BREED TECHNOLOGIES, INC.
PROXY STATEMENT AND
PROXY STATEMENT AND OF STOCKHOLDERS
TO BE HELD NOVEMBER 20, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders of BREED
Technologies, Inc., a Delaware corporation (the "Company"), will be held on
Thursday, November 20, 1997 at 9:00 a.m. in The Frank Lloyd Wright Reception
Center at Florida Southern College, 111 Lake Hollingsworth Drive, Lakeland,
Florida (the "Meeting") for the purpose of considering and voting upon the
following matters:
1. To elect a Board of Directors to serve until the next Annual Meeting of
Stockholders.
2. To approve an amendment to the Company's 1994 Stock Incentive Plan to
increase the number of shares from 2,500,000 to 3,700,000 shares of Common Stock
of the Company authorized for issuance under the Plan.
3. To transact such other business as may properly come before the Meeting or
any adjournment thereof.
The Board of Directors has no knowledge of any other business to be transacted
at the Meeting.
The Board of Directors has fixed the close of business on Thursday, September
25, 1997 as the record date for the determination of Stockholders entitled to
notice of and to vote at the Meeting and at any adjournments thereof.
A copy of the Company's Annual Report to Stockholders for the year ended June
30, 1997, which contains consolidated financial statements and other information
of interest to Stockholders, accompanies this Notice and the enclosed Proxy
Statement.
By order of the Board of Directors,
LIZANNE GUPTILL, Secretary
September 25, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE PROMPTLY COMPLETE, DATE,
SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. NO POSTAGE NEED
BE AFFIXED IF THE PROXY IS MAILED IN THE UNITED STATES.
<PAGE>
BREED TECHNOLOGIES, INC.
5300 OLD TAMPA HIGHWAY
LAKELAND, FLORIDA 33811
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 20, 1997
This Proxy Statement is furnished to holders ("Stockholders") of shares of the
common stock, $0.01 par value per share ("Common Stock"), of BREED Technologies,
Inc. (the "Company") in connection with the solicitation of proxies by the
Company's Board of Directors for use at the Annual Meeting of Stockholders of
the Company to be held on Thursday, November 20, 1997 at 9:00 a.m. in The Frank
Lloyd Wright Reception Center at Florida Southern College, 111 Lake
Hollingsworth Drive, Lakeland, Florida, and at any adjournments thereof (the
"Meeting").
At the Meeting, the Stockholders will be asked to consider and vote on the
election of six directors to serve on the Board of Directors of the Company and
to consider and vote on a proposal to amend the Company's 1994 Stock Incentive
Plan. All properly executed proxies received prior to or at the Meeting will be
voted in accordance with the instructions of the Stockholder. If no choice is
specified, the proxies will be voted in favor of each of the matters set forth
in the accompanying Notice of Meeting. Any Stockholder giving a proxy may revoke
it at any time before it is exercised by duly executing and submitting a
subsequently dated proxy, by delivering a subsequently dated written notice of
revocation to the Secretary of the Company, or by voting in person at the
Meeting (although attendance at the Meeting will not itself be deemed to revoke
a Proxy unless the Stockholder gives affirmative notice at the Meeting that the
Stockholder intends to revoke the Proxy and vote in person).
The Board of Directors has fixed the close of business on September 25, 1997 as
the record date ("Record Date") for the determination of Stockholders entitled
to receive notice of, and to vote at, the Meeting. On September 25, 1997, there
were outstanding and entitled to vote an aggregate of 31,687,984 shares of
Common Stock. Each share entitles the record holder to one vote on each of the
matters to be voted upon at the Meeting.
The Notice of Meeting, this Proxy Statement, the enclosed Proxy and the
Company's Annual Report to Stockholders for the fiscal year ended June 30, 1997
are being mailed to Stockholders on or about October 7, 1997. The Company will,
upon written request of any Stockholder, furnish without charge a copy of its
Annual Report on Form 10-K for the fiscal year ended June 30, 1997, as filed
with the Securities and Exchange Commission, without exhibits. Please address
all such requests to the Company, attention of Investor Relations, P.O. Box
33050, Lakeland, Florida 33807-3050. Exhibits will be provided upon written
request and payment of an appropriate processing fee.
Votes Required
The holders of a majority of the shares of Common Stock issued and outstanding
and entitled to vote at the Meeting shall constitute a quorum for the
transaction of business at the Meeting. Shares of Common Stock present in person
or represented by proxy (including shares which abstain or do not vote with
respect to one or more of the matters presented for Stockholder approval) will
be counted for purposes of determining whether a quorum exists at the Meeting.
The affirmative vote of the holders of a plurality of the votes cast by the
Stockholders entitled to vote at the Meeting is required for the election of
directors. The affirmative vote of the holders of a majority of the shares of
Common Stock present in person or represented by proxy at the Meeting is
required for the approval of each of the other matters to be voted upon.
Shares which abstain from voting as to a particular matter, and shares held in
"street name" by brokers or nominees who indicate on their proxies that they do
not have discretionary authority to vote such shares as to a particular matter,
will not be counted as votes in favor of such matter, and will also not be
counted as votes cast or shares voting on such matter. Accordingly, abstentions
and "broker non-votes" will have no effect on the voting on a matter that
requires the affirmative vote of a certain percentage of the votes cast or
shares voting on a matter.
Stock Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information as of July 31, 1997 with
respect to the beneficial ownership of shares of Common Stock
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by (i) each person known to the Company to own beneficially more than 5% of the
outstanding shares of Common Stock, (ii) all directors and director nominees,
(iii) each person listed in the following Summary Compensation Table, and (iv)
all directors and executive officers of the Company as a group.
Amount and Nature of Beneficial
Ownership
Number of Percent of
Name and Address of Beneficial Owner (1) Shares (2) Class (3)
---------------------------------------- ---------- ---------
Director Nominees and Certain Executive Officers
Allen K. Breed ................................... 8,532,850(4) 26.94%
Johnnie Cordell Breed ............................ 9,352,850(5) 29.52%
Peter A. Lewis ................................... 11,579(6) *
Larry W. McCurdy ................................. 11,579(7) *
Charles J. Speranzella, Jr ....................... 75,528(8) *
Fred J. Musone ................................... 0 *
Giovanni Magistrali .............................. 130,636(9) *
Edward H. McFadden ............................... 33,037(10) *
All executive officers
and directors, as a group (10 persons) ......... 19,207,265(11) 60.63%
Other Beneficial Holders
Pioneering Management Corporation................. 2,895,500(12) 9.14%
Total outstanding shares as of July 31, 1997 31,679,217
* Less than 1%
(1) The business address for Mrs. Breed and Messrs. Breed, Lewis, McCurdy,
Speranzella, Musone and Magistrali is 5300 Old Tampa Highway, Lakeland, Florida
33811.
(2) The number of shares beneficially owned by each director and executive
officer is determined under rules promulgated by the Securities and Exchange
Commission, and the information is not necessarily indicative of beneficial
ownership for any other purpose. In accordance with Rule 13d-3 promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), a person
is deemed to be a beneficial owner of securities if he or she has sole or shared
voting power or investment power with respect to such securities or has the
right to acquire such ownership within 60 days. The inclusion herein of such
shares, however, does not constitute an admission that the named Stockholder is
a direct or indirect beneficial owner of such shares. Unless otherwise
indicated, each person or entity named in the table has sole voting power and
investment power (or shares such power with his or her spouse) with respect to
all shares of capital stock listed as owned by such person or entity.
(3) In calculating the percentage ownership for a given individual or group, the
number of shares of Common Stock outstanding includes unissued shares subject to
options, warrants, rights or other conversion privileges excersiable within
sixty (60) days held by such individual or group, but are not deemed outstanding
by any other person or group.
(4) Includes 8,477,750 shares of Common Stock held by A. Breed, Ltd., a Texas
limited partnership; the Allen K. Breed Revocable Trust, limited partner. Mr.
Breed is the sole trustee of the Allen K. Breed Revocable Trust. Also includes
100 shares of Common Stock held as a joint tenant with Johnnie Cordell Breed,
Mr. Breed's wife, Co-Chairman and Chief Executive Officer of the Company, and
55,000 shares held by the Breed Charitable Foundation.
(5) Includes 8,477,750 shares held by J. Breed, Ltd., a Texas limited
partnership; the Johnnie Eileen Cordell Breed Revocable Trust, limited partner .
Mrs. Breed is the sole trustee of the Johnnie Eileen Cordell Breed Revocable
Trust. Also includes 875,000 shares of
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Common Stock held in five trusts of which Mrs. Breed is a trustee with shared
voting and investment power and of which her and Mr. Breed's children are
beneficiaries. Mrs. Breed disclaims beneficial ownership of the shares held in
the trusts. Also includes 100 shares of Common Stock held as a joint tenant with
Mr. Breed, Chairman of the Board of Directors of the Company.
(6) Includes 11,579 shares of Common Stock which may be acquired pursuant to
stock options exercisable within 60 days.
(7) Includes 11,579 shares of Common Stock which may be acquired pursuant to
stock options exercisable within 60 days.
(8) Includes 55,000 shares of Common Stock held by the Breed Charitable
Foundation for which Mr. Speranzella is Trustee. Includes 19,148 shares of
Common Stock which may be acquired pursuant to stock options exercisable within
60 days.
(9) Includes 11,609 shares of Common Stock which may be acquired pursuant to
stock options exercisable within 60 days.
(10) Includes 29,036 shares of Common Stock which may be acquired pursuant to
stock options exercisable within 60 days. Mr. McFadden's address is 2602 South
Dundee Street, Tampa, Florida 33629.
(11) Includes 92,157 shares of Common Stock which may be acquired pursuant to
stock options granted to executive officers and directors and exercisable within
60 days. The number includes options, held by directors to purchase an aggregate
of 27,628 shares of Common Stock (includes 4,470 shares held by former director,
Daniel M. Edelman) and options held by executive officers to purchase the
following respective numbers of shares: Charles J. Speranzella, Jr. 19,148
shares; Giovanni Magistrali, 11,609 shares; Arthur R. Schauffert, Jr. 4,736
shares; and Edward H. McFadden 29,036 shares.
(12) This information is based on Amendment No. 1 of Schedule 13G filed with the
Securities and Exchange Commission on January 14, 1997, and a subsequent 13F
filed for the quarter ending June 30, 1997. Pioneering Management's address is
60 State Street, Boston, MA 02109.
Section 16(a) Beneficial Ownership Reporting Compliance
Under Section 16(a) of the Exchange Act, all executive officers, directors and
persons who are the beneficial owner of more than 10% of the common stock of a
company which files reports pursuant to Section 12 of the Exchange Act are
required to report the ownership of such common stock, options and stock
appreciation rights and any changes in that ownership with the Securities and
Exchange Commission (the "SEC"). Specific due dates for these reports have been
established, and the Company is required to report in this Proxy Statement any
failure to comply therewith during the fiscal year ended June 30, 1997. The
Company believes that all of these filing requirements were satisfied by its
executive officers, directors and by the beneficial owners of more than 10% of
the Common Stock. In making this statement, the Company has relied on copies of
the reporting forms received by it or on the written representations from
certain reporting persons that no Form 5 (Annual Statement of Changes in
Beneficial Ownership) were required to be filed under applicable rules of the
SEC.
PROPOSAL 1 -- ELECTION OF DIRECTORS
Nominees for Election as Directors
The Company's Board of Directors consists of four directors, each of whose term
will expire at the Meeting. The Board of Directors has nominated six persons,
all of whom have agreed to stand for election at the Meeting. Each nominee has
agreed to seek election as a director of the Company and to hold office until
the next Annual Meeting of Stockholders and his/her successor is duly elected
and qualified. The persons named as proxies in the accompanying Proxy intend
(unless authority to vote therefor is specifically withheld) to vote for the
election of the six persons named below as directors. Each nominee has consented
to being named in this Proxy Statement and to serve if elected. If any of the
nominees become unavailable to serve as a director, the persons named as proxies
in the accompanying Proxy may vote the Proxy for substitute nominees. The Board
of Directors has no reason to believe that any of the nominees will be unable to
serve if elected. The following table sets forth certain information with
respect to the nominees:
Principal Occupation, Other
Business Experience During Past
Director Five Years and Other
Name Age Since Directorships
- - ---- --- ----- -------------------------------
Allen K. Breed 70 1986 Chairman of the Board of
Directors of the Company since
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September 1997; Chairman and
Chief Executive Officer of the
Company from 1986 through
September 1997; Chairman and
President of Breed Corporation,
a former defense contractor,
since 1961; Mr. Breed is the
husband of Johnnie Cordell
Breed.
Johnnie Cordell Breed 53 1986 Co-Chairman and Chief Executive
Officer of the Company since
September 1997; President and
Chief Operating Officer from
September 1995 through
September 1997; Vice Chairman
of the Company from 1986
through August 1995; Vice
President of Breed Corporation
since 1986; Secretary and
Treasurer of Transcor, Inc., a
provider of transportation
travel services, since 1982,
and currently the sole
stockholder of Transcor, Inc.;
a Trustee of Columbia College
of South Carolina; Mrs. Breed
is the wife of Allen K. Breed.
Peter A. Lewis 66 1987 Limited Managing Director of
Lazard Freres & Co., LLC, an
investment banking firm, since
May 1995; Limited Partner of
Lazard Freres & Co. since
January 1993; General Partner
of Lazard Freres & Co. from
1969 through 1992; Director of
Molten Metal Technology, Inc.
Larry W. McCurdy 62 1992 Chief Executive Officer and
President of Echlin, Inc., an
automotive components supplier
since 1997. Previously,
Executive Vice President of
Cooper Industries, a
manufacturer of automotive
products, since 1994; President
and Chief Executive Officer of
Moog Automotive, Inc., a
manufacturer of automotive
aftermarket products, since
1985; President and Chief
Operating Officer of Echlin,
Inc. from 1983 to 1985;
Director of Lear Seating Corp.
and Mohawk Industries, Inc.; a
Trustee of Millikin University.
Charles J. Speranzella, Jr. 42 Nominee Vice Chairman of the Company
since September 1997; Executive
Vice President, Worldwide
Operations and President BREED
European Holdings Limited since
1996; Executive Vice President,
General Counsel and Secretary
since 1995; General Counsel and
Assistant Secretary since
September, 1994. Various senior
positions with Matra Hachette's
Fairchild Space and Defense
Corporation and Martin Marietta
from 1979 until joining the
Company in 1994.
Fred J. Musone 53 Nominee President and Chief Operating
Officer of the Company since
September 1997; President and
Chief Operating Officer of
Morton International
ASP/Autoliv, Inc., a
manufacturer of airbags since
1995; Various management
positions with Federal Mogul
Corporation from 1972 through
1995, the most recent being
President of Worldwide
Manufacturing Operations;
All directors of the Company hold office until the earlier of the next Annual
Meeting of Stockholders and until their successors have been duly elected and
qualified, or their death, resignation or removal. Other than as indicated
above, there are no family relationships between any of the Company's directors,
nominees to serve as director or executive officers. There are no arrangements
between any director or director nominee of the Company and other person
pursuant to which he or she was, or will be, selected as director.
For information relating to shares of Common Stock owned by each of the
directors, see "Stock Ownership of Certain Beneficial Owners and Management."
Board and Committee Meetings
4
<PAGE>
The Board of Directors met 6 times (including by telephone conference) during
fiscal year 1997. All directors attended at least 75% of the meetings of the
Board of Directors and the committees on which they served. The Board of
Directors has an Audit Committee and a Compensation Committee. The Audit
Committee, whose members are Messrs. Lewis and McCurdy, reviews the audit of the
Company's accounts, monitors the effectiveness of the audit and evaluates the
scope of the audit. The Compensation Committee, whose members are Messrs. Lewis
and McCurdy, reviews and recommends salaries and other compensatory benefits for
the principal officers of the Company. During fiscal year 1997, the Audit
Committee met 3 times and the Compensation Committee met 2 times. The Board of
Directors of the Company presently does not have a standing nominating committee
or committees performing similar functions. Through the date of the Proxy
Statement, all functions normally performed by such a committee have been
carried out by the full Board of Directors.
Director Compensation
As compensation for serving on the Board of Directors, members of the Board of
Directors who are not employees of the Company are paid $5,000 for attendance at
each meeting of the Board, $1,250 for participation in each telephonic Board
meeting, $1,000 for each committee meeting and $2,000 for serving as chairman of
a Board Committee. These fees are in addition to participation in the Directors'
Stock Option Plan.
In September 1992, the Board of Directors adopted, and the Stockholders of the
Company approved, the Company's 1992 Director Stock Option Plan (the "1992
Director Plan"). Under the terms of the 1992 Director Plan, directors of the
Company who are not employees of the Company or any subsidiary are eligible to
receive non-statutory options to purchase shares of Common Stock of the Company.
In November 1996, the Stockholders of the Company increased the total shares
available under the 1992 Director Plan from 50,000 to 100,000 shares of Common
Stock which may be issued upon exercise of options granted. Annual options under
the 1992 Director Plan will be granted to eligible directors after their
election on the date of each annual meeting of Stockholders. The number of
shares of Common Stock covered by the options shall be determined by dividing
$50,000 by the fair market value of the Company's Common Stock on the date of
grant and shall vest on the first anniversary of the date of grant (or, if
earlier, the day prior to the first annual meeting of Stockholders of the
Company following the date of grant). The exercise price of options granted
under the 1992 Director Plan shall equal the fair market value of the Common
Stock on the date of grant. On November 20, 1996, options to purchase 1,170
shares of Common Stock at an exercise price of $28.250 per share were granted to
each of Messrs. Lewis and McCurdy. These options fully vest in November, 1997.
Certain Transactions
Since November 1992, the Company has engaged the services of Transcor, Inc.
("Transcor") to support its travel requirements. Transcor has provided the
Company with airline tickets, computer services, ticket stock and car and hotel
rentals. Johnnie Cordell Breed is the sole stockholder of Transcor. During
fiscal year 1997, Transcor received gross commissions of $168,252 based
transactions by Transcor on behalf of the Company of $1,808,951 of business. In
addition, pursuant to the terms of a travel management agreement, the Company is
entitled to share in a portion of Transcor's revenues derived from the Company.
The Company incurs no cost or fees in connection with this arrangement. The
Company believes that the terms of its relationship with Transcor are as
favorable as those that were available though other travel companies.
Recent Developments
On September 2, 1997, BREED announced that it reached agreement with
AlliedSignal, Inc. to acquire its automotive safety restraint business.
AlliedSignal Safety Restraint Systems has annual sales in excess of $900 million
and employs 7,700 people in 14 plants in seven countries. It is the largest
supplier of seatbelts and third largest supplier of airbags in the United
States. Management believes that this strategic combination will make BREED an
even stronger global competitor in fully integrated occupant safety systems. The
transaction is expected to be completed following regulatory review, as well as
other legal requirements in various countries where these businesses operate.
Although no assurances can be given, the Company does not anticipate any
difficulty in completing this transaction.
Compensation of Executive Officers
Summary Compensation
The following Summary Compensation Table sets forth certain information with
respect to the annual and long-term compensation paid during the past three
fiscal years to the Chief Executive Officer of the Company and each of the four
other most highly compensated executive officers of the Company earning in
excess of $100,000 for the fiscal year ended June 30, 1997.
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation(1)
--------------------------------------------- ---------------
Name and Principal Other Annual Number of All Other
Position Year Salary ($) Bonus (2) Compensation(3) Options Compensation(4)
-------- ---- ---------- -------- --------------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Allen K. Breed 1997 $456,404 $456,404 $32,064 0 $ 4,500
Chief Executive Officer 1996 $455,812 $441,000 $36,466 0 $ 4,500
1995 $441,000 $441,000 $14,360 0 $ 4,500
Johnnie Cordell Breed 1997 $331,749 $287,950 $17,115 0 $ 4,500
President and Chief 1996 $283,032 $220,000 $44,376 0 $ 4,500
Operating Officer 1995 $220,000 $220,000 $11,073 0 $ 4,500
Charles J. Speranzella, Jr 1997 $210,784 $115,000 $58,881 7,485 $ 4,500
Executive Vice President, 1996 $198,672 $43,125 $74,461 90,607 $40,661
General Counsel &
Secretary
Giovanni Magistrali, 1997 $315,016 $0 $34,478 7,747 $ 4,500
President, BREED 1996 $315,016 $0 $32,445 40,607 $ 4,500
International 1995 $315,016 $1,078,750 $12,850 11,475 $ 4,500
Manufacturing
Edward H. McFadden 1997 $207,012 $93,150 $18,578 0 $ 4,500
Executive Vice President 1996 $206,743 $88,667 $25,322 66,153 $ 4,500
& Chief Financial Officer 1995 $193,271 $90,758 $9,597 10,956 $17,581
</TABLE>
(1) The Company does not have a long-term compensation program that includes
long-term incentive payouts. However, the 1994 Stock Incentive Plan adopted by
the Stockholders on November 17, 1994, provides participants under the Plan
performance-based compensation in the form of incentive stock options or
restricted stock awards.
(2) Amounts in this column represent bonuses earned under the Company's employee
incentive program for the respective fiscal years. Amounts earned in any fiscal
year are payable in the following fiscal year.
(3) Amounts in this column represent the value of certain executive benefits
provided by the Company.
(4) Amounts shown in this column represent the Company's contributions under its
tax-qualified and tax-deferred 401(k) savings plan, taxes paid by the Company,
and income realized from the exercise of incentive stock options. The Company's
401(k) matching contribution was $4,500 to each of Messrs. Breed, McFadden,
Speranzella and Mrs. Breed.
Stock Option Grants
No Stock Appreciation Rights were granted to the executive officers during
fiscal year 1997. Stock Options granted to the executive officers during fiscal
year 1997 are as follows:
<TABLE>
<CAPTION>
Name Options Percent of Option Price Market Price Expiration Potential Realizable Value
Granted(*) Total on Grant Date 5% 10%
Granted Date
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Allen K. Breed -- -- -- -- -- -- --
Johnnie C -- -- -- -- -- -- --
Breed
Charles J 7,485 11.58% $21.375 $21.375 08/19/2006 $100,617 $254,985
Speranzella, Jr
Giovanni 7,747 11.99% $21.375 $21.375 08/19/2006 $104,139 $263,911
Magistrali
</TABLE>
6
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<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Edward H -- -- -- -- -- -- --
McFadden
</TABLE>
*Options granted under the 1994 Stock Incentive Plan
Year-End Option Table
The following table summarizes certain information regarding stock options
exercised during the fiscal year ended June 30, 1997, and presents the value of
unexercised options held by the executive officers named in the Summary
Compensation Table at fiscal year end.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Value of
Number of Shares Unexercised In-the-
Shares Underlying Money Options at
Acquired Unexercised Options Fiscal Year-End
on Value At Fiscal Year-End (Exercisable/
Exercise Realized (Exercisable/ Unexercisable) (1)
Name (#) ($) Unexercisable) (#) ($)
- - --------------------------------------------------------------------------------------- ---------------------------------
<S> <C> <C> <C> <C>
Allen K. Breed -- -- -- --
Johnnie Cordell -- -- -- --
Breed
Charles J. -- -- 9,368/97,057 $13,564/508,226
Speranzella, Jr.
Giovanni Magistrali -- -- 119,027/50,802 $1,223,655/$196,151
Edward H. McFadden -- -- 29,036/0 $114,133/0
</TABLE>
(1) Value based on the last sales price per share ($23.00) of the Company's
Common Stock on June 30, 1997, as reported on the New York Stock Exchange, less
the exercise price.
Report of the Compensation Committee
Overview of Executive Compensation Program. In connection with the Company's
initial public offering of Common Stock, the Board of Directors of the Company
established a compensation committee (the "Compensation Committee") to
administer the Company's executive compensation program. Under its charter, the
Compensation Committee has authority to set the policies governing the principal
elements of executive compensation, assure compliance with those policies and
set annual compensation guidelines for executives. The Compensation Committee
currently consists of two non-employee directors of the Company.
Elements of Executive Compensation. The Company's executive compensation program
consists of base salary, annual incentive bonuses, stock grants and stock
options. Executives also participate in benefit programs that are generally
available to employees of the Company, including medical benefits and a 401(k)
savings plan.
Objectives of the Executive Compensation Program. The compensation program's
objectives are to attract and retain a high quality executive team and to
encourage that team to achieve profitable growth and thereby increase
Stockholder value. To meet these objectives, the Company's compensation packages
are intended to provide (i) an overall level of compensation that is competitive
and (ii) incentive bonuses and stock-related compensation that reflect business
results.
Status and Outlook for Executive Compensation. The Compensation Committee sets
annual compensation guidelines for the Company's executives which includes
salary ranges, salary increase guidelines and incentive compensation standards
and formulas keyed to achievement of corporate goals. The Committee also
established guidelines for the grant of non-executive stock-related
compensation. In addition, the Committee determines the compensation of the
Chairman and President and approves the compensation of all other executive
officers (including stock options and restricted stock grants).
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<PAGE>
In response to the Company's rapid growth, and in anticipation of the Company's
future growth, the salaries of executives are competitive to salaries of
executives in manufacturing firms comparable in size to the Company's current
size. In reviewing this issue, the Committee determined that it should shift its
compensation strategy toward a greater reliance on options and incentive
bonuses, and lesser reliance on salary and has moved accordingly.
Determination of Compensation. For fiscal year 1997, management set overall
compensation within the range of compensation of executives with comparable
qualifications, experience and responsibilities in the same or similar business
and of comparable size and success. In addition to external market data, merit
increases and bonuses were determined by individual performance, the Company's
financial performance and the achievement of certain non-financial corporate
goals.
Determination of Incentive Compensation. Under existing policy, a bonus standard
is established for each executive position and is based on a percentage of
salary. Based upon the criteria established for the fiscal year 1997 bonus
incentive plan, bonuses were not awarded to participating employees.
Stock Options. Stock options were granted at an option price equal to fair
market value on the date of grant and vest over a three-year period.
Accordingly, the stock options are intended to motivate key management personnel
to improve long-term stock market performance.
Summary of Compensation of Chief Executive Officer. In fiscal year 1997, the
Company's Chairman and Chief Executive Officer, Allen K. Breed, received a base
salary of $456,404. Mr. Breed was also paid a bonus of $456,404 which was earned
in fiscal year 1996. Mr. Breed's bonus is based on the financial performance of
the Company. Mr. Breed, as Trustee of the Allen K. Breed Revocable Trust, owns
approximately 26.94% of the outstanding shares of Common Stock of the Company
and thus received no option grants.
Compliance with Internal Revenue Code Section 162(m). The Company does not
believe that Section 162 (m) of the Internal Revenue Code of 1986, as amended
(the "Code"), which disallows a tax deduction to public companies for certain
compensation in excess of $1 million paid to the Company's Chief Executive
Office and four other most highly compensated executive officers, will generally
have a material effect on the Company. The Committee intends to periodically
review the potential consequences of Section 162 (m) and may structure the
performance-based portion of its executive officer compensation to comply with
certain exemptions provided in Section 162 (m).
Compensation Committee
PETER A. LEWIS
LARRY W. MCCURDY
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee are Messrs. Lewis and McCurdy. No
executive officer of the Company has served as a director or member of the
Compensation Committee (or other committee serving an equivalent function) of
any other entity, one of whose executive officers served as a director of or
member of the Compensation Committee of the Company.
Comparative Stock Performance
The following graph compares the cumulative total Stockholder return on the
Common Stock of the Company for the period from November 13, 1992 through June
30, 1997, with the cumulative total return on (i) the Standard & Poor's 500
Composite Index and (ii) a peer group index* selected by the Company which
includes six publicly traded companies within the Company's industry. The
comparison assumes the investment of $100 on November 13, 1992, in the Company's
Common Stock and in the peer group index and the investment of $100 on October
31, 1992, in the Standard & Poor's 500 Composite Index and, in each case,
assumes reinvestment of all dividends. Prior to November 13, 1992, the Company's
Common Stock was not registered under the Exchange Act.
COMPARISON OF 55 MONTH CUMULATIVE TOTAL RETURN
AMONG BREED TECHNOLOGIES, INC., THE S & P 500 INDEX
AND A PEER GROUP
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*The peer group index reflects the stock performance of the following companies:
Morton International ASP/Autoliv, Inc., Simpson Industries, Inc., TRW, Inc.,
OEA, Inc., Superior Industries International, Inc. and Modine Manufacturing
Company.
PROPOSAL 2 -- APPROVAL OF AMENDMENT TO THE 1994 STOCK INCENTIVE PLAN
The Stockholders are being asked to approve an amendment to the Company's Stock
Incentive Plan (the "Plan") to increase the number of shares of Common Stock
authorized and reserved for issuance under the Plan. Prior to the date hereof,
the Board of Directors authorized, and the Stockholders approved, a total of
2,500,000 shares of Common Stock for issuance under the Plan. As of July 31,
1997, an aggregate of 1,451,037 shares have been issued or were subject to
outstanding options under the Plan. In recognition of the Company's need to
attract and retain qualified employees in a highly competitive environment, on
September 17, 1997, the Board of Directors adopted, subject to Stockholder
approval, an amendment to the Plan which increases the number of shares of
Common Stock authorized for issuance under the Plan from 2,500,000 to 3,700,000
shares.
The following is a description of the Plan, as amended to date. This summary is
qualified in its entirety by the terms of the Plan, a copy of which, in its
amended form, may be obtained from the Secretary of the Company. In November
1994, the Board of Directors adopted, and the Stockholders of the Company
approved the Plan. Under the terms of the Plan, all Company employees, officers,
directors, consultants and advisors who are expected to contribute to the
Company's future growth and success are eligible to be participants in the Plan.
Participants under the Plan may be awarded shares or other awards under the
various categories except that Incentive Stock Options ("Incentive Stock
Options") may only be awarded to persons eligible to receive Incentive Stock
Options under Section 422 of the Internal Revenue Code (the "Code"), i.e.,
employees of the Company. The Board of Directors determines the exercisability
of an option at the time of its grant. The current form of option agreement
under the Plan provides that options are not exercisable except to the extent
vested. Options granted to employees typically vest in three increments over a
three year period. The maximum term of options granted under the Plan is ten
years. An option is non-transferable by the participant other than by will or
the laws of descent and distribution, and is exercisable during the participants
lifetime only by the participant, or, in the event of death of the participant,
by a person who acquires the right to exercise by bequest or inheritance. All
shares under the Plan must be authorized but may be unissued or treasury shares.
The various types of awards that may be granted under the Plan may be in
different forms. Incentive Stock Options which the Board intends to qualify as
performance-based compensation under Section 162(m) of the Code may not be
granted at an exercise price less than the fair market value of the Common Stock
on the date of grant (or less than 110% of the fair market value in the case of
Incentive Stock Options granted to optionees holding 10% or more of the voting
stock of the Company). All other options may be granted at an exercise price
which may be less than, equal to or greater than the fair market value of the
Common Stock on the date of grant. Incentive Stock Options can have an exercise
period that shall not exceed ten years from the date of the grant. In addition,
options granted under the Plan (whether Incentive Stock Options or Non-statutory
Stock Options) may provide for the payment of the exercise price by the delivery
of
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cash or check, delivery of shares of Common Stock owned by the optionee for at
least six months, delivery of a promissory note of the optionee to the Company
on terms determined by the Board of Directors, delivery of an irrevocable
undertaking by a broker to deliver promptly to the Company sufficient funds to
pay the exercise price in the form of cash or check, and payment of such other
lawful consideration as the Board of Directors may determine, or a combination
of the foregoing.
The Plan also provides that where Incentive Stock Options are granted to any
employee under the Plan, and the aggregate options granted under the Plan or any
other Company incentive stock option plan become exercisable for the first time
in any one calendar year for shares of Common Stock with an aggregate fair
market value of more than $100,000, then the number of shares with a value in
excess of $100,000 shall not constitute Incentive Stock Options, but are
classified as Non-statutory Stock Options (" Stock Options"). Furthermore, no
Incentive Stock Options may be exercised unless at the time of such exercise the
participant is and has been continually, since the date of the grant, an
employee of the Company, except that Incentive Stock Options may be exercised
within a period of three months after the participant ceases to be an employee.
In addition to the Incentive Stock Options, the Plan also provides for the
issuance of Non-statutory Stock Options, Stock Appreciation Rights ("SAR"),
Performance Share Awards and Restricted Stock Awards.
As of the date of this Proxy Statement the Board of Directors has awarded
pursuant to the Plan 1,412,680 options to purchase shares and 38,357 shares of
restricted stock for certain executive offices and employees. Under such awards,
some of the individual award recipients have the right to elect to receive a
designated number of shares of restricted stock or a number of options to
purchase shares of Common Stock equal to three times such designated number.
These awards of restricted stock vest over a five year period and the awards of
options vest over a four year period.
The Plan is administered by the Board of Directors of the Company which is
authorized to decide questions of eligibility and to make rules and regulations
for the administration and interpretation of the Plan.
Federal Income Tax Consequences of the 1994 Stock Incentive Plan
Incentive Stock Options. No taxable income will be recognized by an optionee
upon the grant or exercise of an Incentive Stock Option (provided that the
difference between the option exercise price and the fair market value of the
stock on the date of exercise must be included in the optionee's "alternative
minimum taxable income"), and no corresponding expense deduction will be
available to the Company. Generally, if an optionee holds shares acquired upon
the exercise of Incentive Stock Options until the later of (i) two years from
the grant of the option and (ii) one year from the date of transfer of the
purchased shares to him or her (the "Statutory Holding Period"), any gain to the
optionee upon a sale of such shares will be treated as a capital gain. The gain
recognized upon the sale of the stock is the difference between the option price
and the sale price of the stock. The net federal income tax effect on the holder
of Incentive Stock Options is to defer, until the stock is sold, taxation of any
increase in the stock's value from the time of grant to the time of exercise and
to cause all such increase to be treated as capital gain.
If the optionee sells the shares prior to the expiration of the Statutory
Holding Period (a "disqualifying disposition"), he or she will realize taxable
income at ordinary income tax rates in an amount equal to the lesser of (i) the
fair market value of the shares on the date of exercise less the option price,
or (ii) the amount realized on the sale less the option price, and the Company
will receive a corresponding business expense deduction. If the optionee sells
the stock for less than the option price, he or she will recognize a capital
loss equal to the difference between the sale price and the option price. The
loss will be a long-term capital loss if the shares are held for more than one
year prior to the sale and a short-term capital loss if the shares are held for
a shorter period.
For purposes of the "alternative minimum tax" applicable to individuals, the
exercise of an Incentive Stock Option is treated in the same manner as the
exercise of a Non-statutory Stock Option. Thus, an optionee must, in the year of
option exercise, include the difference between the exercise price and the fair
market value of stock on the date of exercise in alternative minimum taxable
income. The alternative minimum tax is imposed upon an individual's alternative
minimum taxable income currently at rates of 26% to 28%, but only to the extent
that such tax exceeds the taxpayer's regular income tax liability for the
taxable year.
Non-statutory Stock Options. No taxable income is recognized by the optionee
upon the grant of a Non-statutory Stock Option. The optionee must recognize as
ordinary income in the year in which the option is exercised the amount by which
the fair market value of the purchased shares on the date of exercise exceeds
the option price (and the Company is required to withhold an appropriate amount
for tax purposes). If the optionee is a reporting person, then upon the exercise
of an option within six months from the date of grant no income will be
recognized by the optionee until six months have expired from the date the
option was granted, and the income then recognized will include any appreciation
in the value of the shares during the period between the date of exercise and
the date six months after the date of grant (unless the optionee makes an
election under Section 83(b) of the Code to have the difference between the
exercise price
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and fair market value at the time of exercise recognized as ordinary income as
of the time of exercise). The Company will be entitled to a business expense
deduction equal to the amount of ordinary income recognized by the optionee,
subject to the limitations of Section 162(m) of the Code. Any additional gain or
any loss recognized upon the subsequent disposition of the purchased shares will
be a capital gain or loss, and will be a long-term gain or loss if the shares
are held for more than one year.
Stock Appreciation Rights. No taxable income is recognized by the recipient upon
the grant of a Stock Appreciation Right. The recipient must recognize as
ordinary income any cash delivered and the fair market value of any shares of
Common Stock delivered in payment of an amount due under a Stock Appreciation
Right. On the disposition by the recipient of any Common Stock received in
payment of a Stock Appreciation Right, any additional gain or any loss
recognized will be a capital gain or loss, and will be a long-term gain or loss
if the shares are held for more than one year. The Company will be entitled to a
business expense deduction equal to the amount of ordinary income recognized by
the recipient, subject to the limitations of Section 162 (m) of the Code.
Performance Shares. No taxable income is recognized by the recipient upon the
grant of a Performance Share Award. The recipient must recognize as ordinary
income the fair market value of any shares of Common Stock actually delivered in
accordance with the terms of the Performance Share Award. On the disposition by
the recipient of any Common Stock received pursuant to a Performance Share
Award, any additional gain or any loss recognized will be a capital gain or
loss, and will be a long-term gain or loss if the shares are held for more than
one year. The Company will be entitled to a business expense deduction equal to
the amount of ordinary income recognized by the recipient, subject to the
limitations of Section 162 (m) of the Code.
Restricted Stock. Neither the Company nor the recipient of a Restricted Stock
Award will realize any federal tax consequences at the time the award is
granted. If, however, the recipient makes a Section 83 (b) election within 30
days of the date of grant, then special rules will apply. The Company will be
entitled to deduct as a compensation expense, the same amount as the employee is
required to recognize as ordinary income, in the same year as the employee
includes the amount in income for federal tax purposes, subject to the
limitations of Section 162 (m) of the Code. Any additional gain or any loss
recognized upon the disposition of the Common Stock acquired pursuant to a
Restricted Stock Award will be a capital gain or loss, and will be a long-term
gain or loss if the shares are held for more than one year.
The Plan also provides that the participants shall pay to the Company, or make
provisions satisfactory to the Board of Directors, for the payment of any taxes
required by law to be withheld in respect of shares awarded under the Plan no
later than the date of the event creating the tax liability.
The Board of Directors has the discretion, subject to such conditions as may be
established by the Board of Directors, that tax obligations may be paid in whole
or in part of shares of Common Stock, including shares retained from the award
creating the tax obligation valued at their fair market value. The Company has
the right to the extent permitted by law to deduct any such tax obligations from
any payment of any kind otherwise due to the participant.
Board Recommendation
The Board of Directors believes that the approval of the amendment to the Plan
is in the best interests of the Company and its Stockholders because it will
enhance the Company's ability to attract, retain and motivate key employees and
others who are in a position to contribute to the Company's future growth and
success and recommends that the Stockholders vote FOR the amendment.
INDEPENDENT AUDITORS
The accounting firm of Ernst & Young, LLP served as the Company's independent
auditors for fiscal year 1997. One or more representatives of that firm will
attend the Annual Meeting and will be given the opportunity to comment, if they
so desire, and to respond to appropriate questions that may be asked by
Stockholders.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Any proposal that a Stockholder intends to present at the 1998 Annual Meeting of
Stockholders must be submitted to the Secretary of the Company at its offices,
P.O. Box 33050, 5300 Old Tampa Highway, Lakeland, Florida 33807-3050, no later
than June 9, 1998, in order to be considered for inclusion in the Proxy
Statement relating to that meeting. A Stockholder is eligible to present
proposals if, at the time he or she submits the proposals, the Stockholder shall
be a beneficial owner or record holder of at least 1% or $1,000 in market value
of Common Stock and has held such shares for at least one year, and the
Stockholder continues to own such shares through the date on which the meeting
is held.
OTHER MATTERS
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The Board of Directors knows of no other business which will be presented for
consideration at the Meeting other than that described above. However, if any
other business should come before the Meeting, it is the intention of the
persons named in the enclosed Proxy to vote, or otherwise act, in accordance
with their best judgment on such matters.
The Company will bear the costs of soliciting proxies. In addition to
solicitations by mail, the Company's directors, officers and regular employees
may, without additional remuneration, solicit proxies by telephone, telegraph,
facsimile and personal interviews. The Company will also request brokerage
houses, custodians, nominees and fiduciaries to forward copies of the proxy
material to those persons for whom they hold shares and request instructions for
voting the Proxies. The Company will reimburse such brokerage houses and other
persons for their reasonable expenses in connection with this distribution.
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING. WHETHER
OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND RETURN THE
ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE WILL GREATLY
FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION IS APPRECIATED.
STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY EVEN THOUGH
THEY HAVE SENT IN THEIR PROXIES.
By Order of the Board of Directors,
LIZANNE GUPTILL, Secretary
September 25, 1997
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