QUARTERLY REPORT ON FORM 10-Q
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
_________________________
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended October 1, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________to_____________
Commission File Number: 1-12432
AMERICAN POWER CONVERSION CORPORATION
(Exact name of Registrant as specified in its charter)
MASSACHUSETTS 04-2722013
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
132 FAIRGROUNDS ROAD, WEST KINGSTON, RHODE ISLAND 02892
401-789-5735
(Address and telephone number of principal executive offices)
Indicate by check mark whether the Registrant (1) has filed all reports to be
filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
YES [ X ] NO [ ]
Registrant's Common Stock outstanding, $.01 par value, at November 9, 2000 -
194,744,000 shares
1
<PAGE>
FORM 10-Q
October 1, 2000
AMERICAN POWER CONVERSION CORPORATION AND SUBSIDIARIES
INDEX
Page No.
Part I - Financial Information:
Item 1. Consolidated Condensed Financial Statements:
Consolidated Condensed Balance Sheets -
October 1, 2000 (Unaudited) and December 31, 1999 3 - 4
Consolidated Condensed Statements of Income -
Three Months and Nine Months Ended
October 1, 2000 and September 26, 1999 (Unaudited) 5
Consolidated Condensed Statements of Cash Flows -
Three Months and Nine Months Ended
October 1, 2000 and September 26, 1999 (Unaudited) 6
Notes to Consolidated Condensed Financial Statements
(Unaudited) 7 - 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10 - 14
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 14
Part II - Other Information:
Item 1. Legal Proceedings 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
Exhibit Index 17
2
<PAGE>
FORM 10-Q
October 1, 2000
PART I - CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
AMERICAN POWER CONVERSION CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
ASSETS
<CAPTION>
October 1, December 31,
2000 1999
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $339,754 $456,325
Short term investments 25,000 -
Accounts receivable,
less allowance for doubtful accounts of
$18,620 in 2000 and $19,543 in 1999 277,879 216,810
Inventories:
Raw materials 121,073 60,708
Work-in-process and finished goods 135,696 115,769
Total inventories 256,769 176,477
Prepaid expenses and other current assets 23,731 18,283
Deferred income taxes 29,607 31,962
Total current assets 952,740 899,857
Property, plant, and equipment:
Land, buildings and improvements 64,113 58,220
Machinery and equipment 166,999 130,031
Office equipment, furniture, and fixtures 65,332 55,284
Purchased software 21,559 17,114
318,003 260,649
Less accumulated depreciation and amortization 124,430 103,422
Net property, plant, and equipment 193,573 157,227
Goodwill and other intangibles 110,235 48,239
Other assets 22,498 1,615
Total assets $1,279,046 $1,106,938
</TABLE>
See accompanying notes to consolidated condensed financial statements.
3
<PAGE>
FORM 10-Q
October 1, 2000
<TABLE>
AMERICAN POWER CONVERSION CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (CONTINUED)
(In thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
October 1, December 31,
2000 1999
(Unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable $126,124 $78,641
Accrued expenses 41,780 41,966
Accrued compensation 19,462 25,743
Accrued sales and marketing programs 17,376 16,853
Income taxes payable 10,712 30,616
Total current liabilities 215,454 193,819
Deferred tax liability 14,682 11,029
Total liabilities 230,136 204,848
Shareholders' equity:
Common stock, $.01 par value;
authorized 450,000 shares; issued 194,908
shares in 2000 and 193,339 shares in 1999 1,949 1,933
Additional paid-in capital 105,784 82,989
Retained earnings 947,753 820,525
Treasury stock, 250 shares, at cost (1,551) (1,551)
Accumulated other comprehensive income (loss) (5,025) (1,806)
Total shareholders' equity 1,048,910 902,090
Total liabilities and shareholders' equity $1,279,046 $1,106,938
</TABLE>
See accompanying notes to consolidated condensed financial statements.
4
<PAGE>
FORM 10-Q
October 1, 2000
<TABLE>
AMERICAN POWER CONVERSION CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In thousands, except earnings per share)
<CAPTION>
Nine months ended Three months ended
October 1, September 26, October 1, September 26,
2000 1999 2000 1999
(Unaudited)
<S> <C> <C> <C> <C>
Net sales $1,070,135 $948,567 $394,977 $355,920
Cost of goods sold 591,867 520,922 227,079 188,983
Gross profit 478,268 427,645 167,898 166,937
Operating expenses:
Marketing, selling, general
and administrative 237,095 211,451 81,050 74,025
Special charges 47,900 - 17,500 -
Research and development 32,728 25,951 11,800 8,176
Total operating expenses 317,723 237,402 110,350 82,201
Operating income 160,545 190,243 57,548 84,736
Other income, net 18,650 7,959 5,846 3,388
Earnings before income taxes 179,195 198,202 63,394 88,124
Income taxes 51,967 58,470 18,385 25,997
Net income $127,228 $139,732 $45,009 $62,127
Basic earnings per share $ .66 $ .73 $ .23 $ .32
Basic weighted average shares
outstanding 194,059 191,998 194,600 192,272
Diluted earnings per share $ .64 $ .71 $ .22 $ .32
Diluted weighted average shares
outstanding 200,274 195,926 200,112 196,621
</TABLE>
See accompanying notes to consolidated condensed financial statements.
5
<PAGE>
FORM 10-Q
October 1, 2000
<TABLE>
AMERICAN POWER CONVERSION CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
<CAPTION>
Nine months ended Three months ended
October 1, September 26, October 1, September 26,
2000 1999 2000 1999
(Unaudited)
<S> <C> <C> <C> <C>
Cash flows from
operating activities:
Net income $127,228 $139,732 $45,009 $62,127
Adjustments to reconcile
net income to net cash
provided by (used in)
operating activities:
Depreciation 22,692 16,606 7,848 6,232
Deferred income taxes 6,008 (2,216) 660 2,059
Other non-cash items, net 3,456 6,213 742 2,779
Changes in operating assets and
liabilities excluding effects
of acquisitions:
Accounts receivable (49,273) (66,200) (28,250) (47,771)
Inventories (64,215) 30,094 (32,780) 33,308
Prepaid expenses and
other current assets (7,413) (1,195) (2,720) 4,467
Other assets (19,749) 529 (477) 132
Accounts payable 34,641 8,641 15,820 1,235
Accrued expenses (8,734) 14,233 (102) 1,526
Income taxes payable (20,087) (1,200) (9,479) (3,066)
Net cash provided by (used in)
operating activities 24,554 145,237 (3,729) 63,028
Cash flows from investing
activities:
Purchases of held-to-maturity
debt securities (75,000) - - -
Maturities of held-to-maturity
debt securities 50,000 - 50,000 -
Capital expenditures, net of
capital grants (56,014) (21,562) (16,287) (7,658)
Proceeds from sale of property,
plant, and equipment - 1,100 - 1,100
Acquisitions (78,922) (8,310) - -
Net cash provided by (used in)
investing activities (159,936) (28,772) 33,713 (6,558)
Cash flows from financing
activities:
Proceeds from issuances of
common stock 18,811 6,927 2,105 3,479
Repayment of short term debt - (12,380) - (848)
Net cash provided by (used in)
financing activities 18,811 (5,453) 2,105 2,631
Net change in cash and cash
equivalents (116,571) 111,012 32,089 59,101
Cash and cash equivalents at
beginning of period 456,325 219,908 307,665 271,819
Cash and cash equivalents at
end of period $339,754 $330,920 $339,754 $330,920
Supplemental cash flow disclosures:
Cash paid during the period for
income taxes (net of refunds) $63,902 $58,664 $25,614 $26,399
</TABLE>
See accompanying notes to consolidated condensed financial statements.
6
<PAGE>
FORM 10-Q
October 1, 2000
AMERICAN POWER CONVERSION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Management Representation
The accompanying unaudited consolidated condensed financial statements should be
read in conjunction with the consolidated financial statements included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999. In
the opinion of management, the accompanying unaudited consolidated condensed
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the consolidated financial
position and the consolidated results of operations and cash flows for the
interim periods. The results of operations for the interim periods are not
necessarily indicative of results to be expected for the full year.
2. Principles of Consolidation
The consolidated financial statements include the financial statements of
American Power Conversion Corporation and its wholly-owned subsidiaries. All
significant intercompany accounts and transactions are eliminated in
consolidation.
3. Earnings Per Share
Basic earnings per share is computed by dividing net income by the weighted
average number of common shares outstanding during the period. Diluted earnings
per share is computed by dividing net income by the weighted average number of
common shares and dilutive potential common shares outstanding during the
period. Under the treasury stock method, the unexercised options are assumed to
be exercised at the beginning of the period or at issuance, if later. The
assumed proceeds are then used to purchase common shares at the average market
price during the period. Potential common shares for which inclusion would have
the effect of increasing diluted earnings per share (i.e., antidilutive) are
excluded from the computation.
<TABLE>
<CAPTION>
In thousands Nine months ended Three months ended
October 1, September 26, October 1, September 26,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Basic weighted average
shares outstanding 194,059 191,998 194,600 192,272
Net effect of dilutive potential
common shares outstanding based
on the treasury stock method
using the average market price 6,215 3,928 5,512 4,349
Diluted weighted average
shares outstanding 200,274 195,926 200,112 196,621
Antidilutive potential common
shares excluded from the
computation above - 725 281 260
</TABLE>
7
<PAGE>
4. Shareholders' Equity
Changes in common stock and paid-in capital for the periods presented represent
the issuances of common stock resulting from the exercise of employee stock
options and the second quarter 2000 acquisition of ABL Electronics Corporation
(see "Acquisitions" in Management's Discussion and Analysis of Financial
Condition and Results of Operations below).
5. Comprehensive Income
The components of comprehensive income, net of taxes, are as follows:
<TABLE>
<CAPTION>
In thousands Nine months ended Three months ended
October 1, September 26, October 1, September 26,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net income $127,228 $139,732 $45,009 $62,127
Other comprehensive income
(loss), net of taxes:
Change in foreign currency
translation adjustment (3,219) (1,192) (2,451) 510
Other comprehensive income (loss) (3,219) (1,192) (2,451) 510
Comprehensive income $124,009 $138,540 $42,558 $62,637
</TABLE>
6. Short Term Investments
At October 1, 2000, short term investments consisted of U.S. Government debt
securities with original maturities greater than three months and less than or
equal to one year. Such securities were classified as held-to-maturity and
carried at amortized cost. Management determines the appropriate classification
of debt securities at the time of purchase and re-evaluates such designation as
of each balance sheet date. Debt securities are classified as held-to-maturity
when the Company has the positive intent and ability to hold such securities to
maturity.
7. Acquisitions
Advance Power
Early in the second quarter of 2000, the Company acquired Advance International
Group subsidiary, Advance Power, a U.K.-based manufacturer of DC-based power
solutions used in telecommunications and Internet applications, for $75 million
in cash plus direct costs of the acquisition. The Company's cash outlays
associated with the acquisition were financed from operating cash. At October
1, 2000, the excess of the purchase price over the estimated fair value of the
tangible net assets acquired was included in goodwill and is being amortized on
a straight-line basis over 15 years. The allocation is preliminary and subject
to change upon completion of valuation of tangible and identifiable intangible
assets. The acquisition has been accounted for as a purchase and, accordingly,
Advance Power's results of operations are included in the Company's consolidated
financial statements from the date of acquisition.
8
<PAGE>
ABL Electronics Corporation
Early in the second quarter of 2000, the Company acquired privately-held ABL
Electronics Corporation ("ABL"), a North American provider of computer and
network cables, switches, and other connectivity products, for $8 million paid
in a combination of cash and stock, plus direct costs of the acquisition. The
Company's cash outlays associated with the acquisition were financed from
operating cash. In partial consideration thereof, the Company agreed to issue
to the stockholders of ABL Electronics an aggregate of 113,273 shares of common
stock of the Company valued at $35.313 per share in a private placement
transaction, of which, on April 28, 2000, the Company issued 84,955 shares, and
held back, without issuance, 28,318 shares of common stock of the Company to
cover any reimbursable claims arising under the applicable stock purchase
agreement. At October 1, 2000, the excess of the purchase price over the
estimated fair value of the tangible net assets acquired was included in
goodwill and is being amortized on a straight-line basis over 15 years. The
allocation is preliminary and subject to change upon completion of valuation of
tangible and identifiable intangible assets. The acquisition has been accounted
for as a purchase and, accordingly, ABL's results of operations are included in
the Company's consolidated financial statements from the date of acquisition.
Subsequent Event - Airflow Company
Early in the fourth quarter of 2000, the Company acquired privately held Airflow
Company ("Airflow"), a leading precision cooling equipment manufacturer, for
$22.5 million in cash plus the assumption of up to $7.5 million in debt. The
Company's cash outlays associated with the acquisition were financed from
operating cash. The acquisition will be accounted for as a purchase and,
accordingly, the purchase price will be allocated to the net tangible and
identifiable intangible assets acquired, and Airflow's results of operations
will be included in the Company's consolidated financial statements from the
date of acquisition.
8. Special Charges
During the third and second quarters of 2000, the Company agreed to license
worldwide patent rights relating to uninterruptible power supply technology for
lump-sum cash payments of $17.0 million and $48.0 million, respectively, as more
fully described under Part II, Item 1 - Legal Proceedings. These license fees
were paid from operating cash during the third and second quarters of 2000,
respectively. The Company evaluated the portion of the license fees that
represented payment for prior use of the subject technology and the portion that
represented payment for future use. Considering each of the Company's markets
and the historical and projected revenue realized in markets utilizing the
licensed technology, the Company estimated the present value of royalty
payments, basing this calculation on an appropriate royalty rate and the
technology's contribution to the overall value of affected products. Separate
present values were calculated for both historic and projected product sales;
the historic values were expensed and the projected values were capitalized.
Accordingly, write-offs of the fully paid-up portions of the patent licenses
were recognized in the Company's statements of income for the third and second
quarters of 2000 as special charges to pre-tax earnings of $17.5 million and
$30.4 million, respectively, including direct expenses of $1.5 million and $1.9
million, respectively. The remaining balances of $1.0 million and $19.5 million
have been classified on the consolidated balance sheet as long term assets and
are being amortized on a straight-line basis over 3 years and 9 years,
respectively, the estimated remaining economic lives of the patent licenses.
9. Operating Segment Information
Basis for presentation
The Company's operating businesses design, manufacture, and market power
protection equipment and related software and accessories for computer and
computer-related equipment. The Company manages its businesses based on the
nature of products provided. These businesses share similar economic
characteristics and have been aggregated into one reportable operating segment.
The Company evaluates the performance of its businesses based on direct
contribution margin. Direct contribution margin includes research and
development ("R&D"), marketing, and administrative expenses directly
attributable to the segment and excludes certain expenses which are managed
outside the reportable segment. Costs excluded from segment profit are indirect
operating expenses, primarily consisting of selling and corporate expenses, and
income taxes. Expenditures for additions to long-lived assets are not reported
to management by the operating businesses.
9
<PAGE>
Summary operating segment information is as follows:
<TABLE>
<CAPTION>
In thousands Nine months ended Three months ended
October 1, September 26, October 1, September 26,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net sales $1,070,135 $948,567 $394,977 $355,920
Segment direct contribution margin $435,584 $396,094 $151,250 $156,052
Indirect operating expenses 227,139 205,851 76,202 71,316
Special charges 47,900 - 17,500 -
Other income, net 18,650 7,959 5,846 3,388
Earnings before income taxes $179,195 $198,202 $63,394 $88,124
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
Revenues
Net sales were $395.0 million for the third quarter of 2000, an increase of
11.0% compared to $355.9 million for the same period in 1999. Net sales for the
first nine months of 2000 were $1.1 billion compared to $948.6 million in 1999,
an increase of 12.8%. The growth in net sales in the third quarter and first
nine months of 2000 from the comparable periods in 1999 was attributable to
growth in the Company's high-end and enterprise businesses, combined with $16.5
million and $12.9 million in third and second quarter 2000 sales, respectively,
attributable to Advance Power and ABL Electronics (see "Acquisitions" below).
Third quarter and first nine months of 2000 net sales growth was led by
increases in Asia and the Americas. Net sales in the Asia Pacific region grew
40% and 41%, respectively, while net sales in the Americas (North and Latin
America) grew 6% and 12%, respectively. Net sales in EMEA (Europe, Middle East
and Africa) increased 8% and 2%, respectively, reflecting continued IT industry
softness as well as the impact of currency movements. On a constant currency
basis, EMEA net sales for the third quarter of 2000 grew 16% versus the third
quarter of 1999 while EMEA net sales for the first nine months of 2000 grew 9%
versus the first nine months of 1999.
Cost of Goods Sold
Cost of goods sold was $227.1 million or 57.5% of net sales in the third quarter
of 2000 compared to $189.0 million or 53.1% of net sales in the third quarter of
1999. Cost of goods sold was $591.9 million or 55.3% of net sales in the first
nine months of 2000 compared to $520.9 million or 54.9% in the first nine months
of 1999. Third quarter 2000 gross margin was 42.5% of net sales, approximately
440 basis points lower than the comparable period in 1999. First nine months
2000 gross margin was 44.7% of net sales, approximately 40 basis points lower
than the comparable period in 1999. Increased manufacturing costs associated
with the ramp up of production and supply chain capacity for Three-Phase Silcon
products, shifts in product mix, and price reductions on desktop products
contributed to the year-over-year gross margin erosion. Total inventory
reserves at October 1, 2000 were $20.0 million compared to $17.1 million at
December 31, 1999. The Company's reserve estimate methodology involves
quantifying the total inventory position having potential loss exposure, reduced
by an amount reasonably forecasted to be sold, and adjusting its interim reserve
provisioning to cover the net loss exposure.
Operating Expenses
Operating expenses include marketing, selling, general and administrative
(SG&A), special charges, and R&D expenses.
10
<PAGE>
SG&A expenses were $81.1 million or 20.5% of net sales for the third quarter of
2000 compared to $74.0 million or 20.8% of net sales for the third quarter of
1999. SG&A expenses were $237.1 million or 22.2% of net sales for the first
nine months of 2000 compared to $211.5 million or 22.3% of net sales for the
first nine months of 1999. The increase in total spending over last year was
due primarily to costs associated with increased staffing and operating expenses
of selling, administrative, and marketing functions, while the slight decrease
as a percentage of net sales was attributable to certain fixed SG&A expenses
spread over a higher revenue base. The Company continues to invest in sales and
marketing programs associated with the ramp up of its high-end UPS business in
the enterprise and data center marketplace. The allowance for doubtful accounts
at October 1, 2000 was 6.3% of accounts receivable, compared to 8.3% at December
31, 1999. The Company continues to experience strong collection performance.
Accounts receivable balances outstanding over 60 days represented 11.4% of total
receivables at October 1, 2000, up from 9.0% at December 31, 1999. This
increase reflects a growing portion of the Company's business originating in
areas where longer payment terms are customary, including a growing contribution
from international markets as well as large system enterprise sales primarily
associated with Silcon products. Write-offs of uncollectible accounts have
historically represented less than 1% of total net sales. A majority of
international customer balances are covered by receivables insurance.
During the third and second quarters of 2000, the Company agreed to license
worldwide patent rights relating to uninterruptible power supply technology for
lump-sum cash payments of $17.0 million and $48.0 million, respectively, as more
fully described under Part II, Item 1 - Legal Proceedings. These license fees
were paid from operating cash during the third and second quarters of 2000,
respectively. The Company evaluated the portion of the license fees that
represented payment for prior use of the subject technology and the portion that
represented payment for future use. Considering each of the Company's markets
and the historical and projected revenue realized in markets utilizing the
licensed technology, the Company estimated the present value of royalty
payments, basing this calculation on an appropriate royalty rate and the
technology's contribution to the overall value of affected products. Separate
present values were calculated for both historic and projected product sales;
the historic values were expensed and the projected values were capitalized.
Accordingly, write-offs of the fully paid-up portions of the patent licenses
were recognized in the Company's statements of income for the third and second
quarters of 2000 as special charges to pre-tax earnings of $17.5 million and
$30.4 million, respectively, including direct expenses of $1.5 million and $1.9
million, respectively. The remaining balances of $1.0 million and $19.5 million
have been classified on the consolidated balance sheet as long term assets and
are being amortized on a straight-line basis over 3 years and 9 years,
respectively, the estimated remaining economic lives of the patent licenses.
R&D expenses were $11.8 million or 3.0% of net sales and $8.2 million or 2.3% of
net sales for the third quarters of 2000 and 1999, respectively, and $32.7
million or 3.1% of net sales and $26.0 million or 2.7% of net sales for the
first nine month periods of 2000 and 1999, respectively. The increase in total
R&D spending primarily reflects increased numbers of software and hardware
engineers and costs associated with new product development and engineering
support.
Other Income, Net and Income Taxes
Other income is comprised principally of interest income, which increased from
1999 to 2000 due to higher average cash balances available for investment during
2000.
The Company's effective income tax rates were approximately 29.0% and 29.5% for
the quarters and nine month periods ended October 1, 2000 and September 26,
1999, respectively. The decrease in the effective tax rate from last year is
due to the expected tax savings from an increasing portion of taxable earnings
being generated from the Company's operations in jurisdictions currently having
a lower income tax rate than the present U.S. statutory income tax rate.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at October 1, 2000 was $737.3 million compared to $706.0 million
at December 31, 1999. The Company has been able to increase its working capital
position as the result of continued strong operating results and despite
internally financing the acquisitions, capital investment required to expand its
operations, and payments related to licenses obtained in 2000. The Company's
cash and short term investments position decreased to $364.8 million at October
1, 2000 from $456.3 million at December 31, 1999, due primarily to third and
second quarter 2000 outlays from operating cash related to acquisitions (see
"Acquisitions" below) and the licensing of worldwide patent rights relating to
uninterruptible power supply technology (see "Part II, Item 1 - Legal
Proceedings).
11
<PAGE>
Worldwide inventories were $256.8 million at October 1, 2000 compared to $176.5
million at December 31, 1999. The increase in inventories during the first nine
months of 2000 was principally attributable to increases in on-hand raw
materials to support current and anticipated demand growth for high-end
products, combined with $18.4 million in inventory attributable to Advance Power
and ABL Electronics (see "Acquisitions" below). Inventory levels as a
percentage of quarterly sales were 65% in the third quarter of 2000, up from 61%
in the second quarter of 2000 and 45% in the fourth quarter of 1999.
At October 1, 2000, the Company had $50 million available for future borrowings
under an unsecured line of credit agreement at a floating interest rate equal to
the bank's cost of funds rate plus .625%; an additional $15 million and $7
million were available under unsecured line of credit agreements with a second
and third bank at similar interest rates. No borrowings were outstanding under
these facilities at October 1, 2000. The Company had no significant financial
commitments, other than those required in the normal course of business, at
October 1, 2000.
Capital investment for the first nine months of 2000 consisted primarily of
manufacturing and office equipment, buildings and improvements, and purchased
software applications. The nature and level of capital spending was made to
improve manufacturing capabilities, principally in the U.S. and the Far East,
and to support the increased marketing, selling, and administrative efforts
necessitated by the Company's growth. Net capital expenditures were financed
from available operating cash. The Company had no material capital commitments,
other than those required in the normal course of business, at October 1, 2000.
The Company has agreements with the Industrial Development Authority of Ireland
("IDA") under which the Company receives grant monies for costs incurred for
machinery, equipment, and building improvements for its Galway and Castlebar
facilities equal to 40% and 60%, respectively, of such costs up to a maximum of
$13.1 million and $1.3 million, respectively. Such grant monies are subject to
the Company meeting certain employment goals and maintaining operations in
Ireland until termination of the respective agreements.
Management believes that current internal cash flows together with available
cash, available credit facilities or, if needed, the proceeds from the sale of
additional equity, will be sufficient to support anticipated capital spending
and other working capital requirements for the foreseeable future.
Acquisitions
Advance Power
Early in the second quarter of 2000, the Company acquired Advance International
Group subsidiary, Advance Power, a U.K.-based manufacturer of DC-based power
solutions used in telecommunications and Internet applications, for $75 million
in cash plus direct costs of the acquisition. The Company's cash outlays
associated with the acquisition were financed from operating cash. At October
1, 2000, the excess of the purchase price over the estimated fair value of the
tangible net assets acquired was included in goodwill and is being amortized on
a straight-line basis over 15 years. The allocation is preliminary and subject
to change upon completion of valuation of tangible and identifiable intangible
assets. The acquisition has been accounted for as a purchase and, accordingly,
Advance Power's results of operations are included in the Company's consolidated
financial statements from the date of acquisition.
ABL Electronics Corporation
Early in the second quarter of 2000, the Company acquired privately-held ABL
Electronics Corporation ("ABL"), a North American provider of computer and
network cables, switches, and other connectivity products, for $8 million paid
in a combination of cash and stock, plus direct costs of the acquisition. The
Company's cash outlays associated with the acquisition were financed from
operating cash. In partial consideration thereof, the Company agreed to issue
to the stockholders of ABL Electronics an aggregate of 113,273 shares of common
stock of the Company valued at $35.313 per share in a private placement
transaction, of which, on April 28, 2000, the Company issued 84,955 shares, and
held back, without issuance, 28,318 shares of common stock of the Company to
cover any reimbursable claims arising under the applicable stock purchase
agreement. At October 1, 2000, the excess of the purchase price over the
estimated fair value of the tangible net assets acquired was included in
goodwill and is being amortized on a straight-line basis over 15 years. The
allocation is preliminary and subject to change upon completion of valuation of
tangible and identifiable intangible assets. The acquisition has been accounted
for as a purchase and, accordingly, ABL's results of operations are included in
the Company's consolidated financial statements from the date of acquisition.
12
<PAGE>
Subsequent Event - Airflow Company
Early in the fourth quarter of 2000, the Company acquired privately held Airflow
Company ("Airflow"), a leading precision cooling equipment manufacturer, for
$22.5 million in cash plus the assumption of up to $7.5 million in debt. The
Company's cash outlays associated with the acquisition were financed from
operating cash. The acquisition will be accounted for as a purchase and,
accordingly, the purchase price will be allocated to the net tangible and
identifiable intangible assets acquired, and Airflow's results of operations
will be included in the Company's consolidated financial statements from the
date of acquisition.
Foreign Currency Activity
The Company invoices its customers in various currencies. Realized and
unrealized transaction gains or losses are included in the results of operations
and are measured based upon the effect of changes in exchange rates on the
actual or expected amount of functional currency cash flows. Transaction gains
and losses were not material to the results of operations in the third quarters
and first nine month periods of 2000 and 1999.
At October 1, 2000, the Company's unhedged foreign currency accounts receivable,
by currency, were as follows:
<TABLE>
<CAPTION>
In thousands Foreign Currency US Dollars
<S> <C> <C>
Japanese Yen 2,062,944 $19,169
European Euros 18,391 16,161
British Pounds 8,775 12,829
Swiss Francs 20,073 11,603
German Marks 21,455 9,664
French Francs 41,476 5,560
</TABLE>
The Company also had non-trade receivables of 1.2 million Irish Pounds
(approximately US$1.3 million) and liabilities denominated in various European
currencies of US$55.5 million, as well as Yen denominated liabilities of
approximately US$5.9 million.
The Company continually reviews its foreign exchange exposure and considers
various risk management techniques, including the netting of foreign currency
receipts and disbursements, rate protection agreements with customers/vendors
and derivatives arrangements, including foreign exchange contracts. The Company
presently does not utilize rate protection agreements or derivative
arrangements.
Recently Issued Accounting Standards
The Financial Accounting Standards Board's Emerging Issues Task Force ("EITF")
assists the Board in the early identification of emerging issues affecting
financial reporting and of problems in implementing authoritative
pronouncements. Additionally, the EITF's discussions of issues and the relevant
accounting pronouncements foster a better understanding of emerging issues and,
when a consensus is reached, may indicate that no immediate action by the FASB
is needed because diversity in practice is not likely to evolve.
In July and September 2000, the EITF reached consensuses on Issue No. 00-10,
"Accounting for Shipping and Handling Fees and Costs." These consensuses
provide guidance on the accounting for and reporting of shipping and handling
costs. These EITF consensuses are effective beginning in the fourth quarter of
2000. Compliance with these EITF consensuses is not expected to have a material
impact on the Company's consolidated financial position or results of
operations.
13
<PAGE>
In May 2000, the EITF reached a consensus on Issue No. 00-14, "Accounting for
Coupons, Rebates, and Discounts." The consensus provides guidance on the
accounting for and reporting of sales subject to rebates and revenue sharing
arrangements as well as coupons and discounts. In July 2000, the EITF revised
the transition date for this consensus to correspond with the implementation
date for Securities and Exchange Commission Staff Accounting Bulletin No. 101
(see below). Accordingly, this EITF consensus is effective beginning in the
fourth quarter of 2000. Compliance with this EITF consensus is not expected to
have a material impact on the Company's consolidated financial position or
results of operations.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin ("SAB") No. 101, which provides guidance on the recognition,
presentation, and disclosure of revenue in financial statements filed with the
Commission. This SAB is effective beginning in the fourth quarter of 2000, as
provided for in SAB No. 101B. Compliance with this SAB is not expected to have
a material impact on the Company's consolidated financial position or results of
operations.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended by SFAS No. 138, which
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives), and for hedging activities. This
Statement is effective for all fiscal quarters of fiscal years beginning after
June 15, 2000, as provided for in SFAS No. 137. The Company presently does not
utilize rate protection agreements or derivative arrangements. The adoption of
this Statement will not have a material impact on the Company's consolidated
financial position or results of operations.
Factors That May Affect Future Performance
Statements contained in this document, which are not historical facts, may
constitute forward-looking statements as that term is defined under the
provisions of the "safe harbor" section of the Private Securities Litigation
Reform Act of 1995. All forward-looking statements are subject to risks and
uncertainties, which could cause actual results to differ from those projected.
The factors that could cause actual results to differ materially include the
following: APC's ability to successfully integrate Airflow Company, ABL and
Advance Power's operations; the timely development and acceptance of new
products; ramp up, expansion, and rationalization of global manufacturing
capacity; general worldwide economic conditions; growth rates in the power
protection industry and related industries, including but not limited to the PC,
server, networking, telecommunications, and enterprise hardware industries;
competitive factors and pricing pressures; changes in product mix; changes in
the seasonality of demand patterns; inventory risks due to shifts in market
demand; the effects of any other possible acquisitions; component constraints
and shortages; risk of nonpayment of accounts receivable; the uncertainty of the
litigation process including risk of an unexpected, unfavorable result of
current or future litigation; financial impact during any period of the
Company's licensing of certain patent rights from General Signal Power Systems
and from Anthony F. Coppola, as more fully described under Part II, Item 1 -
Legal Proceedings; and the risks described from time to time in the Company's
filings with the Securities and Exchange Commission. The Company cautions
readers not to place undue reliance on any such forward-looking statements,
which speak only as of the date they are made. The Company disclaims any
obligation to publicly update or revise any such statements to reflect any
change in Company expectations or in events, conditions, or circumstances on
which any such statements may be based, or that may affect the likelihood that
actual results will differ from those set forth in the forward-looking
statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company, in the normal course of business, is exposed to market risks
relating to fluctuations in foreign currency exchange rates. The information
required under this section related to such risks is included in the Foreign
Currency Activity section of Management's Discussion and Analysis of Financial
Condition and Results of Operations in Item 2 of this Report and is incorporated
herein by reference.
14
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On or about August 20, 1999, General Signal Power Systems, Inc, former parent
company of Best Power ("General Signal"), filed suit against the Company in the
United States District Court for the Western District of Wisconsin alleging
patent infringement and false advertising. General Signal sought unspecified
damages, costs, fees, and injunctive relief. During March and April 2000, the
court dismissed four of the five patent infringement claims. On or about May
12, 2000, General Signal voluntarily dismissed with prejudice the false
advertising claims. On May 17, 2000, the parties agreed to the voluntary
dismissal of the remaining claim in the lawsuit with prejudice. In connection
with the resolution of this dispute, the Company agreed to license from General
Signal worldwide patent rights relating to uninterruptible power supply
technology for a lump-sum cash payment of $48 million. The license fee was paid
from operating cash during the second quarter of 2000.
On or about January 27, 1999, the Company was served with a lawsuit filed by an
individual in the United States District Court for the Central District of
California alleging patent infringement. The plaintiff, Anthony F. Coppola,
claimed sole ownership of the patent referenced in the lawsuit. Coppola sought
unspecified damages, costs, fees, and injunctive relief. On or about April 14,
1999, the Company removed the case from the United States District Court for the
Central District of California to the United States District Court for the
District of Massachusetts. On September 8, 2000, the parties agreed to the
voluntary dismissal of the lawsuit with prejudice. In connection with the
resolution of this dispute, the Company agreed to license from Anthony Coppola
worldwide patent rights relating to uninterruptible power supply technology for
a lump-sum cash payment of $17 million. The license fee was paid from operating
cash during the third quarter of 2000.
The Company is also involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial position or results of operations or liquidity.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
Exhibit No. 3.1 Articles of Organization of the Company, as amended,
previously filed as an exhibit to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended June 27,
1999 and incorporated herein by reference (File No. 1-12432)
Exhibit No. 3.2 By-Laws of the Company, as amended and restated, previously
filed as an exhibit to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1998 and
incorporated herein by reference (File No. 1-12432)
Exhibit No. 10.24 Form of Change-in-Control Severance Agreement dated as of
July 5, 2000 entered into by the Company with each of Rodger
B. Dowdell, Jr. and Neil E. Rasmussen.
Exhibit No. 10.25 Form of Change-in-Control Severance Agreement dated as of
July 5, 2000 entered into by the Company with each of Donald
M. Muir and Aaron L. Davis.
Exhibit No. 27 Financial Data Schedule
(B) Reports on Form 8-K
No reports on Form 8-K were filed by American Power Conversion Corporation
during the quarter ended October 1, 2000.
15
<PAGE>
FORM 10-Q
October 1, 2000
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN POWER CONVERSION CORPORATION
Date: November 15, 2000
/s/ Donald M. Muir
Donald M. Muir
Chief Financial Officer
(Principal Accounting and Financial Officer)
16
<PAGE>
FORM 10-Q
October 1, 2000
<TABLE>
<CAPTION>
AMERICAN POWER CONVERSION CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
<S> <C> <C>
Exhibit Number Description Page No
Exhibit No. 3.1 Articles of Organization of the Company, as amended,
previously filed as an exhibit to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter
ended June 27, 1999 and incorporated herein by
reference (File No. 1-12432)
Exhibit No. 3.2 By-Laws of the Company, as amended and restated,
previously filed as an exhibit to the Company's Annual
Report on Form 10-K for the fiscal year ended December
31, 1998 and incorporated herein by reference (File
No. 1-12432)
Exhibit No. 10.24 Form of Change-in-Control Severance Agreement dated as 18
of July 5, 2000 entered into by the Company with each
of Rodger B. Dowdell, Jr. and Neil E. Rasmussen.
Exhibit No. 10.25 Form of Change-in-Control Severance Agreement dated as 28
of July 5, 2000 entered into by the Company with each
of Donald M. Muir and Aaron L. Davis.
Exhibit No. 27 Financial Data Schedule 38
</TABLE>
17
<PAGE>
FORM 10-Q
October 1, 2000
Exhibit 10.24
CHANGE-IN-CONTROL
SEVERANCE AGREEMENT
THIS AGREEMENT, dated as of July 5, 2000, by and between American
Power Conversion Corporation, with its principal place of business at 132
Fairgrounds Road, West Kingston, RI (the "Company"), and ________________ (the
"Executive").
WHEREAS, the Company considers it essential to the best interests of
its stockholders to foster the continuous employment of key management
personnel, and recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may exist and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the distraction or departure of management personnel
to the detriment of the Company and its stockholders; and
WHEREAS, the Board of Directors of the Company has determined that
appropriate steps should be taken to reinforce and encourage the Executive's
continued attention and dedication to the Executive's assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a change in control of the Company, although no such change is
presently known to be contemplated.
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1
DEFINITIONS
Except as may otherwise be specified or as the context may otherwise
require, the following terms shall have the respective meanings set forth below
whenever used herein:
"Annual Bonus" shall mean the annual bonus, or if the Executive is
paid a bonus on a quarterly basis, the sum of the four quarterly bonus payments,
paid to the Executive for the Company's fiscal year prior to the fiscal year in
which the Date of Termination occurs, or, if greater, the fiscal year
immediately preceding such prior fiscal year; provided that such amount shall be
annualized for any fiscal year consisting of less than 12 full months; and
provided, further, that, if at the time of a Covered Termination it is
substantially certain that a bonus at a level greater than the bonus paid to
Executive for the Company's prior fiscal year (or, if applicable, the next
preceding fiscal year) will be paid or payable for the current or recently ended
fiscal year, then the bonus which is substantially certain to be paid or payable
shall be used for these purposes.
"Base Salary" shall mean the annual base rate of regular compensation
of the Executive immediately before a Covered Termination, or if greater, the
highest annual such rate at any time during the 12-month period immediately
preceding the Covered Termination.
"Board" shall mean the Board of Directors of the Company.
"Cause" shall mean (i) the Executive's engaging in willful and
repeated gross negligence or gross misconduct, (ii) the Executive's breaching of
a material fiduciary duty to the Employer, or (iii) the Executive's being
convicted of a felony, in either case, to the demonstrable and material injury
to the Employer. For purposes hereof, no act, or failure to act, on the
Executive's part, shall be deemed "willful" unless done, or omitted to be done,
by the Executive not in good faith and without reasonable belief that any act or
omission was in the best interest of the Employer.
"Change in Control" shall mean the first to occur, after the date
hereof, of any of the following:
18
<PAGE>
(i) the members of the Board at the beginning of any consecutive 24-
calendar-month period (the "Incumbent Directors") cease for any reason
other than due to death to constitute at least a majority of the
members of the Board; provided that any director whose election, or
nomination for election by the Company's stockholders, was approved by
a vote of at least a majority of the members of the Board then still
in office who were members of the Board at the beginning of such 24-
calendar-month period, shall be deemed to be an Incumbent Director;
(ii) any consolidation or merger of the Company where the stockholders
of the Company, immediately prior to the consolidation or merger,
would not, immediately after the consolidation or merger, beneficially
own (as such term is defined in Rule 13d-3 under the Securities
Exchange Act), directly or indirectly, shares of Stock representing in
the aggregate 50% or more of the combined voting power of the
securities of the corporation issuing cash or securities in the
consolidation or merger (or of its ultimate parent corporation, if
any); or
(iii) there shall occur (A) any sale, lease, exchange or other
transfer (in one transaction or a series of transactions contemplated
or arranged by any party as a single plan) of all or substantially all
of the assets of the Company, other than a sale or disposition by the
Company of all or substantially all of the Company's assets to an
entity, at least 50% of the combined voting power of the voting
securities of which are owned by Persons in substantially the same
proportion as their ownership of the Company immediately prior to such
sale or (B) the approval by stockholders of the Company of any plan or
proposal for the liquidation or dissolution of the Company.
Upon the occurrence of a Change in Control as provided above, no subsequent
event or condition shall constitute a Change in Control for purposes of this
Agreement, with the result that there can be no more than one Change in Control
hereunder.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall mean, subject to Section 4.1(a), American Power
Conversion Corporation, a Massachusetts corporation.
"Covered Termination" shall mean if, within the two-year period
immediately following a Change in Control, the Executive (i) is terminated by
the Employer without Cause (other than on account of death or Disability), or
(ii) terminates the Executive's employment with the Employer for Good Reason.
The Executive shall not be deemed to have terminated for purposes of this
Agreement merely because he or she ceases to be employed by the Employer and
becomes employed by a new employer involved in the Change in Control; provided
that such new employer shall be bound by this Agreement as if it were the
Employer hereunder with respect to the Executive. It is expressly understood
that no Covered Termination shall be deemed to have occurred merely because,
upon the occurrence of a Change in Control, the Executive ceases to be employed
by the Employer and does not become employed by a successor to the Employer
after the Change in Control if the successor makes an offer to employ the
Executive on terms and conditions which, if imposed by the Employer, would not
give the Executive a basis on which to terminate employment for Good Reason.
"Date of Termination" shall mean the date on which a Covered
Termination occurs.
"Disability" shall mean the occurrence after a Change in Control of
the incapacity of the Executive due to physical or mental illness, whereby the
Executive shall have been absent from the full-time performance of the
Executive's duties with the Employer for six consecutive months or, in any one
year period, for an aggregate of six months.
"Employer" shall mean the Company (if and for so long as the Executive
is employed thereby) and each Subsidiary which may now or hereafter employ the
Executive or, where the context so requires, the Company and such Subsidiaries
collectively. A subsidiary which ceases to be, directly or indirectly, through
one or more intermediaries, controlling, controlled by or under common control
with the Company prior to a Change in Control (other than in connection with and
as an integral part of a series of transactions resulting in a Change in
Control) shall, automatically and without any further action, cease to be (or be
part of) the Employer for purposes hereof.
19
<PAGE>
"Good Reason" shall mean, without the express written consent of the
Executive, the occurrence after a Change in Control of any of the following
circumstances, unless such circumstances are fully corrected prior to the Date
of Termination specified in the Notice of Termination given in respect thereof:
(i) the material reduction of the Executive's title, or the
reduction of the Executive's authority, duties or responsibilities, or
the assignment to the Executive of any duties inconsistent with
Executive's position, authority, duties or responsibilities from those
in effect immediately prior to the Change in Control;
(ii) a reduction in the Executive's Base Salary as in effect
immediately before the Change in Control;
(iii) a material reduction in the Executive's aggregate compensation
opportunity, comprised only of the Executive's (A) Base Salary, and
(B) bonus opportunity (taking into account, without limitation, any
target, minimum and maximum amounts payable and the attainability and
otherwise the reasonableness of any performance hurdles, goals and
other measures), if any;
(iv) the Company's requiring the Executive to be based at any office
or location more than 25 miles from that location at which the
Executive performed Executive's services immediately prior to the
occurrence of a Change in Control, except for travel reasonably
required in the performance of the Executive's responsibilities;
(v) the failure of the Company to obtain a reasonable agreement from
any successor to assume and agree to perform this Agreement, as
contemplated in Section 4.1(a);
(vi) the failure of the Company to pay the Executive any amounts due
hereunder; or
(vii) any other material breach by the Company of this Agreement.
"Notice of Termination" shall mean a notice given by the Employer or
Executive, as applicable, which shall indicate the date of termination and the
specific termination provision in this Agreement relied upon and shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provisions so indicated.
"Person" shall have the meaning ascribed thereto by Section 3(a)(9) of
the Securities Exchange Act, as modified and used in Sections 13(d) and 14(d)
thereof (except that such term shall not include (i) the Company or any of its
Subsidiaries, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its Subsidiaries, (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities, (iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportion as their
ownership of stock of the Company, or (v) such Executive or any "group" (as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act) which
includes the Executive).
"Securities Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
"Stock" shall mean the common stock, $.01 par value, of the Company.
"Subsidiary" shall mean any entity, directly or indirectly, through
one or more intermediaries, controlled by the Company.
Section 2
BENEFITS
2.1 If a Change in Control occurs, then:
20
<PAGE>
(a) subject to Section 2.2, (i) any and all outstanding unvested
stock options and stock appreciation rights held by the Executive shall
thereupon automatically vest and become immediately exercisable in accordance
with their terms, and (ii) notwithstanding anything to the contrary contained in
clause (i), upon a termination of employment (regardless of the party initiating
the termination, for any reason or no reason), all stock options and stock
appreciation rights held by the Executive shall be exercisable for the lesser of
(A) the remainder of the generally applicable term of the stock options or stock
appreciation rights, which is measured from the date of grant thereof, and (B)
three years from the date of such termination; provided that nothing in this
Section 2.1(a) shall reduce or otherwise adversely affect the rights under such
stock options and stock appreciation rights that the Executive would have
without regard to this Section 2.1(a); and
(b) any and all restricted stock and restricted stock rights then
held by the Executive shall thereupon fully vest and become immediately
transferable free of restrictions, other than restrictions imposed by applicable
law.
2.2 Notwithstanding Section 2.1, the following additional provisions
shall apply in the case of an option which is an "incentive stock option" as
defined in Section 422(b) of the Code (and not previously converted to a non-
qualified stock option):
(a) unless otherwise provided by the Company, Section 2.1(a)(i) shall
not apply if and to the extent that the acceleration set forth therein would
violate the annual exercisability limitation contained in Section 422(d) of the
Code, and, in such case, the Company (or the Board or any committee thereof)
shall have the right with (and only with) the consent of the Executive, to
accelerate the date on which any installment of any option becomes exercisable;
and
(b) Section 2.1(a)(ii) shall not apply to the extent that the
applicability of Section 2.1(a)(ii) would cause the stock option not to be an
incentive stock option under Section 422(b) of the Code.
2.3 If a Covered Termination occurs, then the Executive shall be
entitled hereunder to the following:
(a) the Company shall pay to the Executive an amount equal to three
times the sum of (i) the Executive's Base Salary and (ii) the Executive's Annual
Bonus;
(b) for a period of three years after such termination, the Employer
shall arrange to make available to the Executive medical, dental, vision, group
life and disability benefits that are at least at a level (and cost to the
Executive) that is substantially similar in the aggregate to the level of such
benefits which was available to the Executive immediately prior to the Change in
Control; provided that (i) the Employer shall be required to provide group life
and disability benefits only to the extent it is able to do so on reasonable
terms and at a reasonable cost, (ii) the Employer shall not be required to
provide benefits under this Section 2.3(b) upon and after the Change in Control
which are in excess of those provided to a significant number of executives of
similar status who are employed by the Employer from time to time upon and after
the Change in Control, and (iii) no type of benefit otherwise to be made
available to the Executive pursuant to this Section 2.3(b) shall be required to
be made available to the extent that such type of benefit is made available to
the Executive by any subsequent employer of the Executive;
(c) in addition to the benefits to which the Executive is entitled
under any tax-qualified defined benefit retirement plan (the "Retirement Plan")
and defined benefit supplemental executive retirement plan of the Company (the
"SERP"), including any successor plans thereto, the Employer shall pay to the
Executive in cash:
(i) the present value of the retirement benefits (or, if available,
the lump-sum retirement benefits) which would have accrued under the
terms of the Retirement Plan and the SERP (without regard to any
amendment to the Retirement Plan or the SERP made subsequent to a
Change in Control and prior to the Date of Termination, which
amendment adversely affects in any manner the computation of
retirement benefits thereunder), determined as if the Executive was 36
months older than their actual age at the Date of Termination and had
accumulated (after the Date of Termination) 36 additional months of
service credit for vesting, benefit accrual and eligibility purposes
thereunder at their highest annual rate of compensation during the 12
months immediately preceding the Date of Termination (or, if higher,
as in effect at the time of the Change in Control) and as if any
benefit indexing factors continued at the rate applicable at the Date
of Termination, minus
21
<PAGE>
(ii) the present value of the vested retirement benefits (or, if
available, the lump-sum retirement benefits) which had then accrued
pursuant to the provisions of the Retirement Plan and the SERP;
provided, however, that any payment otherwise provided for under this
Section 2.3(c) shall be reduced by the present value of any retirement
(including early retirement) incentives offered for a limited time to,
and accepted by, the Executive (whether or not under a tax-qualified
plan).
(d) the Employer shall provide the Executive with out placement
service through a bona fide outplacement organization acceptable to the
Executive that, at a minimum, agrees to supply the Executive with outplacement
counseling, a private office and administrative support including telephone
service until the earlier of one year from the Date of Termination or until such
time that Executive secures suitable employment;
(e) the Company shall pay for the Executive to receive financial
planning services for which the Company pays not more than $5,000; and
(f) the Company shall provide the Executive with a payment for any
accrued but unused vacation.
2.4 (a) The payments provided for in Section 2.3 shall (except as
otherwise expressly provided therein or as provided in Section 2.4(b) or as
otherwise expressly provided hereunder) be made as soon as practicable, but in
no event later than 30 days, following the Date of Termination.
(b) Notwithstanding any other provision of this Agreement to the
contrary, no payment or benefit otherwise provided for under or by virtue of the
foregoing provisions of this Agreement shall be paid or otherwise made available
unless and until the Employer shall have first received from the Executive (no
later than 60 days after the Employer has provided to the Executive estimates
relating to the payments to be made under this Agreement) a valid, binding and
irrevocable general release, in form and substance reasonably acceptable to the
Employer; provided that the Employer shall be permitted to defer any payment or
benefit otherwise provided for in this Agreement to the fifth day after the
later of its receipt of such release and the time at which the release has
become valid, binding and irrevocable.
2.5 Notwithstanding any other provision of this Agreement to the
contrary, to the extent permitted by the Worker Adjustment and Retraining
Notification Act ("WARN"), any benefit payable hereunder to the Executive as a
consequence of the Executive's Covered Termination shall be reduced by any
amounts required to be paid under Section 2104 of WARN to the Executive in
connection with such Covered Termination.
Section 3
PARACHUTE TAX PROVISIONS
3.1 If all, or any portion, of the payments and benefits provided
under this Agreement, if any, either alone or together with other payments and
benefits which the Executive receives or is entitled to receive from the Company
or its affiliates, would constitute an excess "parachute payment" within the
meaning of Section 280G of the Code (whether or not under an existing plan,
arrangement or other agreement) (each such parachute payment, a "Parachute
Payment"), and would result in the imposition on the Executive of an excise tax
under Section 4999 of the Code, then, in addition to any other benefits to which
the Executive is entitled under this Agreement or otherwise, the Executive shall
be paid an amount in cash equal to the sum of the excise taxes payable by the
Executive by reason of receiving Parachute Payments plus the amount necessary to
place the Executive in the same after-tax position (taking into account any and
all applicable federal, state and local excise, income or other taxes at the
highest possible applicable rates on such Parachute Payments (including, without
limitation, any payments under this Section 3.1)) as if no excise taxes had been
imposed with respect to Parachute Payments (the "Parachute Gross-up"). Any
Parachute Gross-up otherwise required by this Section 3.1 shall be made not
later than the time of the corresponding payment or benefit hereunder giving
rise to the underlying Section 4999 excise tax, even if the payment of the
excise tax is not required under the Code until a later time.
22
<PAGE>
3.2 Except as may otherwise be agreed to by the Company and the
Executive, the amount or amounts (if any) payable under this Section 3 shall be
determined, at the sole cost of the Company, by the Company's independent
auditors (who served in such capacity immediately prior to the Change in
Control), whose determination or determinations shall be final and binding on
all parties. The Executive hereby agrees to utilize such determination or
determinations, as applicable, in filing all of the Executive's tax returns with
respect to the excise tax imposed by Section 4999 of the Code. If such
independent auditors refuse to make the required determinations, then such
determinations shall be made by a comparable independent accounting firm of
national reputation reasonably selected by the Company. Notwithstanding any
other provision of this Agreement to the contrary, as a condition to receiving
any Parachute Gross-up payment, the Executive hereby agrees to be bound by and
comply with the provisions of this Section 3.2.
Section 4
MISCELLANEOUS
4.1 (a) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company expressly to assume
and agree to perform under the terms of this Agreement in the same manner and to
the same extent that the Company and its affiliates would be required to perform
it if no such succession had taken place (provided that such a requirement to
perform which arises by operation of law shall be deemed to satisfy the
requirements for such an express assumption and agreement), and in such event
the Company (as constituted prior to such succession) shall have no further
obligation under or with respect to this Agreement. Failure of the Company to
obtain such assumption and agreement with respect to the Executive prior to the
effectiveness of any such succession shall be a breach of the terms of this
Agreement with respect to the Executive and shall entitle the Executive to
compensation from the Employer (as constituted prior to such succession) in the
same amount and on the same terms as the Executive would be entitled to
hereunder were the Executive's employment terminated for Good Reason following a
Change in Control, except that for purposes of implementing the foregoing, the
date on which any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business or assets as aforesaid
which assumes and agrees (or is otherwise required) to perform this Agreement.
Nothing in this Section 4.1(a) shall be deemed to cause any event or condition
which would otherwise constitute a Change in Control not to constitute a Change
in Control.
(b) Notwithstanding Section 4.1(a), the Company shall remain liable
to the Executive upon a Covered Termination after a Change in Control if (i) the
Executive is not offered continuing employment by a successor to the Employer or
(ii) the Executive declines such an offer and the Executive's resulting
termination of employment otherwise constitutes a Covered Termination hereunder.
(c) This Agreement, and the Executive's and the Company's rights and
obligations hereunder, may not be assigned by the Executive or, except as
provided in Section 4.1(a), the Company, respectively; any purported assignment
by the Executive or the Company in violation hereof shall be null and void.
(d) The terms of this Agreement shall inure to the benefit of and be
enforceable by the personal or legal representatives, executors, administrators,
permitted successors, heirs, distributees, devisees and legatees of the
Executive. If the Executive shall die while an amount would still be payable to
the Executive hereunder if they had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the Executive's devisee, legatee or other designee or, if there is
no such designee, the Executive's estate.
4.2 Except as expressly provided in Section 2.3, the Executive shall
not be required to mitigate damages or the amount of any payment or benefit
provided for under this Agreement by seeking other employment or otherwise, nor
will any payments or benefits hereunder be subject to offset in the event the
Executive does mitigate.
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4.3 The Employer shall pay all legal fees and expenses incurred in a
legal proceeding by the Executive in seeking to obtain or enforce any right or
benefit provided by this Agreement. Such payments are to be made within five
days after the Executive's request for payment accompanied with such evidence of
fees and expenses incurred as the Employer reasonably may require; provided that
if the Executive institutes a proceeding and the judge or other decision-maker
presiding over the proceeding affirmatively finds that the Executive has failed
to prevail substantially, the Executive shall pay Executive's own costs and
expenses (and, if applicable, return any amounts theretofore paid on the
Executive's behalf under this Section 4.3).
4.4 The Executive may file a claim for benefits under this Agreement
by written communication to the Board. A claim is not considered filed until
such communication is actually received by the Board. Within 90 days (or, if
special circumstances require an extension of time for processing, 180 days, in
which case notice of such special circumstances shall be provided within the
initial 90-day period) after the filing of the claim, the Board shall:
(i) approve the claim and take appropriate steps for satisfaction of
the claim; or
(ii) if the claim is wholly or partially denied, advise the Executive
of such denial by furnishing to him or her a written notice of such
denial setting forth (A) the specific reason or reasons for the
denial; (B) specific reference to pertinent provisions of this
Agreement on which the denial is based and, if the denial is based in
whole or in part on any rule of construction or interpretation adopted
by the Board, a reference to such rule, a copy of which shall be
provided to the Executive; (C) a description of any additional
material or information necessary for the Executive to perfect the
claim and an explanation of the reasons why such material or
information is necessary; and (D) a reference to this Section 4.4.
4.5 For the purposes of this Agreement, notice and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when hand delivered or mailed by United States
certified or registered express mail, return receipt requested, postage prepaid,
if to the Executive, addressed to the Executive at his or her respective address
on file with the Company; if to the Company, addressed to American Power
Conversion Corporation, 132 Fairgrounds Road, West Kingston, RI 02892, and
directed to the attention of its General Counsel; if to the Board, addressed to
the Board of Directors, c/o 132 Fairgrounds Road, West Kingston, RI 02892, and
directed to the Company's General Counsel; or to such other address as any party
may have furnished to the others in writing in accordance herewith, except that
notice of change of address shall be effective only upon receipt.
4.6 Unless otherwise determined by the Employer in an applicable plan
or arrangement, no amounts payable hereunder upon a Covered Termination shall be
deemed salary or compensation for the purpose of computing benefits under any
employee benefit plan or other arrangement of the Employer for the benefit of
its employees unless the Employer shall determine otherwise.
4.7 This Agreement is the exclusive arrangement with the Executive
applicable to payments and benefits in connection with a change in control of
the Company (whether or not a Change in Control), and supersedes any prior
arrangements involving the Company or its predecessors or affiliates relating
to changes in control (whether or not Changes in Control). This Agreement shall
not limit any right of the Executive to receive any payments or benefits under
an employee benefit or executive compensation plan of the Employer, initially
adopted as of or after the date hereof, which are expressly contingent
thereunder upon the occurrence of a change in control (including, but not
limited to, the acceleration of any rights or benefits thereunder); provided
that in no event shall the Executive be entitled to any payment or benefit under
this Agreement which duplicates a payment or benefit received or receivable by
the Executive under any severance or similar plan or policy of the Employer, and
in any such case the Executive shall only be entitled to receive the greater of
the two payments.
4.8 Any payments hereunder shall be made out of the general assets of
the Employer. The Executive shall have the status of general unsecured creditor
of the Employer, and this Agreement constitutes a mere promise by the Employer
to make payments under this Agreement in the future as and to the extent
provided herein.
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4.9 Nothing in this Agreement shall confer on the Executive any right
to continue in the employ of the Employer or interfere in any way (other than by
virtue of requiring payments or benefits as may expressly be provided herein)
with the right of the Employer to terminate the Executive's employment at any
time.
4.10 The Employer shall be entitled to withhold from any payments or
deemed payments any amount of tax withholding required by law.
4.11 Any controversy or claim arising out of or relating to this
Agreement or the breach of this Agreement that is not resolved by the Employer
and the Executive shall be submitted to arbitration in Providence, Rhode Island,
in accordance with Massachusetts law and the procedures of the American
Arbitration Association. The determination of the arbitrator(s) shall be
conclusive and binding on the Employer and Executive and judgment may be entered
on the arbitrator(s)' award in any court having jurisdiction.
4.12 (a) This Agreement may be amended, superseded, canceled, renewed
or extended, and the terms hereof may be waived, only by a written instrument
signed by the parties or, in the case of a waiver, by the party waiving
compliance. No delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any party of any such right, power or privilege nor any single or
partial exercise of any such right, power or privilege, preclude any other or
further exercise thereof or the exercise of any other such right, power or
privilege.
(b) Notwithstanding Section 4.12(a), the Board, or any committee
thereof, on written notice to the Executive, may unilaterally terminate all or
part of this Agreement as to any particular business combination, without
liability to the Executive hereunder, in the event that the Company is advised
in writing by its independent accounting firm that certain terms of this
Agreement make "pooling of interests" accounting treatment for such business
combination unavailable to the Company (thereby rendering all or part of this
Agreement of no force or effect only with respect to such combination). Any
such notice to the Executive must be accompanied by a copy of the independent
accounting firm's written advice.
4.13 The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement which shall remain in full force and effect.
4.14 The use of captions in this Agreement is for convenience. The
captions are not intended to and do not provide substantive rights.
4.15 In consideration of, among other things, the Company's entering
into this Agreement, the Executive has concurrently herewith executed an
Agreement Relating to Non-Competition, a copy of which is attached hereto as
Schedule 1.
4.16 THIS AGREEMENT SHALL BE CONSTRUED, ADMINISTERED AND ENFORCED
ACCORDING TO THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW, EXCEPT TO THE EXTENT PREEMPTED BY FEDERAL LAW.
IN WITNESS WHEREOF, the parties hereto have signed their names,
effective as of the date first above written.
AMERICAN POWER CONVERSION CORPORATION
By:______________________________
Name:____________________________
Title:___________________________
_________________________________
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Schedule 1
AGREEMENT RELATING TO NON-COMPETITION
I, _______________, in consideration of having been offered by American Power
Conversion Corporation a Change-in-Control Severance Agreement, dated as of the
date hereof (a "Severance Agreement"), hereby agree as follows:
1. Non-competition.
1.1 I acknowledge that (i) the principal business of American Power
Conversion Corporation and its subsidiaries ("Company") is the development,
manufacture, production, marketing, licensing and selling of power protection
equipment, including uninterruptible power supplies, surge suppressors and
related software, and the related manageability, availability and performance of
sensitive networking, electronic, communication and industrial systems and
equipment (such business, and any and all other businesses that after the date
hereof, become material with respect to the Company's then-overall business,
herein collectively referred to as the "Business"); (ii) Company is one of a
limited number of persons who have developed or are in the process of developing
the Business; (iii) the Business is international in scope; (iv) my relationship
with Company has given and will continue to give me access to the confidential,
proprietary and trade secret information of Company or access to the Company's
customers or perspective customers; and (v) the agreements and covenants I have
made in this Agreement are essential to the business and goodwill of Company,
and are required by Company in connection with my acceptance of a Severance
Agreement.
1.2 I covenant and agree that during the period commencing on the date
hereof and ending two years following the date of termination of my employment
with Company, for any reason or no reason, I shall not directly or indirectly,
(i) develop, manufacture, produce, market, license, sell or aid in the
development, manufacturing, production, marketing, licensing or sale of any
product which competes, or is planned to compete, with any products (including
products under development as of the date of my termination) of the Company in
connection with the Business; (ii) otherwise engage in the Business for my own
account; (iii) render any services to any person, corporation, partnership or
other entity (hereinafter referred to as a "person") other than Company engaged
in the Business; or (iv) become interested in any such person (other than
Company) as a partner, shareholder, principal, agent, employee, consultant or in
any other relationship or capacity; provided, however, that notwithstanding the
above, I may own, directly or indirectly, solely as an investment, securities of
any such person which are traded on any national securities exchange or NASDAQ
if I (y) am not a controlling person of, or a member of a group which controls
such person; and (z) do not, directly or indirectly own 2% or more of any class
of securities of such person.
2. Equitable Relief. I acknowledge and agree that monetary damages would not
be a sufficient remedy for a breach of the obligations described herein and
that, in addition to all other rights and remedies which may be available to
Company, Company shall be entitled to equitable relief (without the need to
prove damages or to post a bond), including injunction and specific performance,
for any breach by me of the obligations described herein.
3. Assignment. The obligations described herein are personal to me and may
not be assigned by me to any other party; any unauthorized assignment or other
transfer shall be null and void. This Agreement shall inure to the benefit of
the Company's successors and assigns.
4. Confirmation. I hereby confirm to Company that I have the right to enter
into this Agreement and to perform my obligations hereunder, and that there are
no restrictions or obligations to any third parties, which would in any way
detract from or affect my performance hereunder.
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5. Termination of Employment. Nothing herein is considered to constitute a
right to continued employment. Subject to the provisions of the Severance
Agreement, my employment is terminable at will at any time by Company for any
reason whatsoever. Termination of my employment for any reason will not release
me from any obligations hereunder, and this Agreement shall survive any such
termination in accordance with its terms.
6. Severability. If it is determined that any of the provisions of this
Agreement, including, without limitation, any of the restrictive covenants
contained herein, or any part thereof, is invalid or unenforceable, the
remainder of the provisions of this Agreement shall not thereby be affected and
shall be given full effect, without regard to the invalid portions.
7. Modification and Waiver. This Agreement may not be modified without the
prior written consent of American Power Conversion Corporation. No failure or
delay by Company in exercising any right with respect to this Agreement shall
operate as a waiver thereof, and no single or partial exercise of any right
shall preclude any other or further exercise thereof or the exercise of any
right hereunder.
8. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS WITHOUT REFERENCE
TO ITS CONFLICTS OF LAW PRINCIPLES.
IN WITNESS WHEREOF, this Agreement Relating to Noncompetition has been executed
as of this 5th day of July, 2000.
AMERICAN POWER CONVERSION CORPORATION
By:________________________________
Name:______________________________
Title:_____________________________
___________________________________
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FORM 10-Q
October 1, 2000
Exhibit 10.25
CHANGE-IN-CONTROL
SEVERANCE AGREEMENT
THIS AGREEMENT, dated as of July 5, 2000, by and between American
Power Conversion Corporation, with its principal place of business at 132
Fairgrounds Road, West Kingston, RI (the "Company"), and ________________ (the
"Executive").
WHEREAS, the Company considers it essential to the best interests of
its stockholders to foster the continuous employment of key management
personnel, and recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may exist and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the distraction or departure of management personnel
to the detriment of the Company and its stockholders; and
WHEREAS, the Board of Directors of the Company has determined that
appropriate steps should be taken to reinforce and encourage the Executive's
continued attention and dedication to the Executive's assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a change in control of the Company, although no such change is
presently known to be contemplated.
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1
DEFINITIONS
Except as may otherwise be specified or as the context may otherwise
require, the following terms shall have the respective meanings set forth below
whenever used herein:
"Annual Bonus" shall mean the annual bonus, or if the Executive is
paid a bonus on a quarterly basis, the sum of the four quarterly bonus payments,
paid to the Executive for the Company's fiscal year prior to the fiscal year in
which the Date of Termination occurs, or, if greater, the fiscal year
immediately preceding such prior fiscal year; provided that such amount shall be
annualized for any fiscal year consisting of less than 12 full months; and
provided, further, that, if at the time of a Covered Termination it is
substantially certain that a bonus at a level greater than the bonus paid to
Executive for the Company's prior fiscal year (or, if applicable, the next
preceding fiscal year) will be paid or payable for the current or recently ended
fiscal year, then the bonus which is substantially certain to be paid or payable
shall be used for these purposes.
"Base Salary" shall mean the annual base rate of regular compensation
of the Executive immediately before a Covered Termination, or if greater, the
highest annual such rate at any time during the 12-month period immediately
preceding the Covered Termination.
"Board" shall mean the Board of Directors of the Company.
"Cause" shall mean (i) the Executive's engaging in willful and
repeated gross negligence or gross misconduct, (ii) the Executive's breaching of
a material fiduciary duty to the Employer, or (iii) the Executive's being
convicted of a felony, in either case, to the demonstrable and material injury
to the Employer. For purposes hereof, no act, or failure to act, on the
Executive's part, shall be deemed "willful" unless done, or omitted to be done,
by the Executive not in good faith and without reasonable belief that any act or
omission was in the best interest of the Employer.
"Change in Control" shall mean the first to occur, after the date
hereof, of any of the following:
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(i) the members of the Board at the beginning of any consecutive 24-
calendar-month period (the "Incumbent Directors") cease for any reason
other than due to death to constitute at least a majority of the
members of the Board; provided that any director whose election, or
nomination for election by the Company's stockholders, was approved by
a vote of at least a majority of the members of the Board then still
in office who were members of the Board at the beginning of such 24-
calendar-month period, shall be deemed to be an Incumbent Director;
(ii) any consolidation or merger of the Company where the stockholders
of the Company, immediately prior to the consolidation or merger,
would not, immediately after the consolidation or merger, beneficially
own (as such term is defined in Rule 13d-3 under the Securities
Exchange Act), directly or indirectly, shares of Stock representing in
the aggregate 50% or more of the combined voting power of the
securities of the corporation issuing cash or securities in the
consolidation or merger (or of its ultimate parent corporation, if
any); or
(iii) there shall occur (A) any sale, lease, exchange or other
transfer (in one transaction or a series of transactions contemplated
or arranged by any party as a single plan) of all or substantially all
of the assets of the Company, other than a sale or disposition by the
Company of all or substantially all of the Company's assets to an
entity, at least 50% of the combined voting power of the voting
securities of which are owned by Persons in substantially the same
proportion as their ownership of the Company immediately prior to such
sale or (B) the approval by stockholders of the Company of any plan or
proposal for the liquidation or dissolution of the Company.
Upon the occurrence of a Change in Control as provided above, no subsequent
event or condition shall constitute a Change in Control for purposes of this
Agreement, with the result that there can be no more than one Change in Control
hereunder.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall mean, subject to Section 4.1(a), American Power
Conversion Corporation, a Massachusetts corporation.
"Covered Termination" shall mean if, within the two-year period
immediately following a Change in Control, the Executive (i) is terminated by
the Employer without Cause (other than on account of death or Disability), or
(ii) terminates the Executive's employment with the Employer for Good Reason.
The Executive shall not be deemed to have terminated for purposes of this
Agreement merely because he or she ceases to be employed by the Employer and
becomes employed by a new employer involved in the Change in Control; provided
that such new employer shall be bound by this Agreement as if it were the
Employer hereunder with respect to the Executive. It is expressly understood
that no Covered Termination shall be deemed to have occurred merely because,
upon the occurrence of a Change in Control, the Executive ceases to be employed
by the Employer and does not become employed by a successor to the Employer
after the Change in Control if the successor makes an offer to employ the
Executive on terms and conditions which, if imposed by the Employer, would not
give the Executive a basis on which to terminate employment for Good Reason.
"Date of Termination" shall mean the date on which a Covered
Termination occurs.
"Disability" shall mean the occurrence after a Change in Control of
the incapacity of the Executive due to physical or mental illness, whereby the
Executive shall have been absent from the full-time performance of the
Executive's duties with the Employer for six consecutive months or, in any one
year period, for an aggregate of six months.
"Employer" shall mean the Company (if and for so long as the Executive
is employed thereby) and each Subsidiary which may now or hereafter employ the
Executive or, where the context so requires, the Company and such Subsidiaries
collectively. A subsidiary which ceases to be, directly or indirectly, through
one or more intermediaries, controlling, controlled by or under common control
with the Company prior to a Change in Control (other than in connection with and
as an integral part of a series of transactions resulting in a Change in
Control) shall, automatically and without any further action, cease to be (or be
part of) the Employer for purposes hereof.
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"Good Reason" shall mean, without the express written consent of the
Executive, the occurrence after a Change in Control of any of the following
circumstances, unless such circumstances are fully corrected prior to the Date
of Termination specified in the Notice of Termination given in respect thereof:
(i) the material reduction of the Executive's title, or the
reduction of the Executive's authority, duties or responsibilities, or
the assignment to the Executive of any duties inconsistent with
Executive's position, authority, duties or responsibilities from those
in effect immediately prior to the Change in Control;
(ii) a reduction in the Executive's Base Salary as in effect
immediately before the Change in Control;
(iii) a material reduction in the Executive's aggregate compensation
opportunity, comprised only of the Executive's (A) Base Salary, and
(B) bonus opportunity (taking into account, without limitation, any
target, minimum and maximum amounts payable and the attainability and
otherwise the reasonableness of any performance hurdles, goals and
other measures), if any;
(iv) the Company's requiring the Executive to be based at any office
or location more than 25 miles from that location at which the
Executive performed Executive's services immediately prior to the
occurrence of a Change in Control, except for travel reasonably
required in the performance of the Executive's responsibilities;
(v) the failure of the Company to obtain a reasonable agreement from
any successor to assume and agree to perform this Agreement, as
contemplated in Section 4.1(a);
(viii) the failure of the Company to pay the Executive any amounts due
hereunder; or
(ix) any other material breach by the Company of this Agreement.
"Notice of Termination" shall mean a notice given by the Employer or
Executive, as applicable, which shall indicate the date of termination and the
specific termination provision in this Agreement relied upon and shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provisions so indicated.
"Person" shall have the meaning ascribed thereto by Section 3(a)(9) of
the Securities Exchange Act, as modified and used in Sections 13(d) and 14(d)
thereof (except that such term shall not include (i) the Company or any of its
Subsidiaries, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its Subsidiaries, (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities, (iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportion as their
ownership of stock of the Company, or (v) such Executive or any "group" (as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act) which
includes the Executive).
"Securities Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
"Stock" shall mean the common stock, $.01 par value, of the Company.
"Subsidiary" shall mean any entity, directly or indirectly, through
one or more intermediaries, controlled by the Company.
Section 2
BENEFITS
2.2 If a Change in Control occurs, then:
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(a) subject to Section 2.2, (i) any and all outstanding unvested
stock options and stock appreciation rights held by the Executive shall
thereupon automatically vest and become immediately exercisable in accordance
with their terms, and (ii) notwithstanding anything to the contrary contained in
clause (i), upon a termination of employment (regardless of the party initiating
the termination, for any reason or no reason), all stock options and stock
appreciation rights held by the Executive shall be exercisable for the lesser of
(A) the remainder of the generally applicable term of the stock options or stock
appreciation rights, which is measured from the date of grant thereof, and (B)
three years from the date of such termination; provided that nothing in this
Section 2.1(a) shall reduce or otherwise adversely affect the rights under such
stock options and stock appreciation rights that the Executive would have
without regard to this Section 2.1(a); and
(b) any and all restricted stock and restricted stock rights then
held by the Executive shall thereupon fully vest and become immediately
transferable free of restrictions, other than restrictions imposed by applicable
law.
2.2 Notwithstanding Section 2.1, the following additional provisions
shall apply in the case of an option which is an "incentive stock option" as
defined in Section 422(b) of the Code (and not previously converted to a non-
qualified stock option):
(a) unless otherwise provided by the Company, Section 2.1(a)(i) shall
not apply if and to the extent that the acceleration set forth therein would
violate the annual exercisability limitation contained in Section 422(d) of the
Code, and, in such case, the Company (or the Board or any committee thereof)
shall have the right with (and only with) the consent of the Executive, to
accelerate the date on which any installment of any option becomes exercisable;
and
(b) Section 2.1(a)(ii) shall not apply to the extent that the
applicability of Section 2.1(a)(ii) would cause the stock option not to be an
incentive stock option under Section 422(b) of the Code.
2.3 If a Covered Termination occurs, then the Executive shall be
entitled hereunder to the following:
(a) the Company shall pay to the Executive an amount equal to two
times the sum of (i) the Executive's Base Salary and (ii) the Executive's Annual
Bonus;
(b) for a period of two years after such termination, the Employer
shall arrange to make available to the Executive medical, dental, vision, group
life and disability benefits that are at least at a level (and cost to the
Executive) that is substantially similar in the aggregate to the level of such
benefits which was available to the Executive immediately prior to the Change in
Control; provided that (i) the Employer shall be required to provide group life
and disability benefits only to the extent it is able to do so on reasonable
terms and at a reasonable cost, (ii) the Employer shall not be required to
provide benefits under this Section 2.3(b) upon and after the Change in Control
which are in excess of those provided to a significant number of executives of
similar status who are employed by the Employer from time to time upon and after
the Change in Control, and (iii) no type of benefit otherwise to be made
available to the Executive pursuant to this Section 2.3(b) shall be required to
be made available to the extent that such type of benefit is made available to
the Executive by any subsequent employer of the Executive;
(c) in addition to the benefits to which the Executive is entitled
under any tax-qualified defined benefit retirement plan (the "Retirement Plan")
and defined benefit supplemental executive retirement plan of the Company (the
"SERP"), including any successor plans thereto, the Employer shall pay to the
Executive in cash:
(i) the present value of the retirement benefits (or, if available,
the lump-sum retirement benefits) which would have accrued under the
terms of the Retirement Plan and the SERP (without regard to any
amendment to the Retirement Plan or the SERP made subsequent to a
Change in Control and prior to the Date of Termination, which
amendment adversely affects in any manner the computation of
retirement benefits thereunder), determined as if the Executive was 36
months older than their actual age at the Date of Termination and had
accumulated (after the Date of Termination) 36 additional months of
service credit for vesting, benefit accrual and eligibility purposes
thereunder at their highest annual rate of compensation during the 12
months immediately preceding the Date of Termination (or, if higher,
as in effect at the time of the Change in Control) and as if any
benefit indexing factors continued at the rate applicable at the Date
of Termination, minus
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(ii) the present value of the vested retirement benefits (or, if
available, the lump-sum retirement benefits) which had then accrued
pursuant to the provisions of the Retirement Plan and the SERP;
provided, however, that any payment otherwise provided for under this
Section 2.3(c) shall be reduced by the present value of any retirement
(including early retirement) incentives offered for a limited time to,
and accepted by, the Executive (whether or not under a tax-qualified
plan).
(d) the Employer shall provide the Executive with out placement
service through a bona fide outplacement organization acceptable to the
Executive that, at a minimum, agrees to supply the Executive with outplacement
counseling, a private office and administrative support including telephone
service until the earlier of one year from the Date of Termination or until such
time that Executive secures suitable employment;
(e) the Company shall pay for the Executive to receive financial
planning services for which the Company pays not more than $5,000; and
(f) the Company shall provide the Executive with a payment for any
accrued but unused vacation.
2.4 (a) The payments provided for in Section 2.3 shall (except as
otherwise expressly provided therein or as provided in Section 2.4(b) or as
otherwise expressly provided hereunder) be made as soon as practicable, but in
no event later than 30 days, following the Date of Termination.
(b) Notwithstanding any other provision of this Agreement to the
contrary, no payment or benefit otherwise provided for under or by virtue of the
foregoing provisions of this Agreement shall be paid or otherwise made available
unless and until the Employer shall have first received from the Executive (no
later than 60 days after the Employer has provided to the Executive estimates
relating to the payments to be made under this Agreement) a valid, binding and
irrevocable general release, in form and substance reasonably acceptable to the
Employer; provided that the Employer shall be permitted to defer any payment or
benefit otherwise provided for in this Agreement to the fifth day after the
later of its receipt of such release and the time at which the release has
become valid, binding and irrevocable.
2.5 Notwithstanding any other provision of this Agreement to the
contrary, to the extent permitted by the Worker Adjustment and Retraining
Notification Act ("WARN"), any benefit payable hereunder to the Executive as a
consequence of the Executive's Covered Termination shall be reduced by any
amounts required to be paid under Section 2104 of WARN to the Executive in
connection with such Covered Termination.
Section 3
PARACHUTE TAX PROVISIONS
3.1 If all, or any portion, of the payments and benefits provided
under this Agreement, if any, either alone or together with other payments and
benefits which the Executive receives or is entitled to receive from the Company
or its affiliates, would constitute an excess "parachute payment" within the
meaning of Section 280G of the Code (whether or not under an existing plan,
arrangement or other agreement) (each such parachute payment, a "Parachute
Payment"), and would result in the imposition on the Executive of an excise tax
under Section 4999 of the Code, then, in addition to any other benefits to which
the Executive is entitled under this Agreement or otherwise, the Executive shall
be paid an amount in cash equal to the sum of the excise taxes payable by the
Executive by reason of receiving Parachute Payments plus the amount necessary to
place the Executive in the same after-tax position (taking into account any and
all applicable federal, state and local excise, income or other taxes at the
highest possible applicable rates on such Parachute Payments (including, without
limitation, any payments under this Section 3.1)) as if no excise taxes had been
imposed with respect to Parachute Payments (the "Parachute Gross-up"). Any
Parachute Gross-up otherwise required by this Section 3.1 shall be made not
later than the time of the corresponding payment or benefit hereunder giving
rise to the underlying Section 4999 excise tax, even if the payment of the
excise tax is not required under the Code until a later time.
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3.2 Except as may otherwise be agreed to by the Company and the
Executive, the amount or amounts (if any) payable under this Section 3 shall be
determined, at the sole cost of the Company, by the Company's independent
auditors (who served in such capacity immediately prior to the Change in
Control), whose determination or determinations shall be final and binding on
all parties. The Executive hereby agrees to utilize such determination or
determinations, as applicable, in filing all of the Executive's tax returns with
respect to the excise tax imposed by Section 4999 of the Code. If such
independent auditors refuse to make the required determinations, then such
determinations shall be made by a comparable independent accounting firm of
national reputation reasonably selected by the Company. Notwithstanding any
other provision of this Agreement to the contrary, as a condition to receiving
any Parachute Gross-up payment, the Executive hereby agrees to be bound by and
comply with the provisions of this Section 3.2.
Section 4
MISCELLANEOUS
4.1 (a) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company expressly to assume
and agree to perform under the terms of this Agreement in the same manner and to
the same extent that the Company and its affiliates would be required to perform
it if no such succession had taken place (provided that such a requirement to
perform which arises by operation of law shall be deemed to satisfy the
requirements for such an express assumption and agreement), and in such event
the Company (as constituted prior to such succession) shall have no further
obligation under or with respect to this Agreement. Failure of the Company to
obtain such assumption and agreement with respect to the Executive prior to the
effectiveness of any such succession shall be a breach of the terms of this
Agreement with respect to the Executive and shall entitle the Executive to
compensation from the Employer (as constituted prior to such succession) in the
same amount and on the same terms as the Executive would be entitled to
hereunder were the Executive's employment terminated for Good Reason following a
Change in Control, except that for purposes of implementing the foregoing, the
date on which any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business or assets as aforesaid
which assumes and agrees (or is otherwise required) to perform this Agreement.
Nothing in this Section 4.1(a) shall be deemed to cause any event or condition
which would otherwise constitute a Change in Control not to constitute a Change
in Control.
(b) Notwithstanding Section 4.1(a), the Company shall remain liable
to the Executive upon a Covered Termination after a Change in Control if (i) the
Executive is not offered continuing employment by a successor to the Employer or
(ii) the Executive declines such an offer and the Executive's resulting
termination of employment otherwise constitutes a Covered Termination hereunder.
(c) This Agreement, and the Executive's and the Company's rights and
obligations hereunder, may not be assigned by the Executive or, except as
provided in Section 4.1(a), the Company, respectively; any purported assignment
by the Executive or the Company in violation hereof shall be null and void.
(d) The terms of this Agreement shall inure to the benefit of and be
enforceable by the personal or legal representatives, executors, administrators,
permitted successors, heirs, distributees, devisees and legatees of the
Executive. If the Executive shall die while an amount would still be payable to
the Executive hereunder if they had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the Executive's devisee, legatee or other designee or, if there is
no such designee, the Executive's estate.
4.2 Except as expressly provided in Section 2.3, the Executive shall
not be required to mitigate damages or the amount of any payment or benefit
provided for under this Agreement by seeking other employment or otherwise, nor
will any payments or benefits hereunder be subject to offset in the event the
Executive does mitigate.
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4.3 The Employer shall pay all legal fees and expenses incurred in a
legal proceeding by the Executive in seeking to obtain or enforce any right or
benefit provided by this Agreement. Such payments are to be made within five
days after the Executive's request for payment accompanied with such evidence of
fees and expenses incurred as the Employer reasonably may require; provided that
if the Executive institutes a proceeding and the judge or other decision-maker
presiding over the proceeding affirmatively finds that the Executive has failed
to prevail substantially, the Executive shall pay Executive's own costs and
expenses (and, if applicable, return any amounts theretofore paid on the
Executive's behalf under this Section 4.3).
4.4 The Executive may file a claim for benefits under this Agreement
by written communication to the Board. A claim is not considered filed until
such communication is actually received by the Board. Within 90 days (or, if
special circumstances require an extension of time for processing, 180 days, in
which case notice of such special circumstances shall be provided within the
initial 90-day period) after the filing of the claim, the Board shall:
(i) approve the claim and take appropriate steps for satisfaction of
the claim; or
(ii) if the claim is wholly or partially denied, advise the Executive
of such denial by furnishing to him or her a written notice of such
denial setting forth (A) the specific reason or reasons for the
denial; (B) specific reference to pertinent provisions of this
Agreement on which the denial is based and, if the denial is based in
whole or in part on any rule of construction or interpretation adopted
by the Board, a reference to such rule, a copy of which shall be
provided to the Executive; (C) a description of any additional
material or information necessary for the Executive to perfect the
claim and an explanation of the reasons why such material or
information is necessary; and (D) a reference to this Section 4.4.
4.5 For the purposes of this Agreement, notice and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when hand delivered or mailed by United States
certified or registered express mail, return receipt requested, postage prepaid,
if to the Executive, addressed to the Executive at his or her respective address
on file with the Company; if to the Company, addressed to American Power
Conversion Corporation, 132 Fairgrounds Road, West Kingston, RI 02892, and
directed to the attention of its General Counsel; if to the Board, addressed to
the Board of Directors, c/o 132 Fairgrounds Road, West Kingston, RI 02892, and
directed to the Company's General Counsel; or to such other address as any party
may have furnished to the others in writing in accordance herewith, except that
notice of change of address shall be effective only upon receipt.
4.6 Unless otherwise determined by the Employer in an applicable plan
or arrangement, no amounts payable hereunder upon a Covered Termination shall be
deemed salary or compensation for the purpose of computing benefits under any
employee benefit plan or other arrangement of the Employer for the benefit of
its employees unless the Employer shall determine otherwise.
4.7 This Agreement is the exclusive arrangement with the Executive
applicable to payments and benefits in connection with a change in control of
the Company (whether or not a Change in Control), and supersedes any prior
arrangements involving the Company or its predecessors or affiliates relating
to changes in control (whether or not Changes in Control). This Agreement shall
not limit any right of the Executive to receive any payments or benefits under
an employee benefit or executive compensation plan of the Employer, initially
adopted as of or after the date hereof, which are expressly contingent
thereunder upon the occurrence of a change in control (including, but not
limited to, the acceleration of any rights or benefits thereunder); provided
that in no event shall the Executive be entitled to any payment or benefit under
this Agreement which duplicates a payment or benefit received or receivable by
the Executive under any severance or similar plan or policy of the Employer, and
in any such case the Executive shall only be entitled to receive the greater of
the two payments.
4.8 Any payments hereunder shall be made out of the general assets of
the Employer. The Executive shall have the status of general unsecured creditor
of the Employer, and this Agreement constitutes a mere promise by the Employer
to make payments under this Agreement in the future as and to the extent
provided herein.
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4.9 Nothing in this Agreement shall confer on the Executive any right
to continue in the employ of the Employer or interfere in any way (other than by
virtue of requiring payments or benefits as may expressly be provided herein)
with the right of the Employer to terminate the Executive's employment at any
time.
4.10 The Employer shall be entitled to withhold from any payments or
deemed payments any amount of tax withholding required by law.
4.11 Any controversy or claim arising out of or relating to this
Agreement or the breach of this Agreement that is not resolved by the Employer
and the Executive shall be submitted to arbitration in Providence, Rhode Island,
in accordance with Massachusetts law and the procedures of the American
Arbitration Association. The determination of the arbitrator(s) shall be
conclusive and binding on the Employer and Executive and judgment may be entered
on the arbitrator(s)' award in any court having jurisdiction.
4.12 (a) This Agreement may be amended, superseded, canceled, renewed
or extended, and the terms hereof may be waived, only by a written instrument
signed by the parties or, in the case of a waiver, by the party waiving
compliance. No delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any party of any such right, power or privilege nor any single or
partial exercise of any such right, power or privilege, preclude any other or
further exercise thereof or the exercise of any other such right, power or
privilege.
(b) Notwithstanding Section 4.12(a), the Board, or any committee
thereof, on written notice to the Executive, may unilaterally terminate all or
part of this Agreement as to any particular business combination, without
liability to the Executive hereunder, in the event that the Company is advised
in writing by its independent accounting firm that certain terms of this
Agreement make "pooling of interests" accounting treatment for such business
combination unavailable to the Company (thereby rendering all or part of this
Agreement of no force or effect only with respect to such combination). Any
such notice to the Executive must be accompanied by a copy of the independent
accounting firm's written advice.
4.13 The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement which shall remain in full force and effect.
4.14 The use of captions in this Agreement is for convenience. The
captions are not intended to and do not provide substantive rights.
4.15 In consideration of, among other things, the Company's entering
into this Agreement, the Executive has concurrently herewith executed an
Agreement Relating to Non-Competition, a copy of which is attached hereto as
Schedule 1.
4.16 THIS AGREEMENT SHALL BE CONSTRUED, ADMINISTERED AND ENFORCED
ACCORDING TO THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW, EXCEPT TO THE EXTENT PREEMPTED BY FEDERAL LAW.
IN WITNESS WHEREOF, the parties hereto have signed their names,
effective as of the date first above written.
AMERICAN POWER CONVERSION CORPORATION
By:______________________________
Name:____________________________
Title:___________________________
_________________________________
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Schedule 1
AGREEMENT RELATING TO NON-COMPETITION
I, _______________, in consideration of having been offered by American Power
Conversion Corporation a Change-in-Control Severance Agreement, dated as of the
date hereof (a "Severance Agreement"), hereby agree as follows:
1. Non-competition.
1.1 I acknowledge that (i) the principal business of American Power
Conversion Corporation and its subsidiaries ("Company") is the development,
manufacture, production, marketing, licensing and selling of power protection
equipment, including uninterruptible power supplies, surge suppressors and
related software, and the related manageability, availability and performance
of sensitive networking, electronic,communication and industrial systems and
equipment (such business, and any and all other businesses that after the date
hereof, become material with respect to the Company's then-overall business,
herein collectively referred to as the "Business"); (ii) Company is one of a
limited number of persons who have developed or are in the process of developing
the Business; (iii) the Business is international in scope; (iv) my relationship
with Company has given and will continue to give me access to the confidential,
proprietary and trade secret information of Company or access to the Company's
customers or perspective customers; and (v) the agreements and covenants I have
made in this Agreement are essential to the business and goodwill of Company,
and are required by Company in connection with my acceptance of a Severance
Agreement.
1.2 I covenant and agree that during the period commencing on the date
hereof and ending one year following the date of termination of my employment
with Company, for any reason or no reason, I shall not directly or indirectly,
(i) develop, manufacture, produce, market, license, sell or aid in the
development, manufacturing, production, marketing, licensing or sale of any
product which competes, or is planned to compete, with any products (including
products under development as of the date of my termination) of the Company in
connection with the Business; (ii) otherwise engage in the Business for my own
account; (iii) render any services to any person, corporation, partnership or
other entity (hereinafter referred to as a "person") other than Company engaged
in the Business; or (iv) become interested in any such person (other than
Company) as a partner, shareholder, principal, agent, employee, consultant or in
any other relationship or capacity; provided, however, that notwithstanding the
above, I may own, directly or indirectly, solely as an investment, securities of
any such person which are traded on any national securities exchange or NASDAQ
if I (y) am not a controlling person of, or a member of a group which controls
such person; and (z) do not, directly or indirectly own 2% or more of any class
of securities of such person.
2. Equitable Relief. I acknowledge and agree that monetary damages would not
be a sufficient remedy for a breach of the obligations described herein and
that, in addition to all other rights and remedies which may be available to
Company, Company shall be entitled to equitable relief (without the need to
prove damages or to post a bond), including injunction and specific performance,
for any breach by me of the obligations described herein.
3. Assignment. The obligations described herein are personal to me and may
not be assigned by me to any other party; any unauthorized assignment or other
transfer shall be null and void. This Agreement shall inure to the benefit of
the Company's successors and assigns.
4. Confirmation. I hereby confirm to Company that I have the right to enter
into this Agreement and to perform my obligations hereunder, and that there are
no restrictions or obligations to any third parties, which would in any way
detract from or affect my performance hereunder.
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5. Termination of Employment. Nothing herein is considered to constitute a
right to continued employment. Subject to the provisions of the Severance
Agreement, my employment is terminable at will at any time by Company for any
reason whatsoever. Termination of my employment for any reason will not release
me from any obligations hereunder, and this Agreement shall survive any such
termination in accordance with its terms.
6. Severability. If it is determined that any of the provisions of this
Agreement, including, without limitation, any of the restrictive covenants
contained herein, or any part thereof, is invalid or unenforceable, the
remainder of the provisions of this Agreement shall not thereby be affected and
shall be given full effect, without regard to the invalid portions.
7. Modification and Waiver. This Agreement may not be modified without the
prior written consent of American Power Conversion Corporation. No failure or
delay by Company in exercising any right with respect to this Agreement shall
operate as a waiver thereof, and no single or partial exercise of any right
shall preclude any other or further exercise thereof or the exercise of any
right hereunder.
8. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS WITHOUT REFERENCE
TO ITS CONFLICTS OF LAW PRINCIPLES.
IN WITNESS WHEREOF, this Agreement Relating to Noncompetition has been executed
as of this 5th day of July, 2000.
AMERICAN POWER CONVERSION CORPORATION
By:_______________________________
Name:_____________________________
Title:____________________________
__________________________________
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