AMERICAN POWER CONVERSION CORPORATION
132 Fairgrounds Road
West Kingston, Rhode Island 02892
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders:
The Annual Meeting of Shareholders of American Power Conversion
Corporation, a Massachusetts corporation (the "Company"), will be held on
Thursday, June 7, 2001 at 10:00 a.m., local time, in the Main Conference Room at
APC's St. Louis offices located at 801 Corporate Centre Drive, St. Charles,
Missouri, for the following purposes:
1. To fix the number of directors at five.
2. To elect a Board of Directors for the ensuing year.
3. To consider and act upon a shareholder proposal regarding the composition
of the Company's Board of Directors, which proposal is OPPOSED by the
Company's Board of Directors.
4. To transact such other business as may properly come before the meeting and
any adjournments thereof.
Shareholders of record at the close of business on April 17, 2001 will be
entitled to vote at the meeting or any adjournments thereof.
IF YOU PLAN TO ATTEND:
Please be aware that seating may be limited. Registration and seating will
begin at 9:00 a.m. Please bring valid picture identification, such as a driver's
license or passport. You may be required to provide this upon entry to the
meeting. Shareholders holding stock in brokerage accounts ("street name"
holders) will also need to bring a copy of a brokerage statement reflecting
stock ownership as of the record date. Cameras, cell phones, recording devices
and other electronic devices will not be permitted at the meeting.
By Order of the Board of Directors,
/s/ Emanuel E. Landsman
Emanuel E. Landsman,
Clerk
April 18, 2001
SHAREHOLDERS ARE REQUESTED TO SIGN THE ENCLOSED PROXY CARD AND RETURN
IT IN THE ENCLOSED STAMPED ENVELOPE BY RETURN MAIL.
2
AMERICAN POWER CONVERSION CORPORATION
132 Fairgrounds Road
West Kingston, Rhode Island 02892
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
To Be Held on June 7, 2001
Proxies in the form enclosed with this proxy statement are solicited by the
Board of Directors of American Power Conversion Corporation, a Massachusetts
corporation (the "Company"), for use at the Annual Meeting of Shareholders to be
held on Thursday, June 7, 2001 at 10:00 a.m., local time, in the Main Conference
Room at APC's St. Louis Offices located at 801 Corporate Centre Drive, St.
Charles, Missouri (the "Meeting").
Only shareholders of record as of the close of business on April 17, 2001
will be entitled to vote at the Meeting and any adjournments thereof. As of that
date, 194,908,352 shares of Common Stock, par value $.01 per share, of the
Company were issued and outstanding. Each share of Common Stock outstanding as
of the record date will be entitled to one vote, and shareholders may vote in
person or by proxy. Execution of a proxy will not in any way affect a
shareholder's right to attend the Meeting and vote in person. Any shareholder
giving a proxy has the right to revoke it by delivering written notice to the
Clerk of the Company at any time before it is exercised or by delivering a later
executed proxy to the Clerk of the Company at any time before the original proxy
is exercised.
Each of the persons named as proxies in the proxy is a director and officer
of the Company. All properly
executed proxies returned in time to be cast at the Meeting will be voted. With
respect to the election of a Board of Directors, any shareholder submitting a
proxy has the right to withhold authority to vote for any individual nominee to
the Board of Directors by writing the name of such individual or group of
individuals in the space provided on the proxy. In addition to the election of
directors, the shareholders will consider and vote upon proposals to: (i) fix
the number of directors at five; and (ii) to consider and act upon a stockholder
proposal regarding the composition of the Company's Board of Directors. Where a
choice has been specified on the enclosed proxy with respect to the foregoing
matters, the shares represented by the proxy will be voted in accordance with
the shareholders' specifications contained therein. In the absence of
specifications, the shares represented by the enclosed proxy will be voted FOR
fixing the number of directors at five; FOR the five nominees for director named
in this proxy statement; AGAINST the shareholder proposal set forth in this
proxy statement if the shareholder proposal is properly presented by the
proponent's qualified representative for action at the Meeting; and according to
the discretion of the proxies on any other matters to properly come before the
Meeting.
The representation in person or by proxy of at least a majority of the
outstanding shares of Common Stock entitled to vote at the Meeting is necessary
to establish a quorum for the transaction of business. Votes withheld from any
nominee, abstentions and broker non-votes are counted as present or represented
for purposes of determining the presence or absence of a quorum at the Meeting.
A "non-vote" occurs when a broker holding shares for a beneficial owner votes on
one proposal, but does not vote on another proposal because, with respect to
such other proposal, the broker does not have discretionary voting power and has
not received instructions from the beneficial owner. Directors are elected by a
plurality of the votes cast by shareholders entitled to vote at the Meeting. All
other matters being submitted to shareholders require the affirmative vote of a
majority of the shares of Common Stock of the Company present in person or
represented by proxy and entitled to vote at the Meeting. An automated system
administered by the Company's transfer agent tabulates the votes. The vote on
each matter submitted to shareholders is tabulated separately. Abstentions are
included in the number of shares present or represented and voting on each
matter. Broker "non-vote" shares are not so included.
The Board of Directors knows of no other matter to be presented at the
Meeting. If any other matter should be presented at the Meeting upon which a
vote may be properly taken, shares represented by all proxies received by the
Board of Directors will be voted with respect thereto in accordance with the
judgment of the persons named as attorneys in the proxies.
All share and per share information contained in this proxy statement has
been adjusted to reflect a 2-for-1 stock split effected in the form of a stock
dividend in May 1999.
An Annual Report to Shareholders, containing financial statements for the
fiscal year ended
December 31, 2000, is being mailed together with this proxy statement to all
shareholders entitled to vote. This proxy statement and the accompanying proxy
are intended to be mailed to shareholders on or about April 26, 2001.
3
MANAGEMENT AND PRINCIPAL HOLDERS OF VOTING SECURITIES
Unless otherwise noted, the following table sets forth as of March 12,
2001, certain information regarding beneficial ownership of the Company's Common
Stock (i) by each person who, to the knowledge of the Company, beneficially
owned more than 5% of the outstanding shares of Common Stock of the Company
outstanding at such date, (ii) by each director or nominee for director of the
Company, (iii) by each executive officer named in the Summary Compensation Table
in this proxy statement, and (iv) by all directors, nominees for director and
executive officers of the Company as a group.
Name and Address Amount and Nature Percentage of
of Beneficial Owner of Beneficial Ownership(1) Common Stock
Outstanding(2)
Rodger B. Dowdell, Jr. 18,046,385(3) 9.2%
American Power Conversion Corporation
132 Fairgrounds Road
West Kingston, RI 02892
Neil E. Rasmussen 9,754,094(4) 5.0%
APC America, Inc.
755 Middlesex Turnpike
Billerica, MA 01862
Emanuel E. Landsman 2,163,223(5) 1.1%
APC America, Inc.
755 Middlesex Turnpike
Billerica, MA 01862
James D. Gerson 593,226(6) *
Fahnestock & Co
780 Third Avenue
New York, NY 10017
Ervin F. Lyon 749,030(7) *
270 North Haverhill Road
Kensington, NH 03833-5503
Edward W. Machala 302,328(8) *
APC America, Inc.
132 Fairgrounds Road
West Kingston, RI 02892
Donald M. Muir 93,492(9) *
APC America, Inc.
132 Fairgrounds Road
West Kingston, RI 02892
Aaron L. Davis 233,032(10) *
American Power Conversion Corporation
132 Fairgrounds Road
West Kingston, RI 02892
David P. Vieau 36,337(11) *
145 Harrison Avenue
Newport, RI 02840
All directors and 31,971,147(12) 16.3%
executive officers as
a group (9 persons)
__________________________________
*Less than 1.0%
4
(1) Unless otherwise indicated, the named person possesses sole voting and
investment power with respect to the shares listed.
(2) The number of shares of Common Stock deemed outstanding on March 12, 2001
includes (i) 194,904,115 shares outstanding on such date and (ii) all
options that are currently exercisable or will become exercisable within 60
days thereafter by the persons or group in question.
(3) Includes 484,826 shares of Common Stock issuable to Mr. Dowdell pursuant to
options which may be exercised within the next 60 days; 752,630 shares of
Common Stock currently allocated to Mr. Dowdell under the Company's
Employee Stock Ownership Plan (the "ESOP"); and 1,557 shares currently held
by Mr. Dowdell under the Company's 401(k) Plan.
(4) Includes 189,750 shares of Common Stock issuable to Mr. Rasmussen pursuant
to options which may be exercised within the next 60 days; 609,401 shares
of Common Stock currently allocated to Mr. Rasmussen under the Company's
ESOP; and 199 shares currently held by Mr. Rasmussen under the Company's
401(k) Plan. Does not include 160,424 shares held by the Neil and Anna
Rasmussen Foundation, a charitable trust. Mr. Rasmussen disclaims
beneficial ownership of the shares held by such trust.
(5) Includes 46,700 shares of Common Stock issuable to Dr. Landsman pursuant to
options which may be exercised within the next 60 days; 253,759 shares of
Common Stock currently allocated to Dr. Landsman under the Company's ESOP;
and 1,170 shares currently held by Dr. Landsman under the Company's 401(k)
Plan. Does not include 40,000 shares held by a trust for the benefit of
certain family members. Dr. Landsman disclaims beneficial ownership of the
shares held by such trust.
(6) Includes 66,250 shares of Common Stock issuable to Mr. Gerson pursuant to
options which may be exercised within the next 60 days. Does not include
8,000 shares held by Mr. Gerson's wife for the benefit of his children. Mr.
Gerson disclaims beneficial ownership of the shares held by his wife for
the benefit of his children.
(7) Includes 66,250 shares of Common Stock issuable to Dr. Lyon pursuant to
options which may be exercised within the next 60 days. Does not include
99,484 shares held by a trust for the benefit of Dr. Lyon's daughter. Dr.
Lyon disclaims beneficial ownership of the shares held by such trust.
(8) Includes 208,031 shares of Common Stock issuable to Mr. Machala pursuant to
options which may be exercised within the next 60 days; 93,698 shares of
Common Stock currently allocated to Mr. Machala under the Company's ESOP;
and 199 shares currently held by Mr. Machala under the Company's 401(k)
Plan.
(9) Includes 61,932 shares of Common Stock issuable to Mr. Muir pursuant to
options which may be exercised within the next 60 days; 2,735 shares of
Common Stock currently allocated to Mr. Muir under the Company's ESOP; and
1,575 shares currently held by Mr. Muir under the Company's 401(k) Plan.
(10) Includes 164,461 shares of Common Stock issuable to Mr. Davis pursuant to
options which may be exercised within the next 60 days; 31,093 shares
currently allocated to Mr. Davis under the Company's ESOP; and 2,698 shares
currently held by Mr. Davis under the Company's 401(k) Plan.
(11) Includes 17,018 shares of Common Stock currently allocated to Mr. Vieau
under the Company's ESOP; and 1,173 shares currently held by Mr. Vieau
under the Company's 401(k) Plan.
(12) Includes 1,288,200 shares issuable to the directors and executive officers
of the Company pursuant to options which may be exercised within the next
60 days; 1,760,334 shares allocated to the accounts of the executive
officers of the Company under the Company's ESOP; and 8,571 shares held by
the accounts of the executive officers of the Company under the Company's
401(k) Plan. Also see footnotes (3) through (11).
5
PROPOSALS NOs. 1 & 2: NUMBER AND ELECTION OF DIRECTORS
At the Meeting, the shareholders will vote on fixing the number of
directors at five and electing the entire Board of Directors. The directors of
the Company are elected annually and hold office until the next annual meeting
of shareholders and until their successors shall have been chosen and qualified.
Shares represented by all proxies received by the Board of Directors and
not so marked as to oppose or abstain from voting on fixing the number of
directors will be voted for fixing the number of directors for the ensuing year
at five.
Shares represented by all proxies received by the Board of Directors and
not so marked as to withhold authority to vote for any individual director or
for all directors will be voted (unless one or more nominees is unable or
unwilling to serve) for the election of the nominees named in the table below.
The Board of Directors knows of no reason why any such nominee should be unable
or unwilling to serve, but if such should be the case, proxies will be voted for
the election of some other person or for fixing the number of directors at a
lesser number. All of the nominees are currently directors of the Company and
were elected at the Annual Meeting of Shareholders held on May 11, 2000. The
following table sets forth the year each nominee first became a director of the
Company, each nominee's age, and the positions each nominee currently holds with
the Company.
Nominee Director Since Age Position(s) Held with Company
Rodger B. Dowdell, Jr. 1985 51 Chairman of the Board of Directors,
President and Chief Executive Officer
Emanuel E. Landsman 1981 64 Director, Vice President and Clerk
Neil E. Rasmussen 1981 46 Director, Vice President and Chief
Technical Officer
Ervin F. Lyon (1)(2) 1981 65 Director
James D. Gerson (1)(2) 1988 57 Director
__________________________________
(1) Member, Compensation and Stock Option Committee
(2) Member, Audit Committee
The By-laws of the Company provide that each director is elected to hold
office until the next annual meeting of shareholders, and until his successor is
chosen and qualified. The officers of the Company are elected annually at the
first meeting of the Board of Directors following the annual meeting of
shareholders and hold office until their respective successors are chosen and
qualified.
Rodger B. Dowdell, Jr. has been President and a Director since August 1985
and Chairman of the Board of Directors since June 1988. From January to August
1985, Mr. Dowdell worked for the Company as a consultant, developing a marketing
and production strategy for uninterruptible power supply products. From 1978 to
December 1984, he was President of Independent Energy, Inc., a manufacturer of
electronic temperature controls.
Emanuel E. Landsman has been Vice President, Clerk and a Director of the
Company since its inception. From 1966 to 1981, Dr. Landsman worked at
Massachusetts Institute of Technology's ("M.I.T.") Lincoln Laboratory, where he
was in the Space Communications Group from 1966 to 1977 and the Energy Systems
Engineering Group from 1977 to 1981.
Neil E. Rasmussen became Chief Technical Officer of the Company in 1997,
and has been Vice President and a Director of the Company since its inception.
From 1979 to 1981, Mr. Rasmussen worked in the Energy Systems Engineering Group
at M.I.T.'s Lincoln Laboratory.
Ervin F. Lyon has been a Director of the Company since its inception. From
September 1986 to March 1993, Dr. Lyon worked for M.I.T.'s Lincoln Laboratory,
from which he retired in March 1993. From the inception of the Company through
August 1985, Dr. Lyon was President and Chairman of the Board of Directors of
the Company. From 1977 to 1981, Dr. Lyon was a member of the technical staff at
M.I.T.'s Lincoln Laboratory.
6
James D. Gerson has been a Director of the Company since August 1988. Mr.
Gerson has been a Vice President of Fahnestock & Co. for more than five years.
Mr. Gerson is also a member of the Board of Directors of Ag Services of America,
Inc., Fuel Cell Energy, Inc., and Evercel, Inc.
There are no family relationships between directors and executive officers
of the Company, except that Mr. Dowdell is the uncle of Aaron L. Davis, Vice
President, Small Systems Group.
THE BOARD OF DIRECTORS BELIEVES THAT FIXING THE NUMBER OF DIRECTORS AT FIVE
AND ELECTING ALL OF THE NOMINEES AS DIRECTORS IS IN THE BEST INTEREST OF
THE COMPANY AND ITS SHAREHOLDERS AND RECOMMENDS A VOTE FOR THESE PROPOSALS.
Meetings of the Board of Directors and Committees
The Board of Directors met seven times and took action by unanimous written
consent two times during the fiscal year ended December 31, 2000.
The Company's Compensation and Stock Option Committee, comprised of Messrs.
Gerson and Lyon, met three times and took action by unanimous written consent
two times during the fiscal year ended December 31, 2000. The Compensation and
Stock Option Committee makes recommendations to the Board of Directors regarding
compensation and benefits for employees, consultants and directors of the
Company, determines the compensation of executive officers and is responsible
for the administration of the Company's 1987 Stock Option Plan, 1993 Non-
Employee Director Stock Option Plan, 1997 Stock Option Plan, 1997 Non-Employee
Director Stock Option Plan and 1997 Employee Stock Purchase Plan.
The Company's Audit Committee, comprised of Messrs. Gerson and Lyon, met
two times during the fiscal year ended December 31, 2000. The Audit Committee
oversees the accounting, tax and financial functions of the Company, including
matters relating to the appointment and activities of the Company's auditors.
The Company does not currently have a standing Nominating Committee.
During the fiscal year ended December 31, 2000, each director attended at
least 75% of the meetings held by the Board of Directors. Overall attendance at
meetings of the Board of Directors was in excess of 96%. All of the members of
the Compensation and Stock Option Committee and the Audit Committee attended all
of the meetings of such committees.
Compensation of Directors
As compensation for serving on the Board of Directors, each non-employee
director receives (i) $20,000 per year, (ii) $1,500 for attendance at a meeting
of the Board of Directors, and (iii) $1,500 for attendance at a meeting of a
Committee of the Board of Directors held on a day on which no meeting of the
Board of Directors is held. Non-employee directors are also reimbursed for
reasonable expenses incurred while attending meetings.
On February 25, 1993, the Board of Directors of the Company adopted the
1993 Non-Employee Director Stock Option Plan (the "1993 Director Plan"), subject
to approval by the Company's shareholders, which approval was granted on May 20,
1993. The 1993 Director Plan provides for a one-time grant of a stock option to
purchase 40,000 shares of Common Stock to each member of the Company's Board of
Directors who is neither an employee nor officer of the Company. An option was
granted to each of Messrs. Gerson and Lyon, the two members of the Board of
Directors entitled to participate in the 1993 Director Plan, on February 25,
1993. Such options have an exercise price of $6.00 per share, the fair market
value on the date of grant. Each director can currently exercise an option to
purchase up to 40,000 shares of Common Stock under the 1993 Director Plan.
On February 12, 1997, the Board of Directors of the Company adopted the
1997 Non-Employee Director Stock Option Plan (the "1997 Director Plan"), subject
to approval by the Company's shareholders, which approval
was granted on April 21, 1997. The 1997 Director Plan authorized the grant on
April 21, 1997 and each February 12th thereafter, of an option to purchase
20,000 shares of Common Stock to each member of the Company's Board
of Directors who is neither an employee nor officer of the Company.
Accordingly, options were granted on April 21, 1997, February 12, 1998, February
12, 1999, February 12, 2000 and February 12, 2001 to each of Messrs. Gerson and
Lyon, the two members of the Board of Directors entitled to participate in the
1997 Director Plan. Such options have exercise prices of $10.8750, $13.50,
$19.9375, $29.8438 and $13.25 per share, respectively, the fair market value on
the date of grant. Each director can currently exercise options to purchase up
to 26,250 shares of Common Stock under the 1997 Director Plan.
7
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation for
services in all capacities to the Company for the fiscal years ended December
31, 2000, 1999, and 1998, of those persons who were at
December 31, 2000 (i) the chief executive officer and (ii) the four other most
highly compensated executive officers of the Company and (iii) one executive
officer who would have been included in the preceding clause (ii) but for the
fact that he was no longer an executive officer of the Company as of December
31, 2000 (collectively, the "Named Officers").
Summary Compensation Table
Long-Term
Annual Compensation(1)
Compensation(2)
Securities
Name and Underlying All Other
Principal Position Year Salary Bonus(3) Options (#) Compensation
Rodger B. Dowdell, Jr. 2000 $535,000 $ - 588,000 $ 11,360(5)
Chairman of the Board of 1999 535,000 493,805 193,300 6,795(5)
Directors, President and 1998 516,031(4) 458,235 216,000 8,523(5)
Chief Executive Officer
Neil E. Rasmussen 2000 320,000 - 200,000 2,610(6)
Vice President, Chief 1999 320,000 - 86,000 2,370(6)
Technical Officer and 1998 289,000(4) 256,632 43,000 5,360(6)
Director
Edward W. Machala 2000 320,000 - 250,000 2,240(7)
Vice President, 1999 320,000 295,360 103,500 2,030(7)
Operations and Treasurer 1998 303,665(4) 269,655 86,000 5,030(7)
Donald M. Muir 2000 259,000 - 180,000 8,118(8)
Vice President, Finance 1999 259,000 239,057 71,400 6,835(8)
and Administration, and 1998 248,988(4) 221,102 72,000 8,377(8)
Chief Financial Officer
Aaron L. Davis 2000 220,000 - 120,000 7,980(9)
Vice President, 1999 220,000 203,061 177,400 5,761(9)
Small Systems Group 1998 191,537(4) 170,085 60,000 3,089(9)
David P. Vieau 2000 261,200 - - 119,712(10)
Vice President, 1999 289,000 266,747 86,000 5,630(10)
Worldwide
Business Development 1998 289,000 256,632 86,000 8,755(10)
__________________________________
1. Excludes perquisites and other personal benefits, the aggregate annual
amount of which for each officer was less than the lesser of $50,000 or 10%
of the total salary and bonus reported.
2. Represents the number of stock options granted during the fiscal years
ended December 31, 2000, 1999 or 1998. The Company did not grant any
restricted stock awards or stock appreciation rights ("SARs") or make any
long term incentive plan payouts during the fiscal years ended December 31,
2000, 1999 or 1998.
3. Includes bonus payments earned by the Named Officers in the years
indicated, for services rendered in such years, which were paid in
subsequent years.
4. Reflects an increase in salary effected in May 1999, retroactive to July
1998.
8
5. Includes $3,710, $3,340, and $3,020, respectively, in premiums on a term
life insurance policy for Mr. Dowdell's benefit for fiscal years ended
December 31, 2000, 1999 and 1998; and $7,650, $3,455 and $5,503,
respectively, contributed to Mr. Dowdell's account by the Company pursuant
to the Company's 401(k) Plan for fiscal years ending December 31, 2000,
1999 and 1998.
6. Includes $2,610, $2,370 and $2,160, respectively, in premiums on a term
life insurance policy for Mr. Rasmussen's benefit for fiscal years ended
December 31, 2000, 1999 and 1998; and $3,200 contributed to Mr. Rasmussen's
account by the Company pursuant to the Company's 401(k) Plan for the fiscal
year ending December 31, 1998.
7. Includes $2,240, $2,030 and $1,830, respectively, in premiums on a term
life insurance policy for Mr. Machala's benefit for fiscal years ended
December 31, 2000, 1999 and 1998; and $3,200 contributed to Mr. Machala's
account by the Company pursuant to the Company's 401(k) Plan for the fiscal
year ending December 31, 1998.
8. Includes $468, $435 and $377, respectively, in premiums on a term life
insurance policy for Mr. Muir's benefit for fiscal years ended December 31,
2000, 1999 and 1998; and $7,650, $6,400 and $8,000, respectively,
contributed to Mr. Muir's account by the Company pursuant to the Company's
401(k) Plan for fiscal years ending December 31, 2000, 1999 and 1998.
9. Includes $330, $315 and $320, respectively, in premiums on a term life
insurance policy for Mr. Davis' benefit for fiscal years ended December 31,
2000, 1999 and 1998; and $7,650, $5,446 and $2,769, respectively,
contributed to Mr. Davis' account by the Company pursuant to the Company's
401(k) Plan for fiscal years ending December 31, 2000, 1999 and 1998.
10. Includes $910, $830 and $755, respectively, in premiums on a term life
insurance policy for Mr. Vieau's benefit for fiscal years ended December 31
2000, 1999 and 1998; $7,650, $4,800 and $8,000, respectively, contributed
to Mr. Vieau's account by the Company pursuant to the Company's 401(k) Plan
for fiscal years ending December 31, 2000, 1999 and 1998; and $111,152 in
severance for the fiscal year ended December 31, 2000. Mr. Vieau's
employment with the Company terminated in November 2000.
Option Grants in the Last Fiscal Year
The following table sets forth grants of stock options pursuant to the
Company's 1997 Stock Option Plan granted during the fiscal year ended December
31, 2000 to the Named Officers. The Company did not grant any
stock appreciation rights to the Named Officers during the fiscal year ended
December 31, 2000.
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
-----------Individual Grants(1)-----------------
Percent of Total for Option Term(2)
Number of
Securities Options Granted Exercise
Underlying to Employees Price
Options in Expiration
Name Granted Fiscal Year Per Share Date(3) 5% 10%
Rodger B. 588,000 6.34% $12.75 11/8/10 $4,714,823 $11,948,287
Dowdell, Jr.
Neil E. 200,000 2.16% 12.75 11/8/10 1,603,681 4,064,043
Rasmussen
Edward W. 250,000 2.70% 12.75 11/8/10 2,004,602 5,080,054
Machala
Donald M. Muir 180,000 1.94% 12.75 11/8/10 1,443,313 3,657,639
Aaron L. Davis 120,000 1.29% 12.75 11/8/10 962,209 2,438,426
David P. Vieau - - - - - -
__________________________________
1. All options were granted by the Compensation and Stock Option Committee at
the fair market value on the date of grant.
9
2. Amounts reported in these columns represent amounts that may be realized
upon exercise of the options and subsequent sale of the underlying shares
immediately prior to the expiration of their term assuming the specified
rates of appreciation (5% and 10%) on the market value of the Company's
Common Stock on the date of option grant, compounded annually from the date
the respective options were granted, over the term of the options. The
gains shown are net of the option exercise price but do not reflect
deductions for taxes or other expenses associated with the exercise of the
options or sale of the underlying shares. These numbers are calculated
based on rules promulgated by the Securities and Exchange Commission and do
not reflect the Company's estimate of future stock price growth. Actual
gains, if any, on stock option exercises and Common Stock holdings are
dependent on the timing of such exercise and the future performance of
the Company's Common Stock. There can be no assurance that the rates of
appreciation assumed in this table can be achieved or that the amounts
reflected will be received by the individuals.
3. The grant date of all options is 10 years prior to the expiration date.
Options vest at the rate of 25% on the first anniversary of the grant date
and 12.5% each six months thereafter.
Option Exercises and Fiscal Year-End Values
The following table sets forth information with respect to options to
purchase the Company's Common Stock granted under the 1987 Stock Option Plan and
the 1997 Stock Option Plan including (i) the number of shares purchased upon
exercise of options in 2000, (ii) the net value realized upon such exercise,
(iii) the number of unexercised options outstanding at December 31, 2000 and
(iv) the value of such unexercised options at December 31, 2000:
Number of Number of Unexercised Value of Unexercised
Shares Options at In-the-Money Options at
Acquired on Value December 31, 2000 December 31, 2000(1)
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
Rodger B. Dowdell, - - 397,456 857,844 $480,664 $160,221
Jr.
Neil E. Rasmussen - - 156,500 309,500 185,062 61,687
Edward W. Machala 20,000 $514,687 174,781 386,899 433,710 206,320
Donald M. Muir 37,100 848,157 33,754 279,288 76,250 136,258
Aaron L. Davis - - 141,209 273,811 164,500 102,211
David P. Vieau 114,592 2,420,325 37,338 - 74,700 -
__________________________________
1. Value is based on the difference between the option exercise price and
$12.375, the closing price as quoted on The Nasdaq Stock Market on the last
trading day of the fiscal year, multiplied by the number of shares
underlying the option.
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE
The Company's executive officer compensation policy is administered by the
Compensation and Stock Option Committee of the Board of Directors (the
"Compensation Committee"). The Compensation Committee is comprised of the
Company's two non-employee directors. Pursuant to the authority delegated by the
Board of Directors, the Compensation Committee establishes each year the
compensation of senior management.
General Compensation Philosophy
The Company's executive compensation philosophy is based on the belief that
competitive compensation is essential to attract, motivate and retain highly
qualified and effective leaders. The Company's philosophy is to provide a total
compensation opportunity that matches competitive standards for commensurate
performance. The compensation policy includes various components of compensation
that are intended to align management behaviors and priorities directly with the
Company's strategic objectives and to encourage management to act in the best
long-term interest of the Company and its shareholders. Annual cash bonuses are
included to encourage effective performance relative to the Company's current
plans and objectives. Stock options are included to promote longer-term focus,
to help retain key contributors, and to more closely align the executives'
interests with those of shareholders.
10
The Compensation Committee's executive compensation policy is designed to
achieve the following objectives: (i) enhance profitability of the Company and
shareholder value, (ii) align compensation with the Company's annual and long-
term performance goals, (iii) reward above-average long-term corporate
performance, (iv) structure executive performance measures to emphasize team
achievement, (v) reinforce individual growth in leadership capabilities and
contribution over an individual's career, and (vi) encourage long-term
retention.
Executive Officer Compensation Policy
The Company's executive officer compensation policy generally consists of
three elements: base salary, annual cash bonus and long-term incentive
compensation in the form of stock options.
Cash Compensation
Annual cash compensation consists of two elements: base salary and annual
cash bonus. Each officer is offered a base salary that is commensurate for the
role that he or she is performing. In setting the annual cash compensation for
Company executive officers (other than the Chief Executive Officer), the
Compensation Committee reviews compensation for comparable positions in a group
of companies selected by the Compensation Committee for comparison purposes.
Most of these companies are engaged in the manufacture and sale of computer
hardware, peripherals and components, and are industry peers, competitors, and
those successful organizations that the Company wishes to emulate. The Company
also regularly compares its compensation practices with other leading companies
through reviews of benchmark surveys and proxy data.
Increases in annual base salary are based on a periodic review and
evaluation of the performance of the operation or function for which the
executive has responsibility, and is measured against defined performance
criteria. The executive is also reviewed according to his or her competence as
an effective leader in the Company, which includes an evaluation of the skills
and experience required for the job, coupled with a comparison of these elements
with similar elements for other executives both within and outside of the
Company.
The annual cash bonus is tied directly to the attainment of Company
financial performance targets approved by the Compensation Committee. The bonus
is designed to promote world class performance by setting incentive thresholds
at aggressive levels and by providing highly leveraged award funding on the
upside. The ratio of bonus ("variable" pay) to base salary ("fixed" pay) varies
significantly across the levels in the organization and reflects the ability of
the individual to impact the performance of the Company and to absorb the risk
of variable pay. At the executive officer level, the cash bonus is dependent
principally on corporate performance, with each bonus subject to review and
approval by the Compensation Committee.
The purpose of the cash bonus is to recognize and reward the contribution
of all executives in achieving or exceeding the Company's established goals and
objectives. The cash bonus provided for an annual payment based on the weighted
average of the Company's annual revenue and net income growth rates over the
prior year. The annual cash incentive is set currently at a target of 60% of
executive base salary. Corresponding to the level of actual total company
revenue and net income growth rate achieved, the cash bonus is calculated as a
multiple of base salary, ranging from zero to a maximum of 168%.
The Chief Executive Officer's employment agreement provides that his cash
compensation shall be in accordance with standards for chief executive officers
of similar size companies. After determining appropriate salary and bonus, then
reviewing it against data from peer comparison companies (defined as those with
sustained high growth in sales, net income and EPS, with a range of one-half to
two times the Company's annual revenues), the Compensation Committee believes
the Chief Executive Officer's cash compensation is commensurate with his
individual and organizational performance.
Long-term Incentive Compensation
Incentive compensation in the form of stock options is designed to provide
long-term incentives to executive officers (including the Chief Executive
Officer) and other employees, to encourage the executive officers and other
employees to remain with the Company and to enable optionees to develop and
maintain a significant, long-term stock ownership position in the Company's
Common Stock. The Company's 1997 Stock Option Plan, administered by the
Compensation Committee, is the vehicle for the granting of stock options.
11
The 1997 Stock Option Plan permits the Compensation Committee to grant
stock options to eligible employees, including executive officers. The value
realizable from exercisable options is dependent upon the extent to which the
Company's performance is reflected in the market price of the Company's Common
Stock at any particular point in time.
During 2000, the Compensation Committee granted options potentially
exercisable for a combined total of 1,338,000 shares of Common Stock to seven
executive officers (including the Chief Executive Officer). The exercise price
is equal to the fair market value on the date of grant. The options granted to
each executive officer become exercisable ratably over the next four years
subject to his or her continued employment with the Company.
In 1997, the Company developed and implemented a 401(k) savings program in
which all executive and non-executive U.S.-based employees who meet applicable
criteria are eligible to participate, subject to any legal limitations on the
amounts that may be contributed. The Company provides a matching benefit in an
amount equal to 100% on the first 3% of employee contributions plus 50% on the
next 3% of employee contributions. Employees are fully vested in their
employer matching contribution.
The 1997 Employee Stock Purchase Plan is administered by the Compensation
Committee and is intended to encourage ownership by all eligible employees of
the Company and participating subsidiaries so that they may share in the growth
of the Company. Eligible employees, including executive officers of the
Company, are those whose customary employment is more than 20 hours per week for
more than five months in any calendar year. Eligible employees who elect to
participate may purchase through payroll deduction shares of the Company's
Common Stock at 85% of the fair market value at specified dates, subject to
certain limitations. It is the intent of the Company to extend this program to
employees in foreign locations where local tax and legal rules and regulations
permit.
The Compensation Committee is satisfied that the executive officers of the
Company are dedicated to achieving significant improvements in the long-term
financial performance of the Company and that the compensation policy
implemented has contributed, and will continue to contribute, towards achieving
this goal.
Tax Considerations
In general, under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), the Company cannot deduct, for federal income tax
purposes, compensation in excess of $1,000,000 paid to certain executive
officers. This deduction limitation does not apply, however, to compensation
that constitutes "qualified performance-based compensation" within the meaning
of Section 162(m) of the Code and the regulations promulgated thereunder. The
Company has considered the limitations on deductions imposed by Section 162(m)
of the Code, and it is the Company's present intention that, so long as it is
consistent with its overall compensation objective, substantially all tax
deductions attributable to executive compensation will not be subject to the
deduction limitations of Section 162(m) of the Code.
This report has been submitted by the members of the Compensation
Committee.
James D. Gerson
Ervin F. Lyon
EMPLOYMENT CONTRACT AND CHANGE-IN-CONTROL AGREEMENTS
The Company has entered into an employment agreement with its Chief
Executive Officer. The agreement is automatically renewed annually unless either
party notifies the other 60 days prior to the renewal date. Pursuant to the
agreement, the Company pays the Chief Executive Officer an annual salary and a
bonus which are based on the salaries and bonuses paid to Chief Executive
Officers of electronics companies having approximately the same
revenues as the Company. The Chief Executive Officer is obligated under the
agreement not to compete with the Company while he is employed by the Company
and for a period of one year thereafter. The Company does not
have employment agreements with any other executive officers.
The Company has also entered into separate Change-In-Control Severance
Agreements with Messrs. Dowdell, Rasmussen, Machala, Muir and Davis which are
designed to provide an incentive to each executive to remain with the Company
leading up to and following a Change in Control. For purposes of the
agreements, "Change in Control" means (i) the members of the Board of Directors
of the Company at the beginning of any consecutive 24-calendar month period
("Incumbent Directors") cease for any reason other than death to constitute at
least a majority of the Board, provided that any director whose election, or
12
nomination for election, was approved by at least a majority of the members of
the Board then still in office who were members of the Board at the beginning of
the 24-calendar month period shall be deemed to be an Incumbent Director; (ii)
any consolidation or merger whereby the stockholders of the Company immediately
prior to the consolidation or merger do not, immediately after the consolidation
or merger, beneficially own shares representing 50% or more of the combined
voting power of the securities of the corporation (or its ultimate parent
corporation) issuing cash or securities in the consolidation or merger; (iii)
any sale or other transfer of all or substantially all of the assets of the
Company to another entity, other than an entity of which at least 50% of the
combined voting power is owned by shareholders in substantially the same
proportion as their ownership of the Company prior to the transaction, or (iv)
any approval by the shareholders of the Company of a plan for liquidation or
dissolution of the Company. Upon a Change in Control, all of the executive's
unvested stock options automatically vest and become immediately exercisable.
In the event of a subsequent termination of the executive's employment for any
reason, all of the executive's stock options become exercisable for the lesser
of (i) the remaining applicable term of the particular stock option or (ii)
three years from the date of termination. The provisions regarding acceleration
of vesting upon a Change of Control and extension of the period of
exercisability are subject to certain limitations applicable to "incentive stock
options" contained in Section 422 of the Internal Revenue Code. If within two
years following a Change in Control the executive's employment is terminated (i)
by the Company other than for specified cause, death or disability, or (ii) by
the executive for specified good reason, the executive shall be entitled to the
following: (i) a multiple (the "Multiple") of the executive's annual base salary
and the executive's bonus for the preceding year; (ii) continued health, life
and disability benefits for a period of years equal to the Multiple; (iii)
outplacement services for up to one year following termination; (iv) up to
$5,000 of financial planning services; and (v) accrued vacation pay. The
Multiple for Messrs. Dowdell and Rasmussen is three and for Messrs. Machala,
Muir and Davis is two. If all or any portion of the benefits and payments
provided to the executive would constitute an excess parachute payment within
the meaning of Section 280G of the Internal Revenue Code resulting in the
imposition on the executive of an excise tax, the payments and benefits will be
"grossed-up" so as to place the executive in the same after-tax position as if
no excise tax had been imposed.
PROPOSAL NO. 3: SHAREHOLDER PROPOSAL REGARDING COMPOSITION OF THE BOARD OF
DIRECTORS
The following supporting statement and shareholder proposal have been co-
submitted by Citizens Funds, 230 Commerce Way, Suite 300, Portsmouth, New
Hampshire, the beneficial owner of 24,700 shares of the Company's Common Stock;
A Territory Resource Foundation, 603 Stewart, Suite 1007, Seattle, Washington,
the beneficial owner of 800 shares of the Company's Common Stock; and Phyllis
Wiener, c/o Progressive Investment Management, 2435 SW 5th Avenue, Portland,
Oregon, the beneficial owner of 3,060 shares of the Company's Common Stock:
"BOARD INCLUSIVENESS RESOLUTION"
Whereas:
Employees, customers, and stockholders make up a greater diversity of
backgrounds than ever before. We believe that the board composition of major
corporations should reflect the people in the workforce and market place of the
21st Century if our company is going to remain competitive.
The Department of Labor's 1995 Glass Ceiling Commission reported ("Good for
Business: Making Full Use of the Nation's Human Capital") that diversity and
inclusiveness in the workplace positively impact the bottom line. A Covenant
Fund report of the S&P 500 companies revealed that ". . . firms that succeed in
the shattering their own glass ceiling racked up stock-market records that were
nearly 2.5 times better than otherwise-comparable companies."
The Investor Responsibility Research Center (IRRC) reports that in 1996
inclusion at senior management levels was only 12 percent for the over 39,000
companies required to submit the EEO- 1 Report. The Glass Ceiling Commission
reported that companies select from only half of the available talent within the
U.S. workforce.
If we are to be prepared for the 21st Century, we must learn how to compete in
an increasingly diverse global marketplace, by promoting and selecting the best
qualified people regardless of race, gender or physical challenge. SunOil's CEO
Robert Campbell stated (Wall Street Journal, 8/12/96): 'Often what a woman or
minority person can bring to the board is some perspective a company has not had
before---adding some modern-day reality to the deliberation process. Those
perspectives are great of value, and often missing from an all-white, male
gathering. They can also be inspirational to the company's diverse workforce.'
13
We believe that the judgement and perspectives of a diverse board will improve
the quality of corporate decision-making. A growing proportion of stockholders
is attaching a value to board inclusiveness, since the board is responsible for
representing shareholder interests in corporate meetings. The Teachers Insurance
and Annuity Association and College Retirement Equities Fund, the largest U.S.
institutional investor, recently issued a set of corporate governance guidelines
which included a call for `diversity of directors by experience, sex, age, and
race.'
We therefore, urge our company to enlarge its search for qualified board
members.
RESOLVED: The Shareholders request that:
1. The Board Nominating Committee make a greater effort to locate qualified
women and persons of color as candidates for nomination to the board.
2. The Board issue a public statement committing the company to a policy of
board inclusiveness, with a program of steps to be taken and a timeline
during which the company is expected to move in that direction.
3. The company provide to shareholders, at reasonable expense, a report by
September 2001, which includes a description of:
a. Efforts to encourage diversified representation on the board
b. Criteria for board qualification
c. The process of selecting board nominees, and board committee members"
Board of Directors Opposition to Shareholder Proposal
The Board of Directors continues to believe this proposal does not serve the
best interests of the Company or its shareholders and recommends a vote AGAINST
it. A substantively identical proposal was submitted for consideration by the
Company's shareholders last year. That proposal was defeated by substantially
more than a majority of shareholders who voted on the issue, indicating
shareholder agreement with management's recommendation that the proposal was not
in the best interests of the Company or its shareholders.
The Company agrees with the merits of pursuing and developing a diverse work
force and as a global company APC benefits from having employees of all
backgrounds throughout the organization. We seek to employ individuals based on
relevant job criteria regardless of race, creed, color, gender, age, religion,
national origin, sexual orientation or physical limitations. For Board
membership we seek to select and recommend the best qualified candidates based
on relevant business experience, expertise, abilities and the desire and time to
commit to a dynamic and fast moving Board such as ours. We do so without regard
to race, creed, color, gender, age, religion, national origin, sexual
orientation or physical limitations.
The composition of the Board has not inhibited the Company's ability to
outperform many comparable companies over the years. APC is clearly ranked at
the top of its industry, as well as among the best companies in the U.S. and the
world. The Board has been instrumental in these achievements and as
shareholders themselves they have a vested interest in the Company. Over the
years they have led the Company from a small upstart of less than $10 million in
annual revenues to a global leader in its industry with nearly$1.5 billion in
annual revenues. Within the past year alone, APC has been added to the Fortune
"1000" ranking of America's largest companies, the S&P 500 index and, for the
third consecutive year, named to Forbes "Platinum 400" listing of "The Best Big
Companies in America."
The proposal, as it is put forward, would unduly burden the Board and the
Company with requirements that are overly restrictive, would limit the Company
in its selection of qualified Board members, would result in incremental costs
and the consumption of Company resources without corresponding benefit to the
Company and would, therefore, be detrimental to the best interests of the
Company and its shareholders.
THE BOARD OF DIRECTORS BELIEVES THAT THIS PROPOSAL IS NOT IN THE BEST
INTEREST OF THE COMPANY AND ITS SHAREHOLDERS AND RECOMMENDS A VOTE AGAINST
THIS PROPOSAL.
14
PERFORMANCE GRAPH
The following graph illustrates a five year comparison of cumulative total
shareholder return among the Company, the University of Chicago's Center for
Research in Security Prices ("CRSP") Index for The Nasdaq Stock Market and the
CRSP Index for Nasdaq Electronic Components Stocks (SIC 367, a peer group index
which includes electronic components companies). The comparison assumes $100 was
invested on December 31, 1995 in the Company's Common Stock and in each of the
foregoing indices and assumes reinvestment of dividends, if any.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG THE
COMPANY, THE NASDAQ STOCK MARKET AND NASDAQ ELECTRONIC COMPONENTS STOCKS
[INSERT CHART HERE]
1995 1996 1997 1998 1999 2000
Broad Market Index(1) $100.00 $123.00 $150.70 $212.50 $394.80 $237.40
Peer Group Index(2) 100.00 173.20 181.60 280.50 521.60 427.90
APC 100.00 286.80 248.70 509.90 555.30 260.50
Assumes $100 invested on 12/31/95.
(1) CRSP Index for Nasdaq Stock Market
(2) CRSP Index for Nasdaq Electronic Components Stocks
14
INDEPENDENT ACCOUNTANTS
The Company has again retained KPMG, LLP ("KPMG") as its independent
auditors for the fiscal year ending December 31, 2001. A representative of KPMG
will be at the Meeting and will be given the opportunity to make a statement if
so desired and will be available to respond to appropriate questions from the
shareholders.
Audit Fees
The aggregate fees billed for professional services rendered by KPMG for the
audit of the Company's financial statements for the fiscal year ended December
31, 2000 and the reviews of the financial statements included in the Company's
quarterly reports on Form 10-Q for the fiscal year ended December 31, 2000 were
$815,540
Financial Information Systems Design and Implementation Fees
There were no fees billed for professional services rendered by KPMG for
financial information systems design and implementation during the fiscal year
ended December 31, 2000.
All Other Fees
The aggregate fees billed for all other services rendered by KPMG during the
fiscal year ended December 31, 2000, exclusive of those services described
above, were $4,191,151.
The Audit Committee of the Board of Directors has considered whether KPMG's
provision of services, other than services rendered in connection with the audit
or review of the Company's financial statements, is compatible with maintaining
KPMG's independence.
REPORT OF THE AUDIT COMMITTEE
The Board of Directors of the Company has adopted a written Audit Committee
charter, a copy of which is reproduced in the Appendix to this proxy statement.
As more fully detailed in the charter, the Audit Committee's primary
responsibilities fall into three broad categories:
1. Monitoring the integrity of the Company's financial reporting process and
systems of internal controls regarding finance, accounting and legal
compliance.
2. Monitoring the independence and performance of the Company's independent
auditors and internal auditing function.
3. Providing an avenue of communication among the independent auditors,
management, internal auditors and the Board of Directors.
The Audit Committee has reviewed and discussed the Company's audited
financial statements with management. The Audit committee has discussed with
KPMG, the Company's independent auditors, the matters required to be discussed
by Statement on Auditing Standards No. 61 (Communication with Audit Committees).
The Audit Committee has also received from KPMG the written disclosures and the
letter required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees) and has discussed with KPMG matters relating
to its independence from the Company.
Based on the review and discussions referred to above, the Audit Committee
recommended to the Company's Board of Directors that the Company's audited
financial statements be included in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2000.
15
Each member of the Audit Committee is independent as defined under the
current listing standards of the National Association of Securities Dealers.
This report has been submitted by the members of the Audit Committee.
James D. Gerson
Ervin F. Lyon
SECTION 16 REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file initial reports of
ownership and reports of changes in ownership with the Securities and Exchange
Commission (the "SEC"). Such persons are required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it with
respect to fiscal 2000, or written representations from certain reporting
persons, the Company believes that all of its directors, officers and persons
who own more than 10% of a registered class of the Company's equity securities
complied with all filing requirements applicable to them with respect to
transactions during 2000, except that Mr. Vieau filed a late Form 4 which
reported 17 transactions for February 2000, Mr. Lyon filed a late Form 4 which
reported 19 transactions for February 2000, Mr. Davis filed a late Form 4 which
reported 24 transactions for May 2000, and Mr. Landsman reported in his December
2000 Form 4 three transactions that occurred in November 2000.
SHAREHOLDER PROPOSALS
The deadline for submission of proposals by shareholders pursuant to Rule
14a-8 issued under the Exchange Act, which are intended for inclusion in the
proxy statement to be furnished to all shareholders entitled to vote at the next
annual meeting of shareholders of the Company, is December 2, 2001. The deadline
for submission of proposals of shareholders intended to be presented at the next
annual meeting of shareholders of the Company (which are not otherwise submitted
for inclusion in the proxy statement in accordance with the preceding sentence)
is February 15, 2002. In submitting such proposals, shareholders must comply
with the requirements set forth in both the Amended and Restated By-Laws of the
Company and in Rule 14a-4(c)(2)(i)-(iii) under the Exchange Act. In order to
curtail any controversy as to the date on which a proposal was received by the
Company, it is suggested that proponents submit their proposals by Certified
Mail, Return Receipt Requested.
EXPENSES AND SOLICITATION
The cost of solicitation of proxies will be borne by the Company. In
addition to soliciting shareholders by mail or by its regular employees, the
Company may request banks and brokers to solicit their customers who have stock
of the Company registered in the name of a nominee and, if so, will reimburse
such banks and brokers for their reasonable out-of-pocket costs. Solicitation by
officers and employees of the Company, none of whom will receive additional
compensation therefor, may also be made of some shareholders in person or by
mail, telephone or telegram, following the original solicitation. The Company
has retained Morrow & Co. Incorporated to assist in the solicitation of proxies,
and will pay this company a fee of approximately $6,500 plus expenses.
16
Appendix
American Power Conversion Corporation
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
I. AUDIT COMMITTEE PURPOSE
The Audit Committee is appointed by the Board of Directors to assist the Board
in fulfilling its oversight responsibilities. The Audit Committee's primary
duties and responsibilities are to:
- - Monitor the integrity of the Company's financial reporting process and
systems of internal controls regarding finance, accounting, and
legal compliance.
- - Monitor the independence and performance of the Company's independent
auditors and internal auditing department.
- - Provide an avenue of communication among the independent auditors,
management, internal auditors, and the Board of Directors.
The Audit Committee has the authority to conduct any investigation appropriate
to fulfilling its responsibilities and it has direct access to the independent
auditors as well as anyone in the organization. The Audit Committee has the
ability to retain, at the Company's expense, special legal, accounting, or other
consultants or experts it deems necessary in the performance of its duties.
II. AUDIT COMMITTEE COMPOSITION AND MEETINGS
Audit Committee members shall meet the requirements of the NASD Exchange. The
Audit Committee shall be comprised of two or more (three or more, effective June
14, 2001) directors as determined by the Board, each of whom shall be
independent non-employee directors, free from any relationship that would
interfere with the exercise of his or her independent judgment. All members of
the Committee shall have a basic understanding of finance and accounting and be
able to read and understand fundamental financial statements, and at least one
member of the Committee shall have accounting or related financial management
expertise.
Audit Committee members shall be appointed by the Board and, if desired, may be
appointed on recommendation of a Nominating Committee. The Audit Committee may
have a Chairman, appointed by the Board. If an audit committee Chair is not
designated or present, the members of the Committee may designate a Chair by
majority vote of the Committee membership.
The Committee shall meet at least two times annually, or more frequently as
circumstances dictate. A record of the Committee's proceedings will be kept.
The Committee should meet privately in executive session at least annually with
management, internal auditors, and the independent auditors and as a committee
to discuss any matters that the Committee or each of these groups believe should
be discussed. In addition, the Committee or at least its Chair should
communicate with management and the independent auditors quarterly to review the
Company's financial statements and significant findings based upon the auditor's
limited review procedures.
III. AUDIT COMMITTEE RESPONSIBILITIES AND DUTIES
General
1. The primary responsibilities of the Audit Committee are to:
1.1. Oversee the financial reporting process and internal control systems.
1.2. Oversee the audit function, both independent and internal.
17
1.3. Oversee the annual consolidated financial statements and quarterly
financial statements are prepared in accordance with GAAP.
1.4. Oversee and supervise special investigations.
1.5. Recommend to the Board the appointment of independent auditors and
annually evaluate their independence.
1.6. Approve audit plan of internal audit function.
Review Procedures
1. Review and reassess the adequacy of this Charter at least annually. Submit
the charter to the Board of Directors for approval and have the document
published at least every three years in accordance with SEC regulations.
2. Review the Company's annual audited financial statements prior to filing or
distribution. Review should include discussion with management and
independent auditors of significant issues regarding accounting principles,
practices and judgments.
3. In consultation with the management, the independent auditors and the
internal auditors, consider the integrity of the Company's financial
reporting processes and controls. Discuss significant financial risk
exposures and the steps management has taken to monitor, control and report
such exposures. Review significant findings prepared by the independent
auditors and the internal auditors together with management's responses.
4. Review with financial management and the independent auditors the Company's
quarterly financial statements. Discuss any significant changes to the
Company's accounting principles and any items required to be communicated
by the independent auditors in accordance with SAS 61 (see item 9). The
Chair of the Committee may represent the entire Audit Committee for
purposes of this review.
Independent Auditors
5. The independent auditors are ultimately accountable to the Audit Committee
and the Board of Directors. The Audit Committee shall review the
independence, and performance of the auditors and annually recommend to the
Board of Directors the appointment of the independent auditors or approve
any discharge of auditors when circumstances warrant.
6. On an annual basis, the Committee should review and discuss with the
independent auditors all significant relationships they have with the
Company that could impair the auditors' independence.
7. Review the independent auditors audit plan - discuss scope, staffing,
locations, reliance upon management and internal audit and general audit
approach.
8. Discuss the results of the audit with the independent auditors. Discuss
certain matters required to be communicated to audit committees in
accordance with AICPA SAS 61.
9. Consider the independent auditors' judgments about the quality and
appropriateness of the Company's accounting principles as applied in its
financial reporting.
Internal Audit Process and Legal Compliance
10. Review the plan, changes in plan, activities, organizational structure, and
qualifications of the internal auditors, as needed.
11. Review the appointment, performance and replacement of the senior internal
audit executive or third-party service provider, if outsourced.
12. Review significant reports prepared by the internal auditors together with
management's response and follow-up to these reports.
18
13. When and where appropriate, the Company's general counsel and outside
counsel will be asked to meet with the Audit Committee. Matters that may
have a significant impact on the financial statements will be reviewed.
Other Audit Committee Responsibilities
14. The Audit Committee will comply with all regulations of the Securities and
Exchange Commission and The NASDAQ Stock Market as they relate to
disclosures and corporate governance.
15. Annually prepare a report to shareholders as required by the Securities and
Exchange Commission. The report should be included in the Company's annual
proxy statement.
16. Perform any other activities consistent with this Charter, the Company's
By-laws and governing law, as the Committee or the Board deems necessary
or appropriate.
17. Maintain minutes of meetings and periodically report to the Board of
Directors on significant results of the foregoing activities.
18. Periodically review fees paid for external and internal audit services and
other consulting services.
19
DIRECTIONS TO APC'S ANNUAL SHAREHOLDER MEETING
The meeting will take place on Thursday, June 7, 2001 at 10:00 a.m., local time,
in the Main Conference Room at APC's St. Louis offices, located at 801 Corporate
Centre Drive, St. Charles, MO 63304 (Tel: 636-300-2300)
From the West:
Take I-70 East to I-64/US 40 West/US 61 East (Exit 210-A)
Continue East on I-64/US 40/US 61 for approximately 10 miles
Turn left onto Corporate Centre Drive in the O'Fallon Corporate Center, and take
first left into APC's parking lot
From the South:
Follow I-55 North to I-270 North to I-64/US 40/US61 West
Follow "Directions from South, North, East and Lambert Airport" below
From the North:
Follow I-55 Southwest to the I-55 - I-64/US 40/US 61 interchange at downtown St.
Louis
Head West I-64/US 40/US 61 for approximately 24 miles
Follow "Directions from South, North, East and Lambert Airport" below
From the East:
Take I-64/US 40 West/US 61 East through downtown St. Louis
Continue east on I-64/US 40/US 61 for approx. 24 miles
Follow "Directions from South, North, East and Lambert Airport" below
If Traveling by Air:
Depart the Lambert Airport heading west to Natural Bridge Road
Follow approximately 3 miles to I-70 West
Follow I-70 for approximately 7 miles to exit 232 for I-270, Chicago/Memphis
Follow I-270 for approximately 9 miles to exit 12, I-64/US 40/US-61, St.
Louis/Wentzville
Follow "Directions from South, North, East and Lambert Airport" below
Directions from South, North, East and Lambert Airport:
Continue West on US 40 and cross over the Daniel Boone Bridge
Proceed through the stoplight at US 40 and Highway K
Turn right onto Corporate Centre Drive in the O'Fallon Corporate Center, and
take first left into APC's parking lot
________________________________
Upon arrival please proceed through the main entrance. The Main Conference
Room will open to shareholders at 9:00 a.m. Please allow adequate time to find
parking, complete any check-in and to be seated prior to the 10:00 a.m. starting
time.
Please be aware that seating may be limited. Please bring valid picture
identification, such as a driver's license or passport. You may be required to
provide this upon entry to the meeting. Shareholders holding stock in brokerage
accounts ("street name" holders) will also need to bring a copy of a brokerage
statement reflecting stock ownership as of the record date. Cameras,
cell phones, recording devices and other electronic devices will not be
permitted at the meeting.
PROXY
AMERICAN POWER CONVERSION CORPORATION
Proxy for Annual Meeting of Shareholders
June 7, 2001
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Rodger B. Dowdell, Jr. and Emanuel E.
Landsman, and each of them, proxies, with full power of substitution, to vote
all shares of stock of American Power Conversion Corporation (the "Company")
which the undersigned is entitled to vote at the Annual Meeting of Shareholders
of the Company to be held on Thursday, June 7, 2001, at 10:00 a.m. local time,
in the Main Conference Room at APC's St. Louis Offices located at 801 Corporate
Centre Drive, St. Charles, Missouri, and at any adjournments thereof, upon
matters set forth in the Notice of Annual Meeting of Shareholders and Proxy
Statement dated April 18, 2001, a copy of which has been received by the
undersigned. The proxies are further authorized to vote, in their discretion,
upon such other business as may properly come before the meeting or any
adjournments thereof. Execution of a proxy will not in any way affect a
shareholder's right to attend the meeting and vote in person. Any shareholder
giving a proxy has the right to revoke it by written notice to the Clerk of the
Company at any time before it is exercised or by delivering a later executed
proxy to the Clerk of the Company at any time before the original proxy is
exercised.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE SIDE
[ X ] Please mark votes as in this example.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN, WILL BE VOTED "FOR" ITEMS 1 AND 2 AND "AGAINST" ITEM 3.
1. To fix the number of directors
at five.
FOR AGAINST ABSTAIN
[ ] [ ] [ ] [ ] MARK HERE IF YOU PLAN TO ATTEND
THE MEETING
2. To elect the Board of Directors
for the ensuing year: [ ] MARK HERE FOR ADDRESS
CHANGE AND NOTE IT BELOW
Nominees: Rodger B. Dowdell, Jr.
___________________________________
Emanuel E. Landsman, Neil E.
Rasmussen, Ervin F. Lyon and James D. ___________________________________
Gerson
FOR WITHHELD
[ ] [ ] If signing as attorney, executor,
trustee or guardian, please give your
full title as such. If stock is held
jointly, each owner should sign.
[ ]_______________________________
For all nominees except as
noted above
_____________________________________
Signature Date
The Board of Directors recommends a
vote "AGAINST" Item 3
3. To consider and act upon a _____________________________________
shareholder proposal regarding Signature Date
the composition of the Company's
Board of Directors.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]