered by a committee appointed by the
Board of Directors of the Company (the "Committee"). The
Committee shall consist of not less than two members of the
Company's Board of Directors. The Board of Directors may from
time to time remove members from, or add members to, the
Committee. Vacancies on the Committee, howsoever caused, shall
be filled by the Board of Directors. The Committee may select
one of its members as Chairman, and shall hold meetings at such
times and places as it may determine. Acts by a majority of the
Committee, or acts reduced to or approved in writing by a
majority of the members of the Committee, shall be the valid acts
of the Committee.
The interpretation and construction by the Committee of any
provisions of the Plan or of any option granted under it shall be
final, unless otherwise determined by the Board of Directors.
The Committee may from time to time adopt such rules and
regulations for carrying out the Plan as it may deem best,
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provided that any such rules and regulations shall be applied on
a uniform basis to all employees under the Plan. No member of
the Board of Directors or the Committee shall be liable for any
action or determination made in good faith with respect to the
Plan or any option granted under it.
In the event the Board of Directors fails to appoint or
refrains from appointing a Committee, the Board of Directors
shall have all power and authority to administer the Plan. In
such event, the word "Committee" wherever used herein shall be
deemed to mean the Board of Directors.
Article 3 - Eligible Employees.
All employees of the Company or any of its participating
subsidiaries whose customary employment is more than 20 hours per
week and for more than five months in any calendar year shall be
eligible to receive options under the Plan to purchase common
stock of the Company, and all eligible employees shall have the
same rights and privileges hereunder. Persons who are eligible
employees on the first business day of any Payment Period (as
defined in Article 5) shall receive their options as of such day.
Persons who become eligible employees after any date on which
options are granted under the Plan shall be granted options on
the first day of the next succeeding Payment Period on which
options are granted to eligible employees under the Plan. In no
event, however, may an employee be granted an option if such
employee, immediately after the option was granted, would be
treated as owning stock possessing five percent or more of the
total combined voting power or value of all classes of stock of
the Company or of any parent corporation or subsidiary
corporation, as the terms "parent corporation" and "subsidiary
corporation" are defined in Section 424(e) and (f) of the Code.
For purposes of determining stock ownership under this paragraph,
the rules of Section 424(d) of the Code shall apply, and stock
which the employee may purchase under outstanding options shall
be treated as stock owned by the employee.
Article 4 - Stock Subject to the Plan.
The stock subject to the options under the Plan shall be
shares of the Company's authorized but unissued common stock, par
value $.01 per share (the "Common Stock"), or shares of Common
Stock reacquired by the Company, including shares purchased in
the open market. The aggregate number of shares which may be
issued pursuant to the Plan is 1,000,000, subject to adjustment
as provided in Article 12. If any option granted under the Plan
shall expire or terminate for any reason without having been
exercised in full or shall cease for any reason to be exercisable
in whole or in part, the unpurchased shares subject thereto shall
again be available under the Plan.
Article 5 - Payment Period and Stock Options.
The first Payment Period during which payroll deductions will
be accumulated under the Plan shall commence on January 1, 1998
and shall end on December 31, 1998. For the remainder of the
duration of the Plan, Payment Periods shall consist of the twelve-
month periods commencing on January 1st and ending on December
31st of each calendar year.
Once each year, on the first business day of each Payment
Period, the Company will grant to each eligible employee who is
then a participant in the Plan an option to purchase on the last
day of such Payment Period, at the Option Price hereinafter
provided for, a maximum of 3,000 shares, on condition that such
employee remains eligible to participate in the Plan throughout
the remainder of such Payment Period. The participant shall be
entitled to exercise the option so granted only to the extent of
the participant's accumulated payroll deductions on the last day
of such Payment Period. If the participant's accumulated payroll
deductions on the last day of the Payment Period would enable the
participant to purchase more than 3,000 shares except for the
3,000 - share limitation, the excess of the amount of the
accumulated payroll deductions over the aggregate purchase price
of the 3,000 shares shall be promptly refunded to the
participant by the Company, without interest. The Option Price
per share for each Payment Period shall be the lesser of (i) 85%
of the average market price of the Common Stock on the first
business day of the Payment Period or (ii) 85% of the average
market price of the Common Stock on the last business day of the
Payment Period, in either event rounded up to the nearest cent.
The foregoing limitation on the number of shares subject to
option and the Option Price shall be subject to adjustment as
provided in Article 12.
For purposes of the Plan, the term "average market price" on
any date means (i) the average (on that date) of the high and low
prices of the Common Stock on the principal national securities
exchange on which the Common Stock is traded, if the Common Stock
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is then traded on a national securities exchange; or (ii) the
last reported sale price (on that date) of the Common Stock on
the NASDAQ National Market, if the Common Stock is not then
traded on a national securities exchange; or (iii) the average of
the closing bid and asked prices last quoted (on that date) by an
established quotation service for over-the-counter securities, if
the Common Stock is not reported on the NASDAQ National Market;
or (iv) if the Common Stock is not publicly traded, the fair
market value of the Common Stock as determined by the Committee
after taking into consideration all factors which it deems
appropriate, including, without limitation, recent sale and offer
prices of the Common Stock in private transactions negotiated at
arm's length.
For purposes of the Plan, the term "business day" means a day
on which there is trading on the NASDAQ National Market or the
aforementioned national securities exchange, whichever is
applicable pursuant to the preceding paragraph; and if neither is
applicable, a day that is not a Saturday, Sunday or legal holiday
in Rhode Island.
No employee shall be granted an option which permits the
employee's right to purchase stock under the Plan, and under all
other Section 423(b) employee stock purchase plans of the Company
and any parent or subsidiary corporations, to accrue at a rate
which exceeds $25,000 of fair market value of such stock
(determined on the date or dates that options on such stock were
granted) for each calendar year in which such option is
outstanding at any time. The purpose of the limitation in the
preceding sentence is to comply with Section 423(b)(8) of the
Code. If the participant's accumulated payroll deductions on the
last day of the Payment Period would otherwise enable the
participant to purchase Common Stock in excess of the
Section 423(b)(8) limitation described in this paragraph, the
excess of the amount of the accumulated payroll deductions over
the aggregate purchase price of the shares actually purchased
shall be promptly refunded to the participant by the Company,
without interest.
Article 6 - Exercise of Option.
Each eligible employee who continues to be a participant in
the Plan on the last day of a Payment Period shall be deemed to
have exercised his or her option on such date and shall be deemed
to have purchased from the Company such number of full shares of
Common Stock reserved for the purpose of the Plan as the
participant's accumulated payroll deductions on such date will
pay for at the Option Price, subject to the 3,000 -share limit of
the option and the Section 423(b)(8) limitation described in
Article 5. If the individual is not a participant on the last
day of a Payment Period, then he or she shall not be entitled to
exercise his or her option. Only full shares of Common Stock may
be purchased under the Plan. Unused payroll deductions remaining
in a participant's account at the end of a Payment Period by
reason of the inability to purchase a fractional share shall be
carried forward to the next Payment Period.
Article 7 - Authorization for Entering the Plan.
An employee may elect to enter the Plan by filling out,
signing and delivering to the Company an authorization:
A. Stating the percentage to be deducted regularly from
the employee's pay;
B. Authorizing the purchase of stock for the employee in
each Payment Period in accordance with the terms of the Plan;
and
C. Specifying the exact name or names in which stock
purchased for the employee is to be issued as provided under
Article 11 hereof.
Such authorization must be received by the Company at least ten
days before the first day of the next succeeding Payment Period
and shall take effect only if the employee is an eligible
employee on the first business day of such Payment Period.
Unless a participant files a new authorization or withdraws
from the Plan, the deductions and purchases under the
authorization the participant has on file under the Plan will
continue from one Payment Period to succeeding Payment Periods as
long as the Plan remains in effect.
The Company will accumulate and hold for each participant's
account the amounts deducted from his or her pay. No interest
will be paid on these amounts.
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Article 8 - Maximum Amount of Payroll Deductions.
An employee may authorize payroll deductions in an amount
(expressed as a whole percentage) not less than one percent (1%)
but not more than ten percent (10%) of the employee's base pay or
salary.
Article 9 - Change in Payroll Deductions.
Deductions may not be increased or decreased during a Payment
Period. However, a participant may withdraw in full from the
Plan.
Article 10 - Withdrawal from the Plan.
A participant may withdraw from the Plan (in whole but not in
part) at any time prior to the last day of a Payment Period by
delivering a withdrawal notice to the Company.
To re-enter the Plan, an employee who has previously withdrawn
must file a new authorization at least ten days before the first
day of the next Payment Period in which he or she wishes to
participate. The employee's re-entry into the Plan becomes
effective at the beginning of such Payment Period, provided that
he or she is an eligible employee on the first business day of
the Payment Period.
Article 11 - Issuance of Stock.
Certificates for stock issued to participants shall be
delivered as soon as practicable after each Payment Period by the
Company's transfer agent.
Stock purchased under the Plan shall be issued only in the
name of the participant, or if the participant's authorization so
specifies, in the name of the participant and another person of
legal age as joint tenants with rights of survivorship.
Article 12 - Adjustments.
Upon the happening of any of the following described events, a
participant's rights under options granted under the Plan shall
be adjusted as hereinafter provided:
A. In the event that the shares of Common Stock shall be
subdivided or combined into a greater or smaller number of
shares or if, upon a reorganization, split-up, liquidation,
recapitalization or the like of the Company, the shares of
Common Stock shall be exchanged for other securities of the
Company, each participant shall be entitled, subject to the
conditions herein stated, to purchase such number of shares
of Common Stock or amount of other securities of the Company
as were exchangeable for the number of shares of Common Stock
that such participant would have been entitled to purchase
except for such action, and appropriate adjustments shall be
made in the purchase price per share to reflect such
subdivision, combination or exchange; and
B. In the event the Company shall issue any of its shares
as a stock dividend upon or with respect to the shares of
stock of the class which shall at the time be subject to
option hereunder, each participant upon exercising such an
option shall be entitled to receive (for the purchase price
paid upon such exercise) the shares as to which the
participant is exercising his or her option and, in addition
thereto (at no additional cost), such number of shares of the
class or classes in which such stock dividend or dividends
were declared or paid, and such amount of cash in lieu of
fractional shares, as is equal to the number of shares
thereof and the amount of cash in lieu of fractional shares,
respectively, which the participant would have received if
the participant had been the holder of the shares as to which
the participant is exercising his or her option at all times
between the date of the granting of such option and the date
of its exercise.
Upon the happening of any of the foregoing events, the class
and aggregate number of shares set forth in Article 4 hereof
which are subject to options which have been or may be granted
under the Plan and the limitations set forth in the second
paragraph of Article 5 shall also be appropriately adjusted to
reflect the events specified in paragraphs A and B above.
Notwithstanding the foregoing, any adjustments made pursuant to
paragraphs A or B shall be made only after the Committee, based
on advice of counsel for the Company, determines whether such
adjustments would constitute a "modification" (as that term is
defined in Section 424 of the Code). If the Committee determines
that such adjustments would constitute a modification, it may
refrain from making such adjustments.
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If the Company is to be consolidated with or acquired by
another entity in a merger, a sale of all or substantially all of
the Company's assets or otherwise (an "Acquisition"), the
Committee or the board of directors of any entity assuming the
obligations of the Company hereunder (the "Successor Board")
shall, with respect to options then outstanding under the Plan,
either (i) make appropriate provision for the continuation of
such options by arranging for the substitution on an equitable
basis for the shares then subject to such options either (a) the
consideration payable with respect to the outstanding shares of
the Common Stock in connection with the Acquisition, (b) shares
of stock of the successor corporation, or a parent or subsidiary
of such corporation, or (c) such other securities as the
Successor Board deems appropriate, the fair market value of which
shall not materially exceed the fair market value of the shares
of Common Stock subject to such options immediately preceding the
Acquisition; or (ii) terminate each participant's options in
exchange for a cash payment equal to the excess of (a) the fair
market value on the date of the Acquisition, of the number of
shares of Common Stock that the participant's accumulated payroll
deductions as of the date of the Acquisition could purchase, at
an option price determined with reference only to the first
business day of the applicable Payment Period and subject to the
3,000-share, Code Section 423(b)(8) and fractional-share
limitations on the amount of stock a participant would be
entitled to purchase, over (b) the result of multiplying such
number of shares by such option price.
The Committee or Successor Board shall determine the
adjustments to be made under this Article 12, and its
determination shall be conclusive.
Article 13 - No Transfer or Assignment of Employee's Rights.
An option granted under the Plan may not be transferred or
assigned and may be exercised only by the participant.
Article 14 - Termination of Employee's Rights.
Whenever a participant ceases to be an eligible employee
because of retirement, voluntary or involuntary termination,
resignation, layoff, discharge, death or for any other reason,
his or her rights under the Plan shall immediately terminate, and
the Company shall promptly refund, without interest, the entire
balance of his or her payroll deduction account under the Plan.
Notwithstanding the foregoing, eligible employment shall be
treated as continuing intact while a participant is on military
leave, sick leave or other bona fide leave of absence, for up to
90 days, or for so long as the participant's right to re-
employment is guaranteed either by statute or by contract, if
longer than 90 days.
If a participant's payroll deductions are interrupted by any
legal process, a withdrawal notice will be considered as having
been received from the participant on the day the interruption
occurs.
Article 15 - Termination and Amendments to Plan.
Unless terminated sooner as provided below, the Plan shall
terminate at the end of the day February 11, 2007. The Plan may
be terminated at any time by the Company's Board of Directors but
such termination shall not affect options then outstanding under
the Plan. It will terminate in any case when all or
substantially all of the unissued shares of stock reserved for
the purposes of the Plan have been purchased. If at any time
shares of stock reserved for the purpose of the Plan remain
available for purchase but not in sufficient number to satisfy
all then unfilled purchase requirements, the available shares
shall be apportioned among participants in proportion to the
amount of payroll deductions accumulated on behalf of each
participant that would otherwise be used to purchase stock, and
the Plan shall terminate. Upon such termination or any other
termination of the Plan, all payroll deductions not used to
purchase stock will be refunded, without interest.
The Committee or the Board of Directors may from time to time
adopt amendments to the Plan provided that, without the approval
of the stockholders of the Company, no amendment may (i) increase
the number of shares that may be issued under the Plan;
(ii) change the class of employees eligible to receive options
under the Plan, if such action would be treated as the adoption
of a new plan for purposes of Section 423(b) of the Code; or
(iii) cause Rule 16b-3 under the Securities Exchange Act of 1934
to become inapplicable to the Plan.
Article 16 - Limits on Sale of Stock Purchased under the Plan.
The Plan is intended to provide shares of Common Stock for
investment and not for resale. The Company does not, however,
intend to restrict or influence any employee in the conduct of
his or her own affairs. An employee may, therefore, sell stock
purchased under the Plan at any time the employee chooses,
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subject to compliance with any applicable federal or state
securities laws and subject to any restrictions imposed under
Article 21 to ensure that tax withholding obligations are
satisfied. THE EMPLOYEE ASSUMES THE RISK OF ANY MARKET
FLUCTUATIONS IN THE PRICE OF THE STOCK.
Article 17 - Participating Subsidiaries.
The term "participating subsidiary" shall mean any present or
future subsidiary of the Company, as that term is defined in
Section 424(f) of the Code, which is designated from time to time
by the Board of Directors to participate in the Plan. The Board
of Directors shall have the power to make such designation before
or after the Plan is approved by the stockholders.
Article 18 - Optionees Not Stockholders.
Neither the granting of an option to an employee nor the
deductions from his or her pay shall constitute such employee a
stockholder of the shares covered by an option until such shares
have been actually purchased by the employee.
Article 19 - Application of Funds.
The proceeds received by the Company from the sale of Common
Stock pursuant to options granted under the Plan will be used for
general corporate purposes.
Article 20 - Notice to Company of Disqualifying Disposition.
By electing to participate in the Plan, each participant
agrees to notify the Company in writing immediately after the
participant transfers Common Stock acquired under the Plan, if
such transfer occurs within two years after the first business
day of the Payment Period in which such Common Stock was
acquired. Each participant further agrees to provide any
information about such a transfer as may be requested by the
Company or any subsidiary corporation in order to assist it in
complying with the tax laws. Such dispositions generally are
treated as "disqualifying dispositions" under Sections 421 and
424 of the Code, which have certain tax consequences to
participants and to the Company and its participating
subsidiaries.
Article 21 - Withholding of Additional Income Taxes.
By electing to participate in the Plan, each participant
acknowledges that the Company and its participating subsidiaries
are required to withhold taxes with respect to the amounts
deducted from the participant's compensation and accumulated for
the benefit of the participant under the Plan, and each
participant agrees that the Company and its participating
subsidiaries may deduct additional amounts from the participant's
compensation, when amounts are added to the participant's
account, used to purchase Common Stock or refunded, in order to
satisfy such withholding obligations. Each participant further
acknowledges that when Common Stock is purchased under the Plan
the Company and its participating subsidiaries may be required to
withhold taxes with respect to all or a portion of the difference
between the fair market value of the Common Stock purchased and
its purchase price, and each participant agrees that such taxes
may be withheld from compensation otherwise payable to such
participant. It is intended that tax withholding will be
accomplished in such a manner that the full amount of payroll
deductions elected by the participant under Article 7 will be
used to purchase Common Stock. However, if amounts sufficient to
satisfy applicable tax withholding obligations have not been
withheld from compensation otherwise payable to any participant,
then, notwithstanding any other provision of the Plan, the
Company may withhold such taxes from the participant's
accumulated payroll deductions and apply the net amount to the
purchase of Common Stock, unless the participant pays to the
Company, prior to the exercise date, an amount sufficient to
satisfy such withholding obligations. Each participant further
acknowledges that the Company and its participating subsidiaries
may be required to withhold taxes in connection with the
disposition of stock acquired under the Plan and agrees that the
Company or any participating subsidiary may take whatever action
it considers appropriate to satisfy such withholding
requirements, including deducting from compensation otherwise
payable to such participant an amount sufficient to satisfy such
withholding requirements or conditioning any disposition of
Common Stock by the participant upon the payment to the Company
or such subsidiary of an amount sufficient to satisfy such
withholding requirements.
Article 22 - Governmental Regulations.
The Company's obligation to sell and deliver shares of Common
Stock under the Plan is subject to the approval of any
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governmental authority required in connection with the
authorization, issuance or sale of such shares.
Government regulations may impose reporting or other
obligations on the Company with respect to the Plan. For
example, the Company may be required to identify shares of Common
Stock issued under the Plan on its stock ownership records and
send tax information statements to employees and former employees
who transfer title to such shares.
Article 23 - Governing Law.
The validity and construction of the Plan shall be governed by
the laws of Commonwealth of Massachusetts, without giving effect
to the principles of conflicts of law thereof.
Article 24 - Approval of Board of Directors and Stockholders of
the Company.
The Plan was adopted by the Board of Directors on February 12,
1997 and was approved by the stockholders of the Company on
_______, 1997.
