<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1999.
-------------
[ ] 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 1-10431
AVX CORPORATION
Delaware 33-0379007
- --------------------------------- ---------------------
(State of other jurisdiction (IRS Employer ID No.)
of incorporation or organization)
801 17th Avenue South, Myrtle Beach, South Carolina 29577
---------------------------------------------------------
(Address of principal executive offices)
(843) 448-9411
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at August 2, 1999
----- -----------------------------
Common Stock, par value $0.01 per share 86,397,125
<PAGE> 2
AVX CORPORATION
INDEX
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
PART I: Financial Information
ITEM 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1999 and March 31, 1999 1
Consolidated Statements of Income for the three months ended
June 30, 1999 and 1998 2
Consolidated Statements of Cash Flows for the three months ended
June 30, 1999 and 1998 3
Notes to Consolidated Financial Statements 4-6
ITEM 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
PART II: Other Information
Signatures
Exhibits:
10.10 Amended 1995 Stock Option Plan
27 Financial Data Schedule (for SEC use only)
</TABLE>
<PAGE> 3
AVX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share data)
<TABLE>
<CAPTION>
June 30, 1999 March 31, 1999
------------- --------------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 178,262 $ 173,106
Accounts receivable, net 181,592 157,331
Inventories 287,828 277,393
Deferred income taxes 22,207 21,895
Other receivables - affiliates 2,255 2,738
Prepaid and other 29,164 31,072
----------- -----------
Total current assets 701,308 663,535
Property and equipment:
Land 12,617 12,287
Buildings and improvements 146,780 142,661
Machinery and equipment 734,028 730,574
Construction in progress 59,776 58,692
----------- -----------
953,201 944,214
Accumulated depreciation (651,556) (639,966)
----------- -----------
301,645 304,248
Goodwill, net 77,464 78,790
Other assets 12,893 11,467
----------- -----------
TOTAL ASSETS $ 1,093,310 $ 1,058,040
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Short-term bank debt $ 17,823 $ 20,944
Current maturities of long-term debt 95 148
Accounts payable:
Trade 52,159 46,737
Affiliates 43,404 32,311
Income taxes payable 20,836 11,995
Accrued payroll and benefits 39,969 41,055
Accrued expenses 42,352 39,092
----------- -----------
Total current liabilities 216,638 192,282
Long-term debt 17,812 12,714
Deferred income taxes 6,251 6,115
Other liabilities 14,421 16,288
----------- -----------
TOTAL LIABILITIES 255,122 227,399
----------- -----------
Contingencies (Note 4)
Stockholders' equity:
Preferred stock, par value $0.01 per share:
Authorized, 20,000,000 shares; None issued or outstanding
Common stock, par value $0.01 per share:
Authorized, 300,000,000 shares; 88,184,125 (June 1999)
and 88,184,125 (March 1999) issued 882 882
Additional paid-in capital 325,181 325,028
Retained earnings 553,106 541,267
Accumulated other comprehensive income (loss) (9,648) (4,789)
Common stock in treasury, at cost: 1,903,967 (June 1999)
and 1,929,100 (March 1999) share (31,333) (31,747)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 838,188 830,641
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,093,310 $ 1,058,040
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE> 4
AVX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(dollars in thousands, except share data)
<TABLE>
<CAPTION>
Three Months ended June 30,
---------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Net sales $ 343,150 $ 292,000
Cost of sales 289,291 240,540
------------ ------------
Gross profit 53,859 51,460
Selling, general and administrative expenses 27,458 27,880
------------ ------------
Profit from operations 26,401 23,580
Other income (expense):
Interest income 1,831 2,578
Interest expense (487) (531)
Other, net (879) (406)
------------ ------------
Income before income taxes 26,866 25,221
Provision for income taxes 9,420 7,819
------------ ------------
Net income $ 17,446 $ 17,402
============ ============
Amounts per share:
Basic and diluted income per share $ 0.20 $ 0.20
============ ============
Dividends declared $ 0.065 $ 0.065
============ ============
Weighted average number of common shares 86,258,257 87,973,038
outstanding
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 5
AVX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------
1999 1998
--------- ---------
<S> <C> <C>
Operating Activities:
Net income $ 17,446 $ 17,402
Adjustments to reconcile net income to net cash from
operating activities:
Depreciation and amortization 22,371 21,286
Changes in operating assets and liabilities, net of effects from
business acquired:
Accounts receivable (30,263) 5,593
Inventories (13,228) (4,108)
Accounts payable and accrued expenses 20,836 (19,720)
Income taxes payable 9,031 3,379
Other assets and liabilities 7,026 8,788
--------- ---------
Net cash from operating activities 33,219 32,620
--------- ---------
Investing Activities:
Purchases of property and equipment (23,951) (24,636)
Business acquired, net of cash received (10,941)
Loans to investee (625)
Other (265)
--------- ---------
Net cash used in investing activities (24,841) (35,577)
--------- ---------
Financing Activities:
Repayment of debt (3,293) (42)
Dividends paid (5,607) (5,725)
Purchase of treasury stock (10,141)
Proceeds from issuance of debt 5,636 2,836
Exercise of stock options 515 11
--------- ---------
Net cash from (used in) financing activities (2,749) (13,061)
--------- ---------
Effect of exchange rate changes on cash (473) 9
--------- ---------
Increase (decrease) in cash and cash equivalents 5,156 (16,009)
Cash and cash equivalents at beginning of period 173,106 201,887
--------- ---------
Cash and cash equivalents at end of period $ 178,262 $ 185,878
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 6
AVX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED
(dollars in thousands, except share data)
1. Basis of presentation:
The consolidated financial statements of AVX Corporation and subsidiaries
(the "Company" or "AVX") include the accounts of the Company and its
subsidiaries. All significant intercompany transactions and accounts have been
eliminated. In the opinion of management, the accompanying unaudited financial
statements reflect all adjustments (consisting of normal recurring accruals)
that are necessary to a fair presentation of the results for the interim periods
shown. These financial statements should be read in conjunction with the
Company's audited financial statements for the fiscal year ended March 31, 1999.
Certain prior year amounts have been reclassified to conform to the current
year presentation.
2. Accounts Receivable:
Accounts receivable consisted of:
June 30, March 31,
1999 1999
--------- ---------
Trade $ 216,497 $ 183,033
Less: allowances for doubtful accounts, sales
returns, distributor adjustments and discounts (34,905) (25,702)
--------- ---------
$ 181,592 $ 157,331
========= =========
3. Inventories:
Inventories consisted of:
June 30, March 31,
1999 1999
--------- ---------
Finished goods $ 86,365 $ 91,551
Work in process 101,187 96,604
Raw materials and supplies 100,276 89,238
--------- ---------
$ 287,828 $ 277,393
========= =========
4
<PAGE> 7
AVX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED - (continued)
4. Environmental Matters and Contingencies:
The Company has been named as a potentially responsible party in state and
federal administrative proceedings seeking contribution for costs associated
with the correction and remediation of environmental conditions at various waste
disposal sites. Once it becomes probable that the Company will incur costs in
connection with remediation of a site and such costs can be reasonably
estimated, the Company establishes reserves or adjusts its reserve for its
projected share of these costs. Management believes that it has adequate
reserves with respect to these matters. Actual costs may vary from these
estimated reserves, but such costs are not expected to have a material adverse
effect on the Company's financial condition or results of operations.
5. Comprehensive Income:
The Company has adopted Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income ("SFAS No. 130"). The statement requires
disclosure of total non-shareowner changes in equity on an annual basis. Total
non-shareowner changes in equity includes all changes in equity during a period
except those resulting from investments by and distributions to shareowners. The
specific components include: net income, deferred gains and losses resulting
from foreign currency translation and minimum pension liability adjustments.
Comprehensive income for the three months ended June, 30 1999 and 1998, includes
the following components:
<TABLE>
<CAPTION>
Three Months ended June 30,
1999 1998
--------------------------------
<S> <C> <C>
Net income 17,446 17,402
Other comprehensive income, net of tax:
Foreign currency translation adjustment (4,859) (17)
--------------------------------
Comprehensive income 12,587 17,385
================================
</TABLE>
The accumulated balance of comprehensive income (loss), (all of which relate to
foreign currency translation adjustments) as of June 30, 1999 and 1998 is as
follows:
<TABLE>
<CAPTION>
Three Months ended June 30,
1999 1998
--------------------------------
<S> <C> <C>
Balance at beginning of period (4,789) 2,575
Translation adjustment (4,859) (17)
--------------------------------
Balance at end of period (9,648) 2,558
================================
</TABLE>
6. Earnings Per Share:
Basic earnings per share are computed by dividing net income by the weighted
average number of shares of common stock outstanding for the period which were
86,258,257 and 87,973,038 for the three months ended June 30, 1999 and 1998,
respectively.
5
<PAGE> 8
Diluted earnings per share has been calculated by dividing net income by
the weighted average number of shares of common stock and common stock
equivalents outstanding for the period which were 86,562,914 and 87,980,994 for
the three months ended June 30, 1999 and 1998, respectively. Stock options are
the only common stock equivalents and are therefore considered in the diluted
earnings per share calculations. Common stock equivalents are computed using the
treasury stock method.
7. Segment information:
The Company has three reportable operating segments: Passive Components,
Connectors and Research and Development. The Company is organized, exclusive of
research and development, on the basis of products being separated into six
units. Five of the units which manufacture or distribute ceramic, tantalum, film
and power capacitors, ferrites and other passive devices have been aggregated
into the segment "Passive Components".
The Company evaluates performance of its segments based upon sales and
operating profit. There are no intersegment revenues. The tables below present
information about reported segments for the three months ended June 30,
1999 1998
--------- ---------
Net sales:
Passive components $ 312,048 $ 263,893
Connectors 31,102 28,107
Research & development -- --
--------- ---------
Total $ 343,150 $ 292,000
========= =========
Operating profit:
Passive components $ 30,539 $ 26,564
Connectors 5,374 4,063
Research & development (5,192) (4,141)
Corporate administration (4,320) (2,906)
--------- ---------
Total $ 26,401 $ 23,580
========= =========
8. Acquisition:
On June 2, 1998 the Company purchased the passive component business of
Thomson-CSF ("TPC") for $74,000 ($58,000 in cash and $16,000 of assumed debt).
The acquisition was accounted for as a purchase and funded through the use of
working capital. Based upon market valuations of the fair values of the assets
acquired and liabilities assumed the purchase price exceeded the fair value of
net assets acquired by approximately $49,000, which is being amortized on a
straight-line basis over 20 years. The results of the operations of TPC are
included in the accompanying financial statements from the date of acquisition.
9. Subsequent Event:
On July 15, 1999, the Company declared a $0.065 dividend per share of common
stock with respect to the quarter ended June 30, 1999, payable on August 9,
1999.
6
<PAGE> 9
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Three months ended June 30, 1999 1998
- ---------------------------------------------------------------------------
Net sales 100% 100%
- ---------------------------------------------------------------------------
Cost of sales 84.3 82.4
- ---------------------------------------------------------------------------
Gross profit 15.7 17.6
- ---------------------------------------------------------------------------
Selling, general and administrative expenses 8.0 9.5
- ---------------------------------------------------------------------------
Profit from operations 7.7 8.1
- ---------------------------------------------------------------------------
Income before income taxes 7.8 8.6
- ---------------------------------------------------------------------------
Provision for income taxes 2.7 2.7
- ---------------------------------------------------------------------------
Net income 5.1 6.0
- ---------------------------------------------------------------------------
Three Months Ended June 30, 1999 Compared to Three Months Ended June 30, 1998
Net sales in the three months ended June 30, 1999 increased 17.5% to $343.1
million from $292.0 million in the three months ended June 30, 1998. The
increase was attributable to growth in both passive components and connectors,
particularly tantalum and advanced products. Sales for the three months ended
June 30, 1999 also benefited from a full three months of revenue from TPC, a
passive component business acquired on June 2, 1998.
Gross profit in the three months ended June 30, 1999 increased 4.7% to
$53.9 million (15.7% of net sales) from $51.5 million (17.6% of net sales) in
the three months ended June 30, 1998. The increase in gross profit can be
attributed to additional sales. The decline in gross profit as a percentage of
sales can be attributed to decline in selling prices and a rise in the cost of
palladium, a principle raw material used in the manufacture of ceramic
capacitors, and the continuing costs associated with the integration of the TPC
operation. Offsetting these factors was the benefit of higher margin advanced
product sales, improvements in manufacturing efficiencies, and higher throughput
in the factories.
Selling, general and administrative expenses in the three months ended June
30, 1999 were $27.5 million (8.0% of net sales) compared with $27.9 million
(9.5% of net sales) in the three months ended June 30, 1998. The decline in
selling, general and administrative expenses, as a percentage of sales, is
primarily a result of higher sales and the Company's ongoing cost containment
programs.
As a result of the above factors, profit from operations in the three
months ended June 30, 1999 increased 12.0% to $26.4 million from $23.6 million
in the three months ended June 30, 1998.
For the reasons set forth above, lower interest income on invested cash and
a higher income tax rate as a result of the non recognition of certain foreign
income tax benefits, net income in the three months ended June 30, 1999 was
$17.4 million (5.1% of net sales) compared to $17.4 million (6.0% of net sales)
in the three months ended June 30, 1998.
Liquidity and Capital Resources
The Company's liquidity needs arise primarily from working capital
requirements, dividends, capital expenditures and acquisitions. Historically,
the Company has satisfied its liquidity requirements through internally
generated funds. As of June 30, 1999, the Company had a current
7
<PAGE> 10
ratio of 3.2 to 1, $178.3 million of cash and cash equivalents, $838.2 million
of stockholders' equity and an insignificant amount of long-term debt.
Net cash from operating activities was $33.2 million in the three months
ended June 30, 1999 compared to $32.6 million in the three months ended June 30,
1998.
Purchases of property and equipment were $24.0 million in the three month
period ended June 30, 1999 and $24.6 million in the three month period ended
June 30, 1998. Expenditures for both periods were primarily for expanding
production capabilities of the tantalum and ceramic surface-mount and advanced
product lines in North America and Europe.
On June 2, 1998, the Company purchased the passive component business of
Thomson-CSF ("TPC") for $74.0 million, including the assumption of debt. The
Company made an initial payment of $10.9 million during the three months ended
June 30,1998.
Although the majority of the Company's funding is internally generated,
certain European subsidiaries of the Company have borrowed German deutsche marks
and French francs under various bank agreements.
Based on the financial condition of the Company as of June 30, 1999, the
Company believes that cash on hand and expected to be generated from operating
activities will be sufficient to satisfy the Company's anticipated financing
needs for working capital, capital expenditures, research, development and
engineering expenses, and any dividends and acquisition payments to be paid in
the foreseeable future.
Certain statements contained above may be "forward looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Actual events, results, and/or timing may differ from the events, results and
/or timing as projected, estimated, or described above.
Part II: Other Information
Item 1. Legal Proceedings.
None.
Item 2. Change in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company held its Annual Meeting of Stockholders on July 15, 1999 for the
purpose of electing five Directors, ratifying an amendment to AVX Corporation
1995 Stock Option Plan, ratifying the Management Incentive Plan, and ratifying
the appointment of independent accountants. Proxies for the meeting were
solicited pursuant to Regulation 14A of the Securities Exchange Act of 1934 and
there was no solicitation in opposition to management's solicitations.
8
<PAGE> 11
Proposal 1:
Election of Class III directors with terms expiring at the Annual Meeting in
July of 2002.
Shares
Voted Shares
"For" "Withheld"
------------------------------------
Class III Donald B. Christiansen 84,202,259 176,144
Class III Mashiro Yamamoto 84,202,359 176,044
Class III Yuzo Yamamura 84,202,359 176,044
Class III Yasuo Nishiguchi 84,202,359 176,044
Class III Henry C. Lucas 84,202,057 176,346
The following is a summary of directors who were not up for election and
continue in office.
Class I Kazuo Inamori
Class I Kensuke Itoh
Class I Benedict P. Rosen
Class I Richard Tressler
Class I Mashiro Umemura
Class II Carrol A. Campbell, Jr.
Class II John S. Gilbertson
Class II Rodney N. Lanthorne
Class II Michihisa Yamamoto
Proposal 2:
Ratification of an amendment to the 1995 Stock Option Plan to (a) increase the
number of shares that may be issued under the plan by 500,000 and (b) modify the
300,000 share limit on the stock options that may be granted to any one
individual during any five-year period to a 500,000 share limit.
Shares Shares
voted voted Shares
"For" "Against" "Abstaining"
--------------------------------------------------------------
80,581,343 24,791 21,712
Proposal 3:
Ratification of the Management Incentive Plan:
Shares Shares
voted voted Shares
"For" "Against" "Abstaining"
--------------------------------------------------------------
83,792,206 528,071 58,125
9
<PAGE> 12
Proposal 4:
Ratification of appointment of PricewaterhouseCoopers LLP as the Company's
independent accountants was approved with the following vote:
Shares Shares
voted voted Shares
"For" "Against" "Abstaining"
--------------------------------------------------------------
84,347,263 12,602 18,538
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
10.10 Amended 1995 Stock Option Plan
27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K.
None.
10
<PAGE> 13
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.
Date: August 2, 1999
AVX Corporation
/s/ DONALD B. CHRISTIANSEN
---------------------------------
Donald B. Christiansen
Senior Vice President of Finance,
Chief Financial Officer,
and Treasurer
11
<PAGE> 1
Exhibit 10.10
AVX CORPORATION
1995 STOCK OPTION PLAN
AS AMENDED JULY 15, 1999
1. Adoption and Purpose. The Company hereby adopts this Plan providing
for the granting of stock options to selected employees of the Company and its
Subsidiaries. The general purpose of the Plan is to promote the interests of the
Company and its Subsidiaries by providing to their employees incentives to
continue and increase their efforts with respect to, and remain in the employ
of, the Company and its Subsidiaries.
Options granted under the Plan may be "incentive stock options" within
the meaning of Section 422 of the Code or "nonqualified stock options", and the
specific type of option granted shall be designated in an applicable stock
option agreement.
2. Administration. The Plan will be administered by the Equity
Compensation Committee (the "Committee"), which shall be comprised of two or
more persons, each of whom shall qualify as (a) an "outside director" within the
meaning of Section 162(m) of the Code and (b) a "Non-Employee Director" within
the meaning of Rule 16b-3(b)(3)(i) promulgated under the Exchange Act.
Subject to the express provisions of the Plan, the Committee shall have
plenary authority, in its discretion, to administer the Plan and to exercise all
powers and authority either specifically granted to it under the Plan or
necessary and advisable in the administration of the Plan, including without
limitation the authority to interpret the Plan; to prescribe, amend and rescind
rules and regulations relating to the Plan; to determine the terms of all
options granted under the Plan (which need not be identical), the purchase price
of the shares covered by each option, the individuals to whom and the time or
times at which options shall be granted, whether an option shall be an incentive
stock option or a nonqualified stock option, when an option can be exercised and
whether in whole or in installments, and the number of shares covered by each
option; and to make all other necessary or advisable determinations with respect
to the Plan. The determination of the Committee on such matters shall be
conclusive.
3. Participants. The Committee shall from time to time select the
officers and key employees of the Company and its Subsidiaries to whom options
are to be granted, and who will, upon such grant, become participants in the
Plan.
4. Shares Subject to Plan. The Committee may not grant options under
the Plan for more than 3,150,000 shares of Common Stock, subject to any
adjustment as provided in Section 13 hereof. Shares to be optioned and sold may
be made available from either authorized but unissued Common Stock or Common
Stock held by the Company in its treasury. Shares that by reason of the
expiration of an option or otherwise are no longer subject to purchase pursuant
to an option granted under the Plan may be reoffered under the Plan.
5. Limitation on Number of Options. The Committee may not grant
incentive stock options under the Plan to any employee unless either (i) the
aggregate Fair Market
<PAGE> 2
Value (determined as of the time an incentive stock option is granted) of the
stock with respect to which incentive stock options granted to an employee under
the Plan (including all options qualifying as incentive stock options pursuant
to Section 422 of the Code granted to such employee under any other plan of the
Company or its Parent or Subsidiaries) are exercisable for the first time by
such employee during any calendar year does not exceed $100,000 or (ii) such
option is issued in exchange for a previously granted incentive stock option in
a substitution which is not treated as a modification of such option pursuant to
Section 424 of the Code.
No person may be granted options under the Plan in any five-year period
representing an aggregate of more than 500,000 shares of Common Stock. The
limitation established by the preceding sentence shall be subject to adjustment
as provided in Section 13 hereof.
6. Grant of Options. All options under the Plan shall be granted by the
Committee. The Committee shall determine the number of shares of Common Stock to
be offered from time to time by grant of options to employees who are
participants of the Plan (it being understood that more than one option may be
granted to the same employee). The grant of an option to an employee shall not
be deemed either to entitle the employee to, or to disqualify the employee from,
participation in any other grant of options under the Plan.
The grant of options shall be evidenced by stock option agreements
containing such terms and provisions as are approved by the Committee, but not
inconsistent with the Plan, including provisions that may be necessary to
ensure, in the case of an incentive stock option, that the option qualifies as
an incentive stock option under the Code. The Company shall execute stock option
agreements upon instructions from the Committee.
7. Option Price. Subject to the provisions set forth in this Section 7
relating to incentive stock options, the purchase price per share of the Common
Stock under each option shall be determined by the Committee, but shall not be
less than (i) 100% of the Fair Market Value per share of the Common Stock on the
date the option is granted, or (ii) with respect to an option issued in exchange
for a previously granted option in a substitution which is not treated as a
modification of such option (or would be so treated if such option was an
incentive stock option) pursuant to Section 424 of the Code, the appropriately
adjusted exercise price determined in accordance with Section 424 and the
regulations issued thereunder. No incentive stock option shall be granted to an
employee who, at the time such option is granted, is a Ten Percent Shareholder
unless at the time such incentive stock option is granted the option price per
share is at least 110% of the Fair Market Value per share of the Common Stock
subject to the incentive stock option.
8. Option Period. The option period will begin on the date the option
is granted, which will be the date the Committee authorizes the option unless
the Committee specifies a later date. No option may terminate later than the day
prior to the tenth anniversary of the date the option is granted; provided,
however, that an incentive stock option granted to an employee who, at the time
of such grant, is a Ten Percent Shareholder shall not be exercisable after the
expiration of five years after the date of grant. The Committee may provide for
the exercise of options in installments and upon such terms, conditions and
restrictions as it may determine. The Committee may provide in a stock option
agreement for termination of an option in the case of termination of employment
or any other reason.
<PAGE> 3
9. Exercisability of Options. The Committee may in its discretion
prescribe in the stock option agreement the installments, if any, in which an
option granted under the Plan shall become exercisable; provided, however, that
no option shall be exercisable (x) until the six-month anniversary of the date
of its grant and (y) unless the holder thereof is then an employee of the
Company or a Subsidiary, except in each case as otherwise provided in this Plan
(including Section 12) or as the Committee otherwise determines.
Except as provided in the applicable option agreement, if the
participant voluntarily terminates his employment or his employment with the
Company or Subsidiary is terminated for cause (as defined below), neither the
Company, the Parent nor any Subsidiary shall have any further obligation to the
participant hereunder, and the options (whether or not vested) shall immediately
terminate in full. In the event a participant's employment is terminated by the
Company for any reason other than for cause (defined as the commission of an act
of dishonesty, gross incompetency or intentional or willful misconduct, which
act occurs in the course of participant's performance of his duties as an
employee), options may be exercised, to the extent of the shares with respect to
which the option could have been exercised by the participant as of his date of
termination of employment, by the participant in accordance with its terms but
in no event beyond the earlier of (x) 90 days after the date of termination or
(y) the scheduled expiration of such option.
10. Payment; Method of Exercise. Payment shall be made in cash or,
unless otherwise prohibited in the applicable stock option agreement, in shares
of Common Stock already owned by the holder of the option or partly in cash and
partly in such shares. No shares may be issued until full payment of the
purchase price therefor has been made, and a participant will have none of the
rights of a stockholder until shares are issued to him.
An option may be exercised by written notice to the Company. Such
notice shall state that the holder of the option elects to exercise the option,
the number of shares in respect of which it is being exercised and the manner of
payment for such shares and shall either (i) be accompanied by payment of the
full purchase price of such shares or (ii) fix a date (not more than 10 business
days from the date of exercise) for the payment of the full purchase price of
such shares. Cash payments shall be made by cash or check payable to the order
of the Company. Common Stock payments (valued at Fair Market Value on the date
of exercise) shall be made by delivery of stock certificates in negotiable form.
If certificates representing Common Stock are used to pay all or part of the
purchase price of an option, a separate certificate shall be delivered by the
Company representing the same number of shares as each certificate so used, and
an additional certificate shall be delivered representing the additional shares
to which the holder of the option is entitled as a result of the exercise of the
option.
11. Withholding Taxes. If the Committee shall so require, as a
condition of exercise, each participant shall agree that (a) no later than the
date of exercise of any option, the participant will pay to the Company or make
arrangements satisfactory to the Committee regarding payment of any Federal,
state or local taxes of any kind required by law to be withheld upon the
exercise of such option (any such tax, a "Withholding Tax"); and (b) the Company
shall, to the extent permitted or required by law, have the right to deduct from
any payment of any kind otherwise due to the participant, any such Withholding
Tax.
12. Rights in the Event of Death, Retirement or Incapacity. If a
participant's employment is terminated due to death, Retirement or Incapacity
prior to termination of his or her right to exercise an option in accordance
with the provisions of his or her stock option
<PAGE> 4
agreement without having fully exercised the option, then (a) the Committee in
its discretion may cause the option to become fully vested and (b) such option
may be exercised by the participant (or in the event of the participant's death,
by his estate or by the person who acquired the right to exercise the option by
bequest or inheritance), to the extent of the shares with respect to which the
option could have been exercised by the participant as of the date of his or her
death, Retirement or Incapacity but also taking into account any acceleration of
vesting pursuant to clause (a) above, provided that the option is exercised
prior to the earlier of (x) one year after the date of such death, Retirement or
Incapacity and (y) the date of its original expiration. In the event of the
death of a participant following his or her termination of employment during the
period in which his or her option remains exercisable, such option may be
exercised to, the extent the option could have been exercised by the decedent,
by the participant's estate or by the person who acquired the right to exercise
the option by bequest or inheritance at any time within one year after the date
of death but in no event beyond the original expiration date of the option.
13. Effect of Certain Changes. (a) If there is any change in the number
of outstanding shares of Common Stock by reason of any stock dividend, stock
split, recapitalization, combination, exchange of shares, merger, consolidation,
liquidation, split-up, spin-off or other similar change in capitalization, any
distribution to common shareholders, including a rights offering, other than
cash dividends, or any like change, then the number of shares of Common Stock
available for options, the number of such shares covered by outstanding options,
and the price per share of such options shall be proportionately adjusted by the
Committee to reflect such change or distribution; provided, however, that any
fractional shares resulting from such adjustment shall be eliminated.
(b) In the event of a change in the Common Stock of the Company as
presently constituted, the shares resulting from any such change shall be deemed
to be the Common Stock within the meaning of the Plan.
(c) In the event of a reorganization, recapitalization, merger,
consolidation, acquisition of property or stock, extraordinary dividend or
distribution (other than as covered by Section 13(a) hereof), separation or
liquidation of the Company, or any other event similarly affecting the Company,
the Board or the Committee shall have the right, but not the obligation,
notwithstanding anything to the contrary in this Plan, to provide that
outstanding options granted under this Plan shall (i) be canceled in respect of
a cash payment or the payment of securities or property, or any combination
thereof, with a per share value determined by the Board in good faith to be
equal to the value received by the stockholders of the Company in such event in
the respect of each share of Common Stock, with appropriate deductions of
exercise prices, or (ii) be adjusted to represent options to receive cash,
securities, property, or any combination thereof, with a per share value
determined by the Board in good faith to be equal to the value received by the
stockholders of the Company in such event in respect of each share of Common
Stock, at such exercise prices as the Board or the Committee in its discretion
may determine is appropriate.
(d) To the extent that the foregoing adjustments relate to stock or
securities of the Company, such adjustments shall be made by the Committee,
whose determination in that respect shall be final, binding and conclusive;
provided that each incentive stock option granted pursuant to this Plan shall
not be adjusted in a manner that causes such option to fail to continue to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
<PAGE> 5
14. Nonexclusive Plan. Neither the adoption of the Plan by the Board
nor the submission of the Plan to the stockholders of the Company for approval
shall be construed as creating any limitations on the power of the Board to
adopt such other incentive arrangements as it may deem desirable, including,
without limitation, the granting of stock options otherwise than under the Plan,
and such arrangements may be either generally applicable or applicable only in
specific cases.
15. Section 16 Persons. With respect to persons subject to Section 16
of the Exchange Act, transactions under the Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors under the Exchange Act. To
the extent any provision of the Plan or action by the Committee fails to so
comply, it shall be deemed null and void, to the extent permitted by law and
deemed advisable by the Committee.
16. Assignability. Nonqualified options may be transferred by gift to
any member of the optionee's immediate family or to a trust for the benefit of
one or more of such immediate family members and nonqualified and incentive
stock options may be transferred by the laws of descent and distribution. During
an optionee's lifetime, options granted to an optionee may be exercised only by
such optionee or by his or her guardian or legal representative unless the
option has been transferred in accordance with the preceding sentence, in which
case, it shall be exercisable only by such transferee. For purposes of this
Section 16, immediate family shall mean the optionee's spouse, children and
grandchildren.
17. Amendment or Discontinuance. The Plan may be amended or
discontinued by the Board without the approval of the stockholders of the
Company, except that stockholder approval shall be required for any amendment
that would (a) increase (except as provided in Section 13 hereof) the maximum
number of shares of Common Stock for which options may be granted under the Plan
or (b) change the class of employees eligible to participate in the Plan. No
termination, modification or amendment of the Plan may, without the consent of
the participant to whom any option shall theretofore have been granted,
adversely affect the rights of such employee (or his or her transferee) under
such option.
18. Effect of Plan. Neither the adoption of the Plan nor any action of
the Board or Committee shall be deemed to give any officer or employee any right
to be granted an option to purchase Common Stock or any other rights except as
may be evidenced by a stock option agreement, or any amendment thereto, duly
authorized by the Board or Committee and executed on behalf of the Company, and
then only to the extent and on the terms and conditions expressly set forth
therein.
19. Term. Unless sooner terminated by action of the Board, this Plan
will terminate on August 1, 2005. The Committee may not grant options under the
Plan after that date, but options granted before that date will continue to be
effective in accordance with their terms.
20. Effectiveness; Approval of Stockholders. The Plan shall take effect
upon its adoption by the Board, but its effectiveness and the exercise of any
options shall be subject to the approval of the holders of a majority of the
voting shares of the Company, which approval must occur within twelve months
after the date on which the Plan is adopted by the Board.
21. Definitions. For the purpose of this Plan, unless the context
requires otherwise, the following terms shall have the meanings indicated:
<PAGE> 6
(a) "Board" means the board of directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" means the Common Stock which the Company is
currently authorized to issue or may in the future be authorized to issue (as
long as the Common Stock varies from that currently authorized, if at all, only
in amount of par value).
(d) "Company" means AVX Corporation, a Delaware corporation.
(e) "Exchange Act" means the Securities Exchange Act of 1934, as from
time to time amended.
(f) "Fair Market Value" means the average of the high and the low sales
prices of a share of Common Stock on the date of grant (or, if not a trading
day, on the last preceding trading day) as reported on the New York Stock
Exchange Composite Transactions Tape or, if not listed on the New York Stock
Exchange, the principal stock exchange or the NASDAQ National Market on which
the Common Stock is then listed or traded; provided, however, that if the Common
Stock is not so listed or traded then the Fair Market Value shall be determined
in good faith by the Board.
(g) "Incapacity" means any material physical, mental or other
disability rendering the participant incapable of substantially performing his
services hereunder that is not cured within 180 days of the first occurrence of
such incapacity. In the event of any dispute between the Company and the
participant as to whether the participant is incapacitated as defined herein,
the determination of whether the participant is so incapacitated shall be made
by an independent physician selected by the Company's Board of Directors and the
decision of such physician shall be binding upon the Company and the
participant.
(h) "Option Period" means the period during which an option may be
exercised.
(i) "Parent" means any corporation in an unbroken chain of corporations
ending with the Company if, at the time of granting of the option, each of the
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in the chain.
(j) "Plan" means this AVX Corporation 1995 Stock Option Plan as amended
from time to time.
(k) "Retirement" means, with respect to any participant, the
participant's retirement as an employee of the Company on or after reaching age
55.
(l) "Subsidiary" means any corporation in an unbroken chain of
corporations beginning with the Company if, at the time of the granting of the
option, each of the corporations other than the last corporation in the unbroken
chain owns stock possessing 50% or more of the total combined voting power of
all classes of stock in
<PAGE> 7
one of the other corporations in the chain. The "Subsidiaries" means more than
one of any such corporations.
(m) "Ten Percent Shareholder" means an individual who owns (or is
treated as owning under Section 424(d) of the Code) stock possessing more than
10% of the total combined voting power of all classes of stock of the Company
or any Subsidiary.
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