SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
American Power Conversion Corporation
(Name of Registrant as Specified in Its Charter)
American Power Conversion Corporation
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
not applicable
(2) Aggregate number of securities to which transactions applies: not
applicable
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: not applicable
(4) Proposed maximum aggregate value of transaction: not applicable
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously paid: not applicable
(2) Form, Schedule or Registration Statement No.: not applicable
(3) Filing party: not applicable
(4) Date filed: not applicable
American Power Conversion Corporation
P.O. Box 278
132 Fairgrounds Road
West Kingston, RI 02892
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders:
The Annual Meeting of Shareholders of American Power Conversion
Corporation, a Massachusetts corporation (the "Company"), will be held on
Friday, May 1, 1998 at 10:00 a.m., local time, in the University Ballroom of
the Radisson Airport Hotel located at 2081 Post Road, Warwick, Rhode Island
02886 for the following purposes:
1. To fix the number of directors at five.
2. To elect a Board of Directors for the ensuing year.
3. To transact such other business as may properly come before the meeting
and any adjournments thereof.
Shareholders of record at the close of business on March 13, 1998, will
be entitled to vote at the meeting or any adjournments thereof.
By Order of the Board of Directors,
Emanuel E. Landsman,
Clerk
March 23, 1998
SHAREHOLDERS ARE REQUESTED TO SIGN THE ENCLOSED PROXY CARD AND RETURN
IT IN THE ENCLOSED STAMPED ENVELOPE BY RETURN MAIL.
AMERICAN POWER CONVERSION CORPORATION
P.O. Box 278
132 Fairgrounds Road
West Kingston, RI 02892
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on May 1, 1998
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 Friday, May 1, 1998 at 10:00 a.m., local time, in
the University Ballroom of the Radisson Airport Hotel located at 2081 Post
Road, Warwick, Rhode Island 02886 (the "Meeting").
Only shareholders of record as of the close of business on March 13,
1998 will be entitled to vote at the Meeting and any adjournments thereof.
As of that date, 95,316,971 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 in the space provided on the
proxy. In
addition to the election of directors, the shareholders will consider and
vote upon a proposal to fix the number of
directors at five. All proxies will be voted in accordance with
shareholders' instructions, and if no choice is specified, the shares
represented by the enclosed proxy will be voted FOR the matters set forth in
the accompanying Notice
of 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 Onon-voteO occurs when a broker holding shares
for a beneficial owner votes on one proposal, but does not vote on another
proposal because, with respect to such other proposal, the broker does not
have discretionary voting power and has not received instructions from the
beneficial owner. Directors are elected by a plurality of the votes cast by
shareholders entitled to vote at the Meeting. All other matters being
submitted to shareholders require the affirmative vote of the majority of
shares present in person or represented by proxy at the Meeting. An
automated system administered by the Company's transfer agent tabulates the
votes. The vote on each matter submitted to shareholders is tabulated
separately. Abstentions are included in the number of shares present or
represented and voting on each matter. Broker Onon-voteO 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.
An Annual Report to Shareholders, containing financial statements for
the fiscal year ended December 31, 1997, is being mailed together with this
proxy statement to all shareholders entitled to vote. This Proxy Statement
and the accompanying proxy were first mailed to shareholders on or about
March 23, 1998.
MANAGEMENT AND PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth as of February 15, 1998, 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 on
page 8, 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 Common
of Beneficial Owner of Beneficial Ownership(1) Stock Outstanding(2)
State of Wisconsin 5,942,000(3) 6.2%
Investment Board
P.O. Box 7842
Madison, WI 53707
AMVESCAP PLC 5,188,100(4) 5.4%
11 Devonshire Square
London EC2M 4YR
England
American Power Conversion 4,844,774(5) 5.1%
Corporation Employee Stock
Ownership Plan
P.O. Box 278
132 Fairgrounds Road
West Kingston, RI 02892
Rodger B. Dowdell, Jr. 9,655,309(6) 10.1%
American Power Conversion
Corporation
P.O. Box 278
132 Fairgrounds Road
West Kingston, RI 02892
Neil E. Rasmussen 5,228,733(7) 5.5%
APC America, Inc.
755 Middlesex Turnpike
Billerica, MA 01862
Emanuel E. Landsman 1,437,482(8) 1.5%
APC America, Inc.
755 Middlesex Turnpike
Billerica, MA 01862
James D. Gerson 283,488(9) *
c/o Hudson Capital
780 Third Avenue
New York, NY 10017
Ervin F. Lyon 652,790(10) *
270 North Haverhill Road
Kensington, NH 03833-5503
Edward W. Machala 46,753(11) *
APC America, Inc.
P.O. Box 278
132 Fairgrounds Road
West Kingston, RI 02892
David P. Vieau 46,395(12) *
American Power Conversion
Corporation
P.O. Box 278
132 Fairgrounds Road
West Kingston, RI 02892
Donald M. Muir 13,910(13) *
American Power Conversion
Corporation
P.O. Box 278
132 Fairgrounds Road
West Kingston, RI 02892
All directors and 17,444,038(14) 18.3%
executive officers as
a group (9 persons)
*Less than 1.0%
(1) Unless otherwise indicated, the named person possesses sole voting and
investment power with respect to the shares listed.
(2) The number of shares of Common Stock deemed outstanding on February 15,
1998 includes (i) 95,281,954 shares outstanding on such date and (ii)
all options that are currently exercisable or will become exercisable
within 60 days thereafter by the person or group in question.
(3) This information was obtained from a filing made with the Securities
and Exchange Commission pursuant to Section 13(g) of the Securities
Exchange Act of 1934, as amended.
(4) Represents shares deemed to be beneficially owned by Amvescap PLC as
the parent corporation to AVZ, Inc., AIM Management Group Services,
Inc., INVESCO, Inc., INVESCO North American Holdings, Inc., INVESCO
Capital Management, Inc., INVESCO Funds Group, Inc., INVESCO Management
& Research, Inc., INVESCO Realty Advisors, Inc., INVESCO MIM Management
Limited, INVESCO Asset Management Limited. Information stated above was
as of December 31, 1997 and was obtained by the Company from a filing
made with the Securities and Exchange Commission pursuant to Section
13(g) of the Securities Exchange Act of 1934, as amended.
(5) The Company's Employee Stock Ownership Plan (the "ESOP") currently
holds an aggregate of 4,844,774 shares, all of which are allocated to
participant employeesO accounts. Under the terms of the ESOP Trust,
established pursuant to the terms of the ESOP, the trustees must vote
the allocated shares in accordance with the instructions of the
participant employees. Any shares with respect to which voting
instructions have been sought, but not timely received, are not voted
by the trustees.
(6) Includes 375,713 shares of Common Stock currently allocated to Mr.
Dowdell under the Company's ESOP. Does not include any shares held by
the ESOP other than the shares allocated to Mr. Dowdell's account. The
ESOP currently holds an aggregate of 4,844,774 shares. Mr. Dowdell is a
trustee of the ESOP and as such, may be deemed to be a beneficial owner
of the shares currently held by it. Mr. Dowdell disclaims beneficial
ownership of such shares, other than the shares allocated to him. Also
includes 84 shares currently allocated to Mr. Dowdell under the
CompanyOs 401(k) Plan.
(7) Includes 303,649 shares of Common Stock currently allocated to Mr.
Rasmussen under the Company's ESOP. Does not include any shares held by
the ESOP other than the shares allocated to Mr. Rasmussen's account.
The ESOP currently holds an aggregate of 4,844,774 shares. Mr.
Rasmussen is a trustee of the ESOP and as such, may be deemed to be a
beneficial owner of the shares currently held by it. Mr. Rasmussen
disclaims
beneficial ownership of such shares, other than the shares allocated to
him.
(8) Includes 126,317 shares of Common Stock currently allocated to Dr.
Landsman under the Company's ESOP. Also includes 71 shares currently
allocated to Dr. Landsman under the CompanyOs 401(k) Plan. Does not
include 15,000 shares held by a trust for the benefit of certain family
members or 70,000 shares held by the Landsman Charitable Trust. Dr.
Landsman disclaims beneficial ownership of the shares held by such
trusts.
(9) Includes 20,000 shares of Common Stock issuable to Mr. Gerson pursuant
to options which may be exercised within the next 60 days. Does not
include 4,000 shares held by Mr. Gerson's wife for the benefit of his
children. Mr. Gerson disclaims beneficial ownership of the shares held
by his wife for the benefit of his children.
(10) Includes 20,000 shares of Common Stock issuable to Dr. Lyon pursuant to
options which may be exercised within the next 60 days. Does not
include 49,742 shares held by a trust for the benefit of Dr. Lyon's
daughter. Dr. Lyon disclaims beneficial ownership of the shares held by
such trust.
(11) Includes 46,553 shares of Common Stock currently allocated to Mr.
Machala under the Company's ESOP. Does not include any shares held by
the ESOP other than the shares allocated to Mr. Machala's account.
The ESOP currently holds an aggregate of 4,844,774 shares. Mr. Machala
is a trustee of the ESOP and as such, may be deemed to be a beneficial
owner of the shares currently held by it. Mr. Machala disclaims
beneficial ownership of such shares, other than the shares allocated to
him.
(12) Includes 8,344 shares of Common Stock currently allocated to Mr. Vieau
under the Company's ESOP. Also includes 51 shares currently allocated
to Mr. Vieau under the CompanyOs 401(k) Plan.
(13) Includes 1,223 shares of Common Stock currently allocated to Mr. Muir
under the Company's ESOP. Also includes 187 shares currently allocated
to Mr. Muir under the Company's 401(k) Plan.
(14) Includes (i) 40,000 shares issuable to certain officers and directors
of the Company pursuant to options which may be exercised within the
next 60 days, (ii) 877,154 shares allocated to the accounts of the
officers of the Company under the Company's ESOP, and (iii) 393 shares
allocated to the accounts of the officers of the Company under the
CompanyOs 401(k) Plan. Also see footnotes (6) through (13).
NUMBER AND ELECTION OF DIRECTORS
At the Meeting, the shareholders will vote on fixing the number of
directors at five and electing the entire Board of Directors. The directors
of the Company are elected annually and hold office until the next annual
meeting of shareholders and until their successors shall have been elected
and qualified.
Shares represented by all proxies received by the 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 April 21, 1997. The following
table sets forth the year each nominee first became a director of the
Company and the positions each nominee currently holds with the Company.
Nominee's or Director's Name and Year Position(s) Held
Nominee or Director First Became Director with Company
Rodger B. Dowdell, Jr. 1985 President, Chairman of the Board of
Directors and Chief Executive Officer
Emanuel E. Landsman 1981 Vice President, Clerk and Director
Neil E. Rasmussen 1981 Vice President, Chief Technical
Officer and Director
Ervin F. Lyon 1981 Director
James D. Gerson 1988 Director
THE BOARD OF DIRECTORS BELIEVES THAT THE ELECTION OF ALL OF THE
NOMINEES AS DIRECTORS IS IN THE BEST INTEREST OF THE COMPANY AND
ITS SHAREHOLDERS AND RECOMMENDS A VOTE FOR FIXING THE NUMBER OF
DIRECTORS AT FIVE AND ELECTING ALL OF THE NOMINEES NAMED IN THE
TABLE ABOVE AS A DIRECTOR OF THE COMPANY.
Meetings of the Board of Directors and Committees
The Board of Directors met four times and took action by unanimous
written consent two times during the fiscal year ended December 31, 1997.
The Company's Compensation and Stock Option Committee, comprised of
Messrs. Gerson and Lyon, met two times and took action by unanimous written
consent four times during the fiscal year ended December 31, 1997. 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, 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 once during the fiscal year ended December 31, 1997. 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, 1997, all of the directors
attended at least 75% of the total number of meetings held by the Board of
Directors, and all of the members of the Compensation and Stock Option
Committee and the Audit Committee attended all of the meetings of such
committees.
Compensation of Directors
As compensation for serving on the Board of Directors, each non-
employee director is paid $20,000 per year and $1,500 for each meeting
attended. Non-employee directors are also reimbursed for reasonable expenses
incurred while attending meetings.
On February 25, 1993, the Board of Directors of the Company adopted the
1993 Non-Employee Director Stock Option Plan (the "1993 Director Plan"),
subject to approval by the Company's shareholders, which approval was
granted on May 20, 1993. The 1993 Director Plan provides for a one-time
grant of a stock 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. An option was granted to each of Messrs. Gerson and
Lyon, the two members of the Board of Directors entitled to participate in
the 1993 Director Plan. Such options have an exercise price of $12.00 per
share, the fair market value of the Company's common stock on the date of
grant. Each director can currently exercise an option to purchase up to
20,000 shares of common stock.
On February 12, 1997, the Board of Directors of the Company adopted the
1997 Non-Employee Director Stock Option Plan (the "1997 Director Plan"),
subject to approval by the Company's shareholders, 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
10,000 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 and on February 12, 1998
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 $21.75 and $28.50 per share, respectively, the fair
market value of the Company's common stock on each date of grant. None of
the options granted under the 1997 Director Plan are currently exercisable.
Occupations of Directors
The following table sets forth the names of all nominees for directors
and all current directors, their ages and present position(s) with the
Company.
Name Age Position(s)
Rodger B. Dowdell, Jr. 48 President, Chief Executive Officer and
Chairman of the Board of Directors
Emanuel E. Landsman 61 Vice President, Secretary, Clerk and
Director
Neil E. Rasmussen 44 Vice President, Chief Technical Officer,
and Director
Ervin F. Lyon(1) (2) 62 Director
James D. Gerson(1) (2) 54 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. joined the Company in August 1985 and has been
President and a Director since that time. From January to August 1985, Mr.
Dowdell worked for the Company as a consultant, developing a marketing and
production strategy for 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 Lincoln Laboratory ("M.I.T."), where
he was in the Space Communications Group from 1966 to 1977 and the Energy
Systems Engineering Group from 1977 to 1981.
Neil E. Rasmussen became Chief Technical Officer of the Company in
1997, and has been Vice President of Engineering and a Director of the
Company since its inception. From 1979 to 1981, Mr. Rasmussen worked in the
Energy Systems Engineering Group at M.I.T.'s Lincoln Laboratory.
Ervin F. Lyon has been a Director of the Company since its inception.
From September 1986 to March 1993, Dr. Lyon worked for M.I.T's Lincoln
Laboratory, from which he retired in March 1993. From the inception of the
Company through August 1985, Dr. Lyon was President and Chairman of the
Company. From 1977 to 1981, Dr. Lyon was a member of the technical staff at
M.I.T's Lincoln Laboratory.
James D. Gerson has been a Director of the Company since August 1988.
Mr. Gerson has been Senior Vice President of Fahnestock & Co. for more than
five years and is currently the Portfolio Manager of the Hudson Capital
Appreciation Fund, a mutual fund. Mr. Gerson is also a member of the Board
of Directors of Ag Services of America, Inc., Arguss Holdings Inc. (formerly
known as Conceptronic, Inc.), Energy Research Corporation, Hilite
Industries, Inc. and Computer Outsourcing Services, Inc.
There are no family relationships between directors and executive
officers of the Company, except that Mr. Dowdell is the uncle of Aaron L.
Davis, Vice President of Marketing and Communications.
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation
for services in all capacities to the Company for the fiscal years ended
December 31, 1997, 1996 and 1995, of those persons who were at December 31,
1997 (i) the chief executive officer and (ii) the other four most highly
compensated executive officers of the Company (the "Named Officers").
Summary Compensation Table
Annual Compensation(1)
Securities
Name and Underlying All Other
Principal Position Year Salary Bonus($)(3) Options/SARs Compensation
Rodger B. Dowdell, Jr. 1997 $499,000 $443,112 0 $4,872(4)
Chief Executive Officer,1996 398,000 398,000 0 24,980(4)
President and Director 1995 392,000 216,000 0 22,728(4)
Neil E. Rasmussen 1997 289,000 256,632 0 2,000(5)
Vice President of 1996 259,000 259,000 0 24,350(5)
Engineering and Director1995 259,000 144,000 0 22,728(5)
Edward W. Machala 1997 289,000 256,632 0 1,660(6)
Vice President, 1996 259,000 259,000 0 24,030(6)
Operations and Treasurer1995 259,000 144,000 0 22,728(6)
Donald M. Muir 1997 240,000 213,120 0 24,248(7)
Chief Financial Officer 1996 165,000 165,000 0 47,852(7)
1995 62,885 30,000 0 9,000(7)
David P. Vieau 1997 289,000 256,632 0 2,033(8)
Vice President, 1996 145,000 181,250 0 23,440(8)
WW Business Development 1995 138,232 50,000 0 22,614(8)
(1) Excludes perquisites and other personal benefits, the aggregate annual
amount of which for each officer was less than the lesser of $50,000
or 10% of the total salary and bonus reported.
(2) The Company did not grant any restricted stock awards or stock
appreciation rights ("SARs") or make any long term incentive plan
payouts during the fiscal years ended December 31, 1997, 1996 and
1995.
(3) Includes bonus payments earned by the Named Officers in the year
indicated, for services rendered in such year, which were paid in the
subsequent year.
(4) Includes $22,500 and $22,500, respectively, the market value of the
shares of Common Stock contributed to the ESOP on behalf of Mr.
Dowdell for fiscal years ended December 31, 1996 and 1995; $2,720,
$2,480 and $228, respectively, in premiums on a term life insurance
policy for Mr. Dowdell's benefit for fiscal years ended December 31,
1997, 1996 and 1995; and $2,152 contributed to Mr. DowdellOs account
by the Company pursuant to the American Power Conversion Corporation
401(k) Plan (the "401(k) Plan") for fiscal year
ending December 31, 1997.
(5) Includes $22,500 and $22,500, respectively, the market value of the
shares of Common Stock contributed to the ESOP on behalf of Mr.
Rasmussen for fiscal years ended December 31, 1996 and 1995; and
$2,000, $1,850 and $228, respectively, in premiums on a term life
insurance policy for Mr. Rasmussen's benefit for fiscal years ended
December 31, 1997, 1996 and 1995.
(6) Includes $22,500 and $22,500, respectively, the market value of the
shares of Common Stock contributed to the ESOP on behalf of Mr.
Machala for fiscal years ended December 31, 1996 and 1995; and $1,660,
$1,530 and $228, respectively, in premiums on a term life insurance
policy for Mr. Machala's benefit for fiscal years ended December 31,
1997, 1996 and 1995.
(7) Mr. Muir joined the Company on July 26, 1995 as Chief Financial
Officer. His compensation includes $22,500, the market value of the
shares contributed to the ESOP on behalf of Mr. Muir for fiscal year
ending December 31, 1996; $353, $1,352 and $250, respectively, in
premiums on a term life insurance policy for
Mr. Muir's benefit for fiscal years ended December 31, 1997, 1996 and
1995; and $18,790, $5,550 and $8,750 of relocation assistance for
fiscal years ending December 31, 1997, 1996 and 1995; and $5,105
contributed to Mr. Muir's account by the Company pursuant to the
CompanyOs 401(k) Plan for fiscal year ending December 31, 1997.
(8) Mr. Vieau was appointed Vice President of Worldwide Business
Development in October 1995 after serving as Vice President of
Marketing from October 1991 through June 1995. His compensation
includes $22,500 and $22,500, respectively, the market value of the
shares of Common Stock contributed to the ESOP on behalf of Mr. Vieau
for fiscal years ended December 31, 1996 and 1995; $695, $940 and
$228, respectively, in premiums on a term life insurance policy for
Mr. Vieau's benefit for fiscal years ended December 31, 1997, 1996 and
1995; and $1,338 contributed to Mr. Vieau's account by the Company
pursuant to the CompanyOs 401(k) Plan for fiscal year ending December
31, 1997.
Option Grants in the Last Fiscal Year
The following table sets forth grants of stock options pursuant to the
Company's 1997 Stock Option Plan granted during the fiscal year ended
December 31, 1997 to the Named Officers. The Company did not grant any
stock appreciation right to the Named Officers during the fiscal year ended
December 31, 1997.
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants(1) for Option Term(2)
- -------------------------------------------------- ------------------------
Percent of Total
Options Options Granted Exercise or
Granted to Employees in Base Expiration
Name (#) Fiscal Year Price ($/Sh) Date 5%($) 10%($)
- ---- --- ----------- ----------- ---- ----- ------
Rodger B.
Dowdell, Jr. 129,000 6.65% $19.50 7/10/07 $1,581,983 $4,009,059
Neil E.
Rasmussen 47,000 2.42% 19.50 7/10/07 576,382 1,460,665
Edward W.
Machala 20,000 1.03% 16.625 4/30/07 209,107 529,919
27,000 1.39% 19.50 7/10/07 331,113 839,105
Donald M.
Muir 16,000 0.83% 16.625 4/30/07 167,286 423,935
25,000 1.29% 19.50 7/10/07 306,586 776,949
David P.
Vieau 17,000 0.88% 16.625 4/30/07 177,741 450,431
25,000 1.29% 19.50 7/10/07 306,586 776,949
(1) All options were granted by the Compensation and Stock Option
Committee at "fair market value" determined as of the last business
day for which prices are available prior to the date an option is
granted and means the last reported sale price (on that date) of the
Common Stock on the NASDAQ Stock Market.
(2) Amounts reported in these columns represent amounts that may be
realized upon exercise of the options immediately prior to the
expiration of their term assuming the specified compounded rates of
appreciation (5% and 10%) on the market value of the Company's Common
Stock on the date of option grant over the term of the options. These
numbers are calculated based on rules promulgated by the Securities
and Exchange Commission and do not reflect the Company's estimate of
future stock price growth. Actual gains, if any, on stock option
exercises and Common Stock holdings are dependent on the timing of
such exercise and the future performance of the Company's Common
Stock. There can be no assurance that the rates of appreciation
assumed in this table can be achieved or that the amounts reflected
will be received by the individuals.
Option Exercises and Fiscal Year-End Values
The following table sets forth information with respect to options to
purchase the Company's Common Stock granted under the 1987 Stock Option Plan
and the 1997 Stock Option Plan including (i) the number of shares purchased
upon exercise of options in 1997, (ii) the net value realized upon such
exercise, (iii) the number of unexercised options outstanding at December
31, 1997 and (iv) the value of such unexercised options at December 31,
1997:
Aggregated Option/SAR Exercises in Last Fiscal Year and December 31, 1997
Option Values
Number of Unexercised Value of Unexercised
Shares Value Options at In-the-Money Options at
Acquired on Realized December 31, 1997 (#) December 31, 1997 ($)(1)
Name Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ --- ----------- ------------- ----------- -------------
Rodger B.
Dowdell, Jr. -- -- -- 129,000 -- $499,875
Neil E.
Rasmussen -- -- -- 47,000 -- 182,125
Edward W.
Machala -- -- -- 71,090 -- 582,908
Donald M.
Muir -- -- 12,500 67,450 $164,063 567,725
David P.
Vieau -- -- -- 55,000 -- 397,160
(1) Value is based on the difference between option exercise price and the
fair market value at December 31, 1997 ($23.375 per share as quoted on
The NASDAQ Stock Market) multiplied by the number of shares underlying
the option.
AMERICAN POWER CONVERSION CORPORATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive 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 industrious employees. The Company's philosophy is to
provide total compensation that is competitive for comparable work and
comparable corporate performance. The
compensation policy includes both motivational and retention-related
compensation components. 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 their interests with those
of shareholders.
The Compensation Committee's executive compensation policy is designed
to achieve the following objectives: (i) enhance profitability of the
Company and shareholder value, (ii) integrate compensation with the
Company's annual and long-term performance goals, (iii) reward above-average
long-term corporate performance, (iv) recognize individual initiative and
achievement, as well as teamwork and (v) assist the Company in attracting
and retaining qualified
executive officers.
Executive Officer Compensation Policy
The Company's executive officer compensation policy generally consists
of three elements: base salary, 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
bonus. 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. The Company also
regularly compares its compensation practices with other leading companies
through reviews of survey and proxy data.
Increases in annual base salary are based on a review and evaluation of
the performance of the operation or activity for which the executive has
responsibility, the impact of that operation or activity on the Company and
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 the Company.
The cash bonus is tied directly to the attainment of financial
performance targets approved by the Compensation Committee. The ratio of
bonus ("variable" pay) to base salary ("fixed" pay) varies significantly
across the levels in the organization to reflect the ability of the
individual to impact the performance of the Company and to absorb the risk
of variable pay. The cash bonus is dependent solely on corporate
performance.
The purpose of the cash bonus is to recognize and reward the
contribution of all executives in achieving the Company's goals and
objectives. In fiscal 1997 the cash bonus provided for an annual payment
based on the average of the Company's annual revenue and net income growth
rates over the prior year. Each executive is assigned a Bonus Target equal
to 60% of base salary. Depending on total company revenue and net income
growth rate levels achieved, the cash bonus is paid as a multiple of the
Bonus Target, ranging from zero to a maximum of 2.5.
The Chief Executive Officer's employment agreement provides that his
cash compensation shall be in accordance with the American Electronics
Association's (AEA) standards for chief executive officers of similar size
companies for salary and bonus. After determining such salary and bonus and
comparing it to similar companies, the Compensation Committee believes the
Chief Executive Officer's cash compensation is in accordance with the AEA
standards.
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.
The 1997 Stock Option Plan permits the Compensation Committee to grant
stock options to eligible employees, including executive officers. During
1997, the Compensation Committee granted stock options to various employees.
Options become exercisable based upon a vesting schedule tied to years of
service. The value realizable from exercisable options is dependent upon the
extent to which the Company's performance is reflected in the market price
of the Company's Common Stock at any particular point in time.
During 1997, the Compensation Committee granted options potentially
exercisable for a combined total of 344,000 shares of Common Stock to seven
executive officers (including the Chief Executive Officer). The exercise
price was equal to the stock market price on the date of grant. The options
granted to each executive officer become exercisable ratably over the next
four years subject to his continued employment with the Company.
The Company also maintains an ESOP in which all executives participate
on the same terms as non-executive employees who meet applicable eligibility
criteria, subject to any legal limitations on the amounts that may be
contributed or the benefits that may be payable under the ESOP. The ESOP's
assets are invested exclusively in the Company's Common Stock so as to
further align employees' and shareholders' long-term financial interests.
The Board of Directors approves the contributions to the ESOP. The Company
did not make any contribution to the ESOP for fiscal 1997. There is a
similar vehicle for employees in Ireland.
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 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
acquire stock options through payroll deduction, subject to certain
limitations.
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 and administered
has contributed and will continue to contribute towards achieving this goal.
Tax Considerations
Compensation paid to certain executive officers of the Company will be
subject to the $1 million limitation on deductibility of compensation under
Section 162(m) of the Internal Revenue Code. It is not anticipated that any
executive officer will receive compensation during 1998 which will not be
deductible by reason of the limitation. This limitation will be considered
by the Compensation Committee when it determines the amounts of compensation
to be paid to executive officers in 1998 and subsequent calendar years.
This report has been submitted by the members of the Compensation
Committee.
James D. Gerson
Ervin F. Lyon
PERFORMANCE GRAPH
The following graph illustrates a five year comparison of cumulative
total shareholder return among the Company, the University of Chicago's
Center for Research in Security i.e. Prices ("CRSP") Index for the NASDAQ
Stock Market and the CRSP Index for NASDAQ Electronic Components Stocks (SIC
367, a peer group index which includes electronic components companies). The
comparison assumes $100 was invested on December 31, 1992 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 GRAPH HERE]
1992 1993 1994 1995 1996 1997
Broad Market Index(1) $100.00 $114.00 $112.00 $158.70 $195.00 $239.50
Peer Group Index(2) 100.00 137.30 151.70 251.30 434.50 455.60
APCC 100.00 169.60 117.00 67.90 194.60 168.80
Assumes $100 invested on 12/31/92.
(1) CRSP Index for NASDAQ Stock Market
(2) SRSP Index for NASDAQ Electronic Components Stocks
EMPLOYMENT CONTRACT
The Company has entered into an employment agreement with its Chief
Executive Officer. The agreement is automatically renewed annually unless
either party notifies the other 60 days prior to the renewal date. Pursuant
to the 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.
INDEPENDENT ACCOUNTANTS
The Company has retained KPMG Peat Marwick LLP as its independent
auditors for the fiscal year ending December 31, 1998. A representative of
KPMG Peat Marwick LLP 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.
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 1997, 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 1997, except that: (i) Mr. Davis filed
one late Form 4 in
connection with one transaction and failed to file one Form 4 in connection
with one transaction, however, such transactions were subsequently reported
on Mr. Davis' Form 5; (ii) Mr. Rasmussen filed a late Form 5 reporting one
transaction; and (iii) Mr. John DiPippo, a former officer of the Company,
filed a late Form 4 in connection with
one transaction.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended for inclusion in the proxy statement
to be furnished to all shareholders entitled to vote at the next annual
meeting of the Company must be received at the Company's principal executive
offices no later than November 23, 1998. 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 $7,500, plus expenses.
DIRECTIONS TO APCOS ANNUAL SHAREHOLDER MEETING
The meeting will take place on Friday, May 1, at 10:00 a.m. in the
University Ballroom of the Radisson Airport Hotel, 2081 Post Road, in
Warwick, Rhode Island. (Tel. 401-739-3000)
FROM I-95 NORTH OR SOUTH:
+ Take Exit 13 (towards T.F. Green Airport)
+ Take the Post Road Exit - at the end of the exit, turn left onto Post
Road (heading north)
+ The hotel will be on the left after about 1/4 mile
Parking is available in the rear of the hotel
IF TRAVELING BY AIR:
The Radisson is conveniently located near T.F. Green Airport in
Providence, Rhode Island. A Hotel Shuttle is available for your convenience
- - just make a call from the Radisson's courtesy phone in the airport lobby.
Taxis and rental cars are also available at the airport.
The University Ballroom is located on the second floor of the Radisson
Airport Hotel - turn right after exiting the elevator.
The University Ballroom will open to shareholders at 9:30 a.m. Please
allow adequate time to find parking and to be seated prior to the 10:00 a.m.
starting time.
Thank you. We hope to see you there!