SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of
the Commission Only (as
permitted by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ARTESYN TECHNOLOGIES, INC.
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(Name Of Registrant As Specified In Its Charter)
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Name Of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check 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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
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[ ] Fee paid previously with preliminary materials:
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[ ] 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:
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ARTESYN TECHNOLOGIES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, MAY 9, 2002
To the Stockholders:
The Annual Meeting of the Stockholders of Artesyn Technologies, Inc. (the
"Company") will be held on Thursday, May 9, 2002, at 10:00 A.M., local time, at
Pete's Grand Terrace, 7880 Glades Road, Boca Raton, Florida 33434, for the
following purposes:
1. To elect 11 directors to hold office until the Company's Annual
Meeting of Stockholders in 2003 and until their respective
successors have been duly elected and qualified; and
2. To transact such other business as may properly come before the
meeting and any adjournment(s) thereof.
The Board of Directors has fixed the close of business on March 15, 2002 as the
record date for the determination of stockholders entitled to notice of, and to
vote at, the Company's Annual Meeting of Stockholders (the "Meeting"). Only
stockholders of record at the close of business on this date will be entitled to
notice of, and to vote at, the Meeting and any adjournment(s) thereof.
By Order of the Board of Directors
RICHARD J. THOMPSON
Secretary
April 5, 2002
YOU ARE URGED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT
PROMPTLY IN THE POSTAGE PREPAID ENVELOPE WHICH HAS BEEN PROVIDED, WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING IN PERSON. THE PROXY MAY BE REVOKED BY YOU AT ANY
TIME PRIOR TO ITS EXERCISE, AND IF YOU ARE PRESENT AT THE MEETING YOU MAY, IF
YOU WISH, REVOKE YOUR PROXY AT THAT TIME AND EXERCISE YOUR RIGHT TO VOTE YOUR
SHARES IN PERSON.
PROXY STATEMENT
ARTESYN TECHNOLOGIES, INC.
7900 GLADES ROAD, SUITE 500
BOCA RATON, FLORIDA 33434
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 9, 2002
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of proxies
by the Board of Directors of Artesyn Technologies, Inc., a Florida corporation
(the "Company"), to be voted at the Company's 2002 Annual Meeting of
Stockholders (the "Meeting") and at any adjournment(s) thereof for the purposes
set forth in the accompanying Notice of Annual Meeting of Stockholders. The
Meeting is to be held on Thursday, May 9, 2002, at Pete's Grand Terrace, 7880
Glades Road, Boca Raton, Florida 33434, at 10:00 A.M., local time.
The principal executive offices of the Company are located at 7900 Glades Road,
Suite 500, Boca Raton, Florida 33434 (telephone no.: 561-451-1000). The enclosed
proxy card and this Proxy Statement are being sent to stockholders of the
Company on or about April 9, 2002.
QUORUM; VOTES REQUIRED
Proxies in the form enclosed with this Proxy Statement are being solicited by,
and on behalf of, the Company's Board of Directors. The persons named in the
proxy have been designated as proxies by the Company's Board of Directors. If a
quorum, consisting of a majority of the outstanding shares of the Company's
common stock, $.01 par value per share (the "Common Stock"), is present at the
Meeting, in person or by proxy, the nominees for director shall be elected by
the affirmative vote of a plurality of the shares cast on such matter at the
Meeting. All other matters to come properly before the Meeting shall, subject to
applicable law, be approved if the number of votes cast in favor of the matter
at the Meeting exceeds the number of votes cast at the Meeting opposing the
matter.
Brokers who hold shares for the accounts of their clients may vote such shares
either as directed by their clients or in their own discretion if permitted by
the stock exchange or other organization of which they are members. Members of
the New York Stock Exchange are permitted to vote their clients' shares in their
own discretion as to the election of directors and certain other "routine"
matters if the clients have not furnished voting instructions prior to the
Meeting. Certain proposals are "non-discretionary"; brokers who have received no
instructions from their clients do not have discretion to vote on those
proposals. When a broker votes a client's shares on some but not all of the
proposals at a meeting, the missing votes are referred to as "broker non-votes."
Those shares will be included in determining the presence of a quorum at the
Meeting, but are not considered "present" for purposes of voting on the
non-discretionary proposals.
Shares represented by properly executed proxies received by the Company will be
voted at the Meeting in the manner specified therein or, if no specification is
made, will be voted "FOR" the election of all the nominees for director named
herein. In the event that any other matters are properly presented at the
Meeting for action, the persons named in the proxy will vote the proxies (which
confer authority upon them to vote on any such matters) in accordance with their
judgment.
REVOCATION AND SOLICITATION
Any proxy given pursuant to this solicitation may be revoked by a record
stockholder at any time before it is exercised by written notification delivered
to the Secretary of the Company, by voting in person at the Meeting or by
executing another proxy bearing a later date. Attendance by a stockholder at the
Meeting does not alone serve to revoke his or her proxy.
The costs of soliciting proxies will be borne by the Company. The solicitation
of proxies will be made primarily by mail, but, in addition, may be made by
directors, officers and employees of the Company, personally or by telephone,
facsimile or other means of communication. Such directors, officers and
employees will not be additionally compensated, but they may be reimbursed for
reasonable out-of-pocket expenses, in connection with such solicitations. The
Company will reimburse brokers, custodians, nominees and fiduciaries for their
out-of-pocket and clerical expenses in transmitting proxies and related
materials to beneficial owners. The Company has retained D.F. King & Co. to
assist in soliciting proxies for a fee of approximately $6,000 plus
reimbursement of its reasonable out-of-pocket expenses.
ANNUAL REPORT
The Company's Form 10-K and Annual Report to Stockholders for the fiscal year
ended December 28, 2001 ("fiscal year 2001"), which contain the Company's
audited financial statements for fiscal year 2001, are being mailed with this
Proxy Statement to all persons who were stockholders as of the close of business
on March 15, 2002.
RECORD DATE; OUTSTANDING SHARES
The Board of Directors has fixed the close of business on March 15, 2002 as the
record date for the determination of stockholders of the Company who are
entitled to receive notice of, and to vote at, the Meeting. At the close of
business on that date, an aggregate of 38,492,822 shares of Common Stock were
issued and outstanding, each of which is entitled to one vote on each matter to
be voted upon at the Meeting. The Company's stockholders do not have cumulative
voting rights. The Company has no other class of voting securities entitled to
vote at the Meeting.
SECURITY OWNERSHIP
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of the close of business on March 15, 2002,
certain information as to the stockholders which are known by us to beneficially
own more than 5% of the Common Stock (based solely upon filings by said holders
with the Securities and Exchange Commission (the "SEC") on Schedule 13D or
Schedule 13G pursuant to Section 13 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act").):
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Name and Address Number of Shares Percent of
of Beneficial Owner Beneficially Common Stock
Owned(1)
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Finestar International Limited (2) 6,095,454(2) 13.7%
c/o ABN Amro Management Services
(Hong Kong) Limited
18/F Lincoln House
Taikoo Place, 979 King's Road
Quarry Bay, Hong Kong
Bruce Cheng (2)
Delta Electronics, Inc. (2)
186 Ruey Kuang Road
Neihu, Taipei 114
Taiwan, R.O.C.
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Mellon Financial Corporation (3) 4,058,049 10.60%
The Boston Company, Inc. (4)
The Boston Company Asset Management, LLC (5)
c/o Mellon Financial Corporation
One Mellon Center
Pittsburgh, PA 15258
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2
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Name and Address Number of Shares Percent of
of Beneficial Owner Beneficially Common Stock
Owned(1)
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Dalton, Greiner, Hartman, Maher & Co. (6) 2,425,245 6.3%
565 Fifth Avenue, Suite 2101
New York, NY 10017
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(1) Beneficial ownership has been determined in accordance with Rule 13d-3
under the Exchange Act.
(2) Finestar International Limited, a British Virgin Islands corporation,
purchased a 3% subordinated convertible note in the principal amount of
$50,000,000 (which note is convertible into shares of Common Stock), and a
warrant to acquire 1,550,000 shares of Common Stock. Finestar is deemed
the beneficial owner of 6,095,454 shares of Common Stock that may be
issued upon the conversion of the note and the exercise of the warrant.
Mr. Bruce Cheng is the sole director and member of Finestar and as such
has sole voting and dispositive power. Mr. Cheng is the founder, chief
executive officer and chairman of Delta Electronics, Inc., a Taiwanese
corporation, a global power supply, electronic component and video display
manufacturer, and a competitor. The note, the warrant and the Common Stock
underlying the note and the warrant are transferable among Finestar, Mr.
Cheng, Delta Electronics, Inc. and their respective direct or indirect
affiliates. See "Certain Relationships and Related Transactions" below.
(3) Mellon Financial Corporation, a parent holding company, is deemed to hold
4,058,049 shares of Common Stock; it has sole voting power of 3,486,599
shares, shared voting power of 403,800 shares, sole dispositive power of
4,053,105 shares and shared dispositive power of 4,944 shares of Common
Stock. The Boston Company, Inc. and The Boston Company Asset Management,
LLC are direct or indirect subsidiaries of Mellon Financial Corporation.
(4) The Boston Company, Inc., a parent holding company, is deemed to hold
3,381,900 shares of Common Stock; it has sole voting power of 2,836,300
shares, shared voting power of 403,800 shares, and sole dispositive
power of 3,381,900 shares of Common Stock. Shares beneficially owned
by Boston Safe Advisors, Inc., TBC Asset Management, Inc., Boston Safe
Deposit and Trust Company and Franklin Portfolio Associates are
beneficially owned by The Boston Company, Inc., as a holding company.
(5) The Boston Company Asset Management, LLC, an investment adviser, is deemed
to hold 2,534,400 shares of Common Stock; it has sole voting power of
1,988,800 shares, shared voting power of 403,800 shares, and sole
dispositive power of 2,534,400 shares of Common Stock. Shares beneficially
owned by Boston Safe Advisors, Inc., TBC Asset Management, Inc., Boston
Safe Deposit and Trust Company and Franklin Portfolio Associates are
beneficially owned by The Boston Company, Inc., as a holding company.
(6) Dalton, Greiner, Hartman, Maher, & Co. is an investment management
firm that, according to it website, advises institutional clients.
OWNERSHIP BY MANAGEMENT
The following table sets forth, as of the close of business on March 15, 2002,
certain information concerning beneficial ownership of Common Stock by each
nominee for election as a director of the Company (all of whom are presently
directors), each of the Named Executives (as defined below), and all directors
and executive officers as a group (based solely upon information furnished by
such persons):
Number of Shares
Beneficially Percent of
Name Owned (1)(2) Common Stock
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Lawrence J. Matthews 992,056(3) 2.6%
3
Number of Shares
Beneficially Percent of
Name Owned (1)(2) Common Stock
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Joseph M. O'Donnell 879,714 2.3%
Ronald D. Schmidt 711,923(4) 1.8%
John M. Steel 634,556(5) 1.6%
Richard J. Thompson 401,938(6) 1.0%
Bert Sager 303,925(7) *
Phillip A. O'Reilly 181,721(8) *
Robert J. Aebli 109,445 *
Norman C. Wussow 97,421 *
Stephen A. Ollendorff 82,100 *
Dr. Fred C. Lee 75,104 *
Edward S. Croft, III 71,881 *
Lewis Solomon 70,000 *
A. Eugene Sapp, Jr 60,500 *
Kenneth E. Blake 5,922 *
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All directors and executive
officers as a group (17 persons) 4,773,260 12.4%
* Represents less than 1%.
(1) Beneficial ownership has been determined in accordance with Rule 13d-3
under the Exchange Act.
(2) Includes the following shares of Common Stock subject to currently
exercisable options and/or that may be acquired upon the exercise of
options within 60 days after March 15, 2002: Mr. Matthews - 50,000; Mr.
O'Donnell - 738,365; Mr. Schmidt - 40,000; Mr. Thompson - 323,812; Mr.
Sager - 90,000; Mr. O'Reilly - 90,000; Mr. Aebli - 95,429; Mr. Wussow -
65,279; Mr. Ollendorff - 70,000; Dr. Lee - 50,000; Mr. Croft - 50,000; Mr.
Solomon - 60,000; Mr. Sapp - 50,000; and all directors and executive
officers as a group (17 persons) - 1,862,885.
(3) Includes 40,000 shares of Common Stock, which are owned of record by
the Lawrence J. and Barbara M. Matthews Charitable Remainder Unitrust,
of which Mr. Matthews and his spouse are beneficiaries and retain the
right to appoint and dismiss the trustee.
(4) Includes 17,926 shares of Common Stock, which are owned of record by Mr.
Schmidt's wife, with respect to which Mr. Schmidt disclaims beneficial
ownership, and 267,000 shares of Common Stock, which are owned by the
Schmidt Family Limited Partnership, a limited partnership of which Mr.
Schmidt is a general partner.
(5) Includes 266,000 shares of Common Stock, which are owned of record by Mr.
Steel's wife, with respect to which Mr. Steel disclaims beneficial
ownership.
(6) Includes 900 shares of Common Stock, which are held in trust by Mr.
Thompson for his daughters.
(7) Includes 2,080 shares of Common Stock, which are beneficially owned by Mr.
Sager's wife as the trustee under a trust for Mrs. Sager's mother, with
respect to which Mr. Sager disclaims beneficial ownership, and 153,860
shares which are owned by Sager Holdings Limited Partnership, a limited
partnership of which Mr. Sager is both a limited partner and a principal
shareholder of the corporate general partner.
4
(8) Includes 81,721 shares of Common Stock owned by the O'Reilly Family LLC
(of which Mr. O'Reilly is the manager), which company is owned by the
O'Reilly Family Trust (a family trust created by Mr. O'Reilly).
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16(a) of the Exchange Act, the directors and executive
officers and beneficial owners of greater than 10% of the Company's Common Stock
are required to file certain reports with the SEC in respect of their ownership
of the Company's securities. The Company believes that during fiscal year 2001,
all required reports were filed on a timely basis.
PROPOSAL I: ELECTION OF DIRECTORS
The entire Board of Directors, presently consisting of 11 members, is to be
elected at the Meeting. The Company's By-laws provide that the maximum number of
directors is 12, with the exact number to be fixed by the Board of Directors. By
resolution of the Board of Directors, the number of directors has been fixed at
11. The 11 persons listed below have consented to being named in this Proxy
Statement and to serving as directors of the Company if elected. All of the
nominees are currently directors of the Company and were elected by the
stockholders at the Company's annual meeting of stockholders held in 2001.
Messrs. Schmidt, Steel and Matthews and Dr. Lee initially became directors of
the Company pursuant to the Agreement and Plan of Merger entered into in
connection with the merger of the Company and Zytec Corporation ("Zytec") in
1997. Messrs. Schmidt, Steel and Matthews currently have the right to designate
up to three individuals to be nominated for election to the Company's Board of
Directors. Such designees are included in the slate of nominees for election to
the Company's Board of Directors set forth below.
Proxies in the accompanying form will be voted at the Meeting in favor of the
election of each of the nominees listed on the accompanying proxy card, unless
authority to do so is withheld as to an individual nominee or nominees or all
nominees as a group. Proxies cannot be voted for a greater number of persons
than the number of nominees named. Directors will be elected by a plurality of
the votes cast therefor by the holders of shares of Common Stock (assuming a
quorum exists). In the unexpected event that any of such nominees should become
unable to, or for good reason will not, serve as a director, it is intended that
proxies will be voted for the election of substitute nominee(s).
Set forth below is certain information with respect to each nominee for election
as a director of the Company at the Meeting (based solely upon information
furnished by such persons):
Year of
First
Age Election Principal Occupations
(As of as a during Past Five Years;
Name 3/15/02) Director Other Directorships
- ---- -------- -------- -----------------------
Edward S. Croft, III 59 1980 Since August 1996, Managing
(1)(3) Director of Croft & Bender LLC,
a private investment banking
firm; from April 1996 to August
1996, President of Croft & Co.,
a financial advisory firm; for
more than five years prior to
April 1996, Managing Director
of The Robinson-Humphrey
Company, Inc., an investment
banking firm.
Dr. Fred C. Lee 55 1997 From February 1986 to December
(1)(3) 1997, a director of Zytec (which
merged with the Company in
1997); since 1977, Professor at
Virginia Polytechnic Institute
and State University ("VPI") and
director of the Virginia Power
Electronics Center at VPI.
5
Year of
First
Age Election Principal Occupations
(As of as a during Past Five Years;
Name 3/15/02) Director Other Directorships
- ---- -------- -------- -----------------------
Lawrence J. Matthews 73 1997 For more than the past five
(1)(3) years, retired executive. From
January 1999 to June 2000,
Acting President and Chief
Executive Officer of Veritec,
Inc., a seller of
microprocessor-based encoding
and decoding systems products.
In October 1995, an involuntary
Chapter 7 petition under the
United States Bankruptcy Code,
was filed against Veritec,
Inc. This filing was
subsequently converted to a
Chapter 11 petition. Veritec
emerged from bankruptcy in
October 1999. Currently a
director of Veritec, Inc.
Joseph M. O'Donnell 55 1994 Co-Chairman of the Board of
(4) Directors of the Company since
December 1997; from February
1997 to December 1997, Chairman
and since July 1994, Chief
Executive Officer and President
of the Company.
Stephen A. Ollendorff 63 1984 Practicing attorney for more
(3)(4) than the past five years; since
February 1999 Of Counsel to
Kirkpatrick & Lockhart LLP; from
December 1990 to January 1999,
Of Counsel to Hertzog, Calamari
& Gleason; from 1983 to present,
Vice President, then President,
then Chairman and Chief
Executive Officer and director
of Acorn Holding Corp., a
manufacturer of microcrystalline
silicon wafers.
Phillip A. O'Reilly 75 1988 For more than the past five
(1)(2) years, retired executive.
Bert Sager 76 1968 Practicing attorney for more
(2)(3) than the past five years;
director of Acorn Holding
Corp., a manufacturer of
microcrystalline silicon wafers.
A. Eugene Sapp, Jr. 65 1997 Since December 2001, Co-Chairman
and a director of Sanmina-SCI
Corporation (the surviving
corporation of the merger of SCI
Systems, Inc. with a
wholly-owned subsidiary of
Sanmina Corporation); from 1994
until 1999, President and Chief
Operating Officer of SCI
Systems, Inc.; since July 2000,
Chairman of the Board and, since
July 1999, Chief Executive
6
Year of
First
Age Election Principal Occupations
(As of as a during Past Five Years;
Name 3/15/02) Director Other Directorships
- ---- -------- -------- -----------------------
Officer of SCI, until the merger
in December 2001.
Ronald D. Schmidt 65 1997 Co-Chairman of the Board of
(1)(4) Directors of the Company since
December 1997; from January 1984
to December 1997, an executive
officer (including Chairman of
the Board and Chief Executive
Officer) and director of Zytec.
Lewis Solomon 68 1995 Since October 1999, Chief
(2)(3)(4) Executive Officer of Broadband
Services, Inc., which provides
logistic and technical services
to the cable television, DBS,
fixed wireless and
telecommunication industries;
from August 1990 to October
1999, Chairman of G&L of
Syosset, Inc., a financial
consulting firm; director of
Anadigics, Inc., a manufacturer
of gallium arsenide
semiconductors; director of
Terayon Communications, Inc., a
manufacturer of cable and
wireless modems; and director of
Harmonic, Inc., a designer,
manufacturer and marketer of
digital and fiber optic systems.
John M. Steel 57 1997 Since July 2000, retired
executive; from December 1997
until July 2000, Vice President
of the Company; from January
1984 to December 1997,
executive officer and director
of Zytec.
(1) Member of the Audit Committee.
(2) Member of the Compensation and Stock Option Committee.
(3) Member of the Nominating Committee.
(4) Member of the Executive Committee.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE RE-ELECTION
OF ALL OF THE 11 NOMINEES NAMED ABOVE AS DIRECTORS OF THE COMPANY.
BOARD OF DIRECTORS; COMMITTEES OF THE BOARD
The Company's Board of Directors met eight times during fiscal year 2001. During
fiscal year 2001, no director attended fewer than 75% of the total number of
meetings of the Board of Directors and of the committee(s), if any, of the Board
on which he served, except Lewis Solomon. The Board of Directors has established
four standing committees, consisting of an Audit Committee, a Compensation and
Stock Option Committee, a Nominating Committee and an Executive Committee. The
following describes the current functions of such committees.
The Audit Committee, which held five meetings during fiscal year 2001, reviews
the internal and external audit functions of the Company and makes
recommendations to the Board of Directors with respect thereto. It also has
7
primary responsibility for the formulation and development of the auditing
policies and procedures of the Company and for making recommendations to the
Board of Directors with respect to the selection of the Company's independent
auditing firm. The Company's Audit Committee Charter, a copy of which was
attached to our 2001 Proxy Statement, governs the Audit Committee. The Board of
Directors of the Company has determined that the current composition of the
Audit Committee satisfies The NASDAQ Stock Market's requirements regarding the
independence, financial literacy and experience of audit committees. The
Chairman of this committee is Edward S. Croft, III.
The Compensation and Stock Option Committee, which held six meetings during
fiscal year 2001, sets and approves salary levels of all corporate officers and
has primary responsibility for the administration of the Company's 2000
Performance Equity Plan (the "2000 Plan"), including the granting of options
thereunder. This committee also administers the Company's 1990 Performance
Equity Plan and 1996 Employee Stock Purchase Plan. The Chairman of this
committee is Phillip A. O'Reilly.
The Nominating Committee, which held one meeting during fiscal year 2001,
recommends nominees to fill vacancies on the Board of Directors and considers
responsible recommendations by the Company's stockholders of candidates to be
nominated as directors of the Company. The Nominating Committee met in early
2002 and considered and recommended the 11 nominees named herein to the Board of
Directors. All recommendations of candidates made by the Company's stockholders
must be in writing and addressed to the Secretary of the Company and must be
received by the Company not less than 50 days nor more than 75 days prior to
that year's annual meeting. By accepting a stockholder recommendation for
consideration, the Nominating Committee does not undertake to adopt or take any
other action concerning the recommendation or to give the proponent thereof its
reasons for any action or failure to act. The Chairman of this committee is Bert
Sager.
The Executive Committee, which did not meet during fiscal year 2001, was
established by the Board of Directors in October 1997. The purpose of this
committee is to exercise all the powers and authority of the full Board of
Directors in the management of the Company except as may be limited by the
Florida Business Corporation Act or other applicable law. The Chairman of this
committee is Joseph M. O'Donnell.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation and Stock Option Committee consists of Phillip A. O'Reilly,
Bert Sager, and Lewis Solomon. None of such committee members are, or were ever,
executive officers or employees of the Company. During the last fiscal year,
none of the executive officers of the Company served on the board of directors
or on the compensation committee of any other entity, any of whose executive
officers served on the Board of Directors of the Company.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company ("Outside Directors") are
compensated for their services by payment of an annual fee of $24,000 plus
$1,500 per day for each Board of Directors' meeting attended, $750 for each
telephonic Board of Directors' meeting attended and $1,000 per day for each
committee meeting attended (and an additional $250 per day for each committee
meeting at which such person acted as chairman) with a maximum payment of $3,500
per day for attendance at meetings of the Board of Directors and committees and
acting as chairman at meetings of committees of the Board of Directors.
During fiscal year 2001, options to purchase 10,000 shares of Common Stock were
granted by the Company to each of the Outside Directors of the Company at an
exercise price equal to the fair market value of the Common Stock on such grant
date pursuant to the Company's 1990 Outside Directors' Stock Option Plan. Under
such plan, each Outside Director is granted an option, exercisable over 10
years, to purchase 10,000 shares of Common Stock each time that such person is
elected or re-elected by the stockholders to serve as a director of the Company
if such Outside Director then owns a prescribed amount of Common Stock.
An Outside Director who had served as a director prior to August 15, 1996, and
serves as a director for five or more years is entitled to receive certain
annual benefits under the Company's Outside Directors' Retirement Plan. The
annual benefits commence on the later of such Outside Director's retirement from
the Board of Directors or attainment of age 70 and continue for a number of
8
years equal to the number of years the Outside Director served on the Company's
Board of Directors. Effective January 1, 2000, the base amount of such benefit
is $24,000, adjusted pursuant to a cost of living index to each Outside
Director's particular retirement date. Once a director has begun to receive the
benefits as so adjusted, no further adjustments will be made for the remainder
of the period of time such Outside Director receives the benefit.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN RELATIONSHIPS
Mr. Ollendorff, a director of the Company, was Of Counsel to the law firm of
Kirkpatrick & Lockhart LLP during fiscal year 2001. Kirkpatrick & Lockhart LLP
acted as counsel for the Company in fiscal year 2001 and received fees in such
fiscal year for various legal services rendered to the Company.
TRANSACTIONS WITH FINESTAR INTERNATIONAL LIMITED
3% CONVERTIBLE NOTE
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On January 14, 2002, the Company entered into a Securities Purchase Agreement,
pursuant to which it sold a 3% subordinated convertible note in the amount of
$50,000,000, due January 15, 2007, to Finestar International Limited, a British
Virgin Islands corporation.
CONVERSION. The note is convertible into Common Stock at a conversion price
equal to (i) the amount of principal to be so converted divided by (ii) 11.00.
The conversion price and the number of shares received upon conversion will be
proportionally adjusted in the event of stock splits, stock dividends,
combinations and recapitalizations. The note also provides for adjustments to
the conversion price if the Company issues shares of Common Stock, or shares
convertible into or exercisable for Common Stock, at a price per share less than
the conversion price of the note, subject to certain exclusions. Those
exclusions include any shares issued by the Company: (i) upon conversion of the
note and/or in connection with the issuance and exercise of the warrant
(described below), (ii) upon exercise of stock option grants and stock purchase
rights approved by a majority of the Board of Directors pursuant to plans
approved by the Company's shareholders, (iii) upon the conversion or the
exercise of convertible or exercisable securities in existence prior to January
15, 2002, (iv) in connection with acquisitions and commercial relationships
(provided that the purpose of such transaction is not capital raising) and (v)
in connection with the satisfaction of any earn-out or contingent payment
obligation of the Company arising out of an acquisition consummated prior to
January 15, 2002.
In addition, the note provides that the actual number of shares of Common Stock
to be issued to Finestar is subject to applicable restrictions imposed on any
such issuance by Nasdaq Marketplace Rules or by the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
INTEREST. The convertible note bears interest at the rate of 3% per annum.
Interest is payable in cash semi-annually, net of applicable withholding tax,
with the first payment due on June 15, 2002.
REDEMPTION. The convertible note is subject to redemption, at the Company's
election, at a redemption price of 100% of the principal amount, together with
accrued and unpaid interest to the redemption date plus any remaining interest
that would have been payable had the note remained outstanding until January 15,
2007. However, the Company cannot redeem the convertible note prior to January
15, 2005 and thereafter unless (a)(i) a shelf registration statement with
respect to the resale by the holder of the note has been declared effective (ii)
the use of the shelf registration has not been suspended on the date notice of
redemption is given, and (iii) the registration will remain effective and not
suspended through the date of redemption and for 45 days thereafter, or (b) the
shares of Common Stock issuable upon conversion of the note are freely tradeable
under Rule 144(k) under the Securities Act of 1933, as amended.
RIGHT TO REQUIRE REPURCHASE. Finestar has the right to require the Company to
repurchase the entire convertible note or a portion of the convertible note (i)
at any time on or after January 15, 2005 or (ii) in the event of a change of
control of the Company. The repurchase price equals the sum of the accrued and
unpaid interest on the convertible note to the date of payment plus (a) in the
case of a repurchase pursuant to a change of control, 115% of the principal
amount of the note outstanding, or (b) in the case of repurchase other than
pursuant to a change of control, 100% of the principal amount of the portion of
9
the convertible note to be repurchased. Change of control is defined as the
acquisition by any person of beneficial ownership, through a purchase, merger or
other acquisition transaction or series of transactions, of shares of the
Company's capital stock, entitling such person to exercise 50% or more of the
total voting power of all shares of capital stock entitled to vote generally in
the elections of directors.
EVENTS OF DEFAULT. An "event of default" under the convertible note will occur
if, among other things, the Company (i) defaults in the payment of any
principal, interest or premium when it becomes due for a period of three
business days, (ii) defaults in the performance of obligations with respect to
the conversion of the note for a period of five business days, (iii) fails to
give notice of a change of control as required by the terms of the note or fails
to perform in any material respect an agreement or obligation in connection with
the Securities Purchase Agreement or the note, (iv) materially breaches a
representation and warranty of the Securities Purchase Agreement which results
in a material adverse effect on the Company, (vi) defaults under the Company's
Credit Agreement, dated as of January 23, 2001, as amended, with a syndicate of
banks, or (v) files, or one or more of its significant subsidiaries files, for
bankruptcy or similar protection or consents to the entry of an order in an
involuntary case under bankruptcy or similar laws.
WARRANT. In connection with the Securities Purchase Agreement, the Company also
issued a five-year warrant to Finestar to purchase up to 1,550,000 shares of
Common Stock. The exercise price per share of Common Stock is equal to $11.50.
The warrant contains a "cashless exercise" feature pursuant to which the
exercise price for the portion of the warrant being exercised is paid by
surrendering warrants with value. The value of the warrants surrendered is
determined by subtracting the aggregate exercise price therefor from the five
trading day average of the market price of Common Stock underlying such warrants
equal to such aggregate exercise price. This feature allows the holder to
exercise the warrant and purchase shares of Common Stock without using cash and
reduces the number of shares of common stock issued to the holder upon such net
exercise of the warrant. In addition, the warrant contains an automatic exercise
feature that is triggered if a portion of the warrant remains unexercised
immediately prior to its expiration and the current market price of Common Stock
exceeds the exercise price. If both conditions exist, the warrant will
automatically convert into shares of Common Stock as if surrendered in a
"cashless exercise".
The exercise price and the number of shares received upon exercise will be
proportionally adjusted in the event of stock splits, stock dividends,
combinations and recapitalizations. The warrant also provides for adjustments to
the exercise price if the Company issues shares of Common Stock at a price per
share less than the exercise price of the warrant, subject to certain
exclusions. Those exclusions include shares issued by the Company: (i) upon
conversion of the note and/or in connection with the issuance and exercise of
the warrant, (ii) upon the exercise of stock option grants and stock purchase
rights approved by a majority of the Board of Directors pursuant to plans
approved by the Company's shareholders, (iii) upon the conversion or the
exercise of convertible or exercisable securities in existence prior to January
15, 2002, (iv) in connection with acquisitions and commercial relationships
(provided that the purpose of such transaction is not capital raising) and (v)
in connection with the satisfaction of any earn-out or contingent payment
obligation of the Company arising out of an acquisition consummated prior to
January 15, 2002.
In addition, the warrant provides that the actual number of shares of Common
Stock to be issued to Finestar is subject to applicable restrictions imposed on
any such issuances by Nasdaq Marketplace Rules or by the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended. The warrant expires on January
15, 2007.
COLLATERAL RIGHTS. In connection with the Securities Purchase Agreement,
Finestar was granted a "right of first negotiation." To the extent the Company
(i) receives a proposal that contemplates a sale of control or a sale of all or
substantially all of the Company's assets on a consolidated basis or the
Company's power supply business, or (ii) determines to sell 15% or more of its
voting securities or all or substantially all of the Company's assets on a
consolidated basis or the Company's power supply business (subject to certain
exceptions), the Company must notify Finestar and give it the opportunity to
negotiate a transaction. Additionally, Finestar was granted the right to have
two observers attend meetings of the Company's Board of Directors and receive
related materials, subject to the Company's right to withhold related materials
and exclude such observers from meetings for reasonable purposes.
10
REGISTRATION RIGHTS
- -------------------
Pursuant to the Registration Rights Agreement with Finestar executed in
connection with the Securities Purchase Agreement, the Company agreed to file
with the SEC a registration statement for the resale of the shares of Common
Stock issuable upon conversion of the convertible note and the exercise of the
warrant. The Registration Rights Agreement also provides Finestar with demand
registration rights and piggyback registration rights customary for a
transaction of this type. We filed a Registration Statement on Form S-3 with the
SEC on January 25, 2002 in order to register 6,095,454 shares of Common Stock
that may be issued upon full conversion of the note and the full exercise of the
warrant. This Registration Statement is currently under review by the SEC.
Under the Registration Rights Agreement with Finestar, the Company is required
to use its best efforts to register for resale the shares of Common Stock
underlying the note and warrant. If the Registration Statement is not declared
effective by April 5, 2002 or does not remain effective, the Company is required
to pay additional interest under the note for the period during which the
Registration Statement is not effective a rate per annum equal to an additional
nine percent (9%) of the principal amount due under the convertible note.
11
EXECUTIVE OFFICERS
The following table sets forth the executive officers and key employees of the
Company and their respective positions.
- --------------------------------------------------------------------------------
NAME AGE POSITION(S) WITH THE COMPANY
- --------------------------------------------------------------------------------
Robert J. Aebli 66 President - Communications Products
- --------------------------------------------------------------------------------
Kenneth E. Blake 47 President - Marketing and Development
- --------------------------------------------------------------------------------
Ewald Braith 38 President - Communications Infrastructure
Group
- --------------------------------------------------------------------------------
D. Harvey Dewan 62 President - Global Manufacturing
- --------------------------------------------------------------------------------
Richard F. Gerrity 46 Corporate Treasurer
- --------------------------------------------------------------------------------
Joseph M. O'Donnell 55 Co-Chairman of the Board of Directors;
President and Chief Executive Officer
- --------------------------------------------------------------------------------
Richard J. Thompson 52 Vice President - Finance; Chief Financial
Officer and Secretary
- --------------------------------------------------------------------------------
Norman C. Wussow 56 President - Enterprise Computing Group
- --------------------------------------------------------------------------------
ROBERT J. AEBLI has been President of Communications Products since November
1993.
KENNETH E. BLAKE has been President - Marketing and Development since August
2000. Previously Mr. Blake was Vice President - Sales and Marketing for Arcom,
Inc., a provider of design and installation services for network systems from
February 1999 through August 2000. For more than five years prior to February
1999, Mr. Blake was Vice President - Sales of the Company.
EWALD BRAITH was appointed President - Communications Infrastructure Group in
January 2002. From January 2000 through December 2001, Mr. Braith served as
Vice-President - Engineering for the Global Wireless and Communications
Infrastructure divisions. Mr. Braith joined Zytec in 1991 and held various
engineering positions, most recently Engineering Manager of Zytec Hungary, until
December 1997.
D. HARVEY DEWAN was appointed President of Global Manufacturing in January 2000.
From December 1997 to December 1999, Mr. Dewan served as President of the
Company's North American and Asian Manufacturing divisions. From February to
December 1997, Mr. Dewan was Vice President of Operations for Communications
Products.
RICHARD F. GERRITY was appointed Corporate Treasurer in July 2000. From April
1996 to July 2000, Mr. Gerrity served as Director of Treasury at Hadco
Corporation, a manufacturer of electronic components for the technology
industry.
JOSEPH M. O'DONNELL was appointed Chairman of the Board of Directors in February
1997 and as Co-Chairman of the Board following the merger of Zytec into the
Company. Mr. O'Donnell has served as President and Chief Executive Officer since
July 1994.
RICHARD J. THOMPSON has served as Vice President - Finance, Chief Financial
Officer, and Secretary since June 1990.
NORMAN C. WUSSOW was appointed to the position of President - Enterprise
Computing Group in June 2001. From June 1999 through June 2001, Mr. Wussow
served as President of the Company's North America-Commercial division. From
January 1998 through June 1999, Mr. Wussow served as Vice President - Custom
12
Engineering of North America's Commercial division. Mr. Wussow joined Zytec in
1993 and held various engineering positions, most recently Vice President -
Engineering until December 1997, when Zytec was merged into the Company.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information for the fiscal years ended December
28, 2001 ("fiscal year 2001"), December 29, 2000 ("fiscal year 2000"), and
December 31, 1999 ("fiscal year 1999"), in respect of compensation earned by the
Chief Executive Officer and by the other four most highly compensated executive
officers (whose salary and bonus earned in fiscal year 2001 exceeded $100,000)
of the Company serving at the end of fiscal year 2001 (the "Named Executives").
- --------------------------------------------------------------------------------
NAME ANNUAL COMPENSATION LONG-TERM COMPENSATION
- --------------------------------------------------------------------------------
Other Annual Securities All Other
Name and Fiscal Bonus Compensation Underlying Compensation
Position(s) Year Salary($) ($)(1) ($)(2) Options(#)(3) ($)
- -------------------------------------------------------------------------------------------------------
Joseph M. 2001 $559,854 -0- -0- 170,000 $32,600(4)
O'Donnell 2000 516,910 $450,270 -0- 137,500 32,500(4)
CO-CHAIRMAN, 1999 495,150 553,217 -0- 70,000 32,300(4)
CHIEF EXECUTIVE
OFFICER AND
PRESIDENT
- --------------------------------------------------------------------------------------------------------
Richard J. 2001 292,191 -0- -0- 105,000 14,946(5)
Thompson 2000 269,794 101,113 -0- 127,500 14,639(5)
VICE 1999 247,188 197,245 -0- 45,000 14,358(5)
PRESIDENT-FINANCE,
CHIEF FINANCIAL
OFFICER AND
SECRETARY
- --------------------------------------------------------------------------------------------------------
Robert J. Aebli 2001 227,146 -0- -0- 35,000 22,685(6)
PRESIDENT- 2000 216,000 247,428 -0- 15,000 21,754(6)
COMMUNICATIONS 1999 188,023 97,544 -0- 15,429 18,085(6)
PRODUCTS
- --------------------------------------------------------------------------------------------------------
Norman C. Wussow 2001 223,776 -0- -0- 40,000 15,824(7)
PRESIDENT- 2000 201,807 26,520 -0- 50,000 15,353(7)
ENTERPRISE 1999 175,280 61,339 -0- 16,000 14,213(7)
COMPUTING GROUP
- --------------------------------------------------------------------------------------------------------
Kenneth E. Blake 2001 247,531 -0- -0- 40,000 8,065(9)
PRESIDENT- 2000(8) 89,481 11,750 -0- 40,000 3,125(9)
MARKETING AND 1999 -0- -0- -0- -0- -0-
DEVELOPMENT
- ---------------------------------------------------------------------------------------------------------
(1) Includes annual amounts awarded under our Executive Incentive Plan to Named
Executives.
(2) Includes only those perquisites that are, in the aggregate, greater than or
equal to the lesser of $50,000 or 10% of annual salary and bonus.
(3) Represents options awarded under our various stock option plans.
(4) Includes insurance premiums paid by the Company in the amounts of $20,000,
$20,000 and $20,000 with respect to two life insurance policies for the
benefit of Mr. O'Donnell, including a whole-life policy and a hybrid policy
in fiscal years 2001, 2000 and 1999, respectively. Also includes $7,500,
$7,500 and $7,500 in premiums paid by the Company with respect to health
13
insurance for the benefit of Mr. O'Donnell and contributions of $5,100,
$5,000 and $4,800 to the Company's 401(k) plan in fiscal years 2001, 2000
and 1999, respectively.
(5) Includes contributions in the amounts of $5,100, $5,000 and $4,800 by the
Company to its 401(k) plan for the benefit of Mr. Thompson and insurance
premiums in the amounts of $9,846, $9,639 and $9,558 paid by the Company
with respect to term life insurance and health insurance for the benefit of
Mr. Thompson in fiscal years 2001, 2000 and 1999, respectively.
(6) Includes contributions in the amounts of $5,100, $5,000 and $4,800 by the
Company to its 401(k) plan for the benefit of Mr. Aebli and insurance
premiums in the amounts of $17,585, $16,754 and $13,285 paid by the Company
with respect to term life insurance and health insurance for the benefit of
Mr. Aebli in fiscal years 2001, 2000 and 1999, respectively.
(7) Includes contributions in the amounts of $5,100, $5,000 and $4,800 by the
Company to its 401(k) plan for the benefit of Mr. Wussow and insurance
premiums in the amounts of $10,724, $10,353 and $9,413 paid by the Company
with respect to term life insurance and health insurance for the benefit of
Mr. Wussow in fiscal years 2001, 2000 and 1999, respectively.
(8) Mr. Blake rejoined the Company in August 2000.
(9) Includes insurance premiums in the amounts of $8,065 and $3,125 paid by the
Company with respect to term life insurance and health insurance for the
benefit of Mr. Blake in fiscal years 2001 and 2000, respectively.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning stock options
granted to the Named Executives in fiscal year 2001.
- -------------------------------------------------------------------------------------------------------
Percentage of
Total Options
Number of Granted to
Securities Employees in Exercise
Underlying Fiscal Price Grant Date
Options Year(%)(1) Per Expiration Present
Name Granted(#) Share($) Date Value($)(2)
- -------------------------------------------------------------------------------------------------------
Joseph M. O'Donnell 7,500 0.28 $11.16 03/27/06 $50,929
7,500 0.28 10.09 03/28/06 46,079
7,500 0.28 10.44 03/29/06 47,648
7,500 0.28 10.81 03/30/06 49,360
70,000 2.58 9.19 04/04/06 438,942
70,000 2.58 7.20 10/24/06 342,332
------- ---- -------
170,000 6.28 975,290
- -------------------------------------------------------------------------------------------------------
Richard J. Thompson 7,500 0.28 10.38 03/22/06 47,363
7,500 0.28 10.09 03/28/06 46,079
45,000 1.66 9.19 04/04/06 282,177
45,000 1.66 5.37 10/16/06 164,138
------- ---- -------
105,000 3.88 539,757
- -------------------------------------------------------------------------------------------------------
Robert J. Aebli 15,000 0.55 9.19 04/04/06 94,059
20,000 0.74 7.20 10/24/06 83,576
------- ---- -------
35,000 1.29 177,635
- -------------------------------------------------------------------------------------------------------
14
- --------------------------------------------------------------------------------
Percentage of
Total Options
Number of Granted to
Securities Employees in Exercise
Underlying Fiscal Price Grant Date
Options Year(%)(1) Per Expiration Present
Name Granted(#) Share($) Date Value($)(2)
- --------------------------------------------------------------------------------
Norman C. Wussow 20,000 0.74 9.19 04/04/06 125,412
20,000 0.74 5.37 10/16/06 72,950
------- ---- -------
40,000 1.48 198,362
- --------------------------------------------------------------------------------
Kenneth E. Blake 20,000 0.74 9.19 04/04/06 125,412
20,000 0.74 5.37 10/16/06 72,950
------- ---- -------
40,000 1.48 198,362
- --------------------------------------------------------------------------------
(1) Represents the percentage of options granted to all employees of the
Company in fiscal year 2001.
(2) Based upon the Black-Scholes option pricing model adopted for use in
valuing executive stock options. The actual value, if any, a Named
Executive may realize will depend upon the excess of the market price of
the Common Stock over the exercise price on the date the option is
exercised. There is, therefore, no assurance that the value realized by a
Named Executive will be at or near the value estimated by the Black-Scholes
model. The estimated values under the model are based upon certain
assumptions that we believe are reasonable, such as a risk-free rate of
return of 4.5%, stock price volatility of 94%, future dividend yield of 0%
and expected life of 3.9 years. The values do not take into account certain
features of the stock plans that may affect such values, such as conditions
to exercisability and nontransferability.
OPTIONS EXERCISED IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES TABLE
The following table sets forth certain information with respect to stock options
exercised by the Named Executives in fiscal year 2001 and certain information
with respect to exercisable and non-exercisable stock options held on December
28, 2001 by the Named Executives. The table also includes the value of
"in-the-money" stock options that represents the spread between the exercise
price of the existing stock options and the year-end trading price of the Common
Stock.
------------------------- -------------------------
Number of Securities
Underlying Unexercised Value of In-The-Money
Options Held on December Options Held on December
28, 2001 (#) 28, 2001 (1)($)
------------------------- -------------------------
- ---------------------------------------------------------------------------------------------------------
Shares
Acquired Value
on Realized Not Not
Name Exercise (#)($) Exercisabl Exercisable Exercisable Exercisable
- ---------------------------------------------------------------------------------------------------------
Joseph M. O'Donnell -0- -0- 654,615 273,750 $1,594,169 $150,675
- ---------------------------------------------------------------------------------------------------------
Richard J. Thompson -0- -0- 267,562 191,250 137,900 179,213
- ---------------------------------------------------------------------------------------------------------
Robert J. Aebli -0- -0- 87,929 50,000 103,350 42,638
- ---------------------------------------------------------------------------------------------------------
Norman C. Wussow -0- -0- 40,279 75,000 -0- 79,650
- ---------------------------------------------------------------------------------------------------------
Kenneth E. Blake -0- -0- -0- 80,000 -0- 79,650
- ---------------------------------------------------------------------------------------------------------
(1) Based upon the closing price of the Common Stock on December 28, 2001 of
$9.27.
15
EMPLOYMENT ARRANGEMENTS
The Compensation and Stock Option Committee approved an employment agreement,
dated as of January 1, 2000, between the Company and Mr. O'Donnell (the
"O'Donnell Agreement"). The O'Donnell Agreement provides that effective February
1, 2000, Mr. O'Donnell is to receive a base salary of $522,000 per year, which
amount is subject to adjustment. Effective February 1, 2001, Mr. O'Donnell's
salary was increased to $560,000. In addition, the O'Donnell Agreement provides
that Mr. O'Donnell is eligible to receive an incentive payment each year of
employment in an amount equal to up to 170% of his base salary for such year.
Mr. O'Donnell is also eligible for additional payments in the discretion of the
Compensation and Stock Option Committee awarded in accordance with the terms of
the Company's Executive Incentive Plan. Mr. O'Donnell is also entitled to
reimbursement of certain health, disability and life insurance benefits. The
Company also has agreed to cause Mr. O'Donnell to be nominated as a director
throughout the term of his employment. The O'Donnell Agreement's initial term
expired on December 31, 2000, but is renewable each successive year thereafter
for an additional one-year term unless either party provides written notice of
termination. No such notice of termination was provided by either party. Mr.
O'Donnell is currently being paid pursuant to the terms of the O'Donnell
Agreement.
The Compensation and Stock Option Committee also approved an employment
agreement between the Company and Richard J. Thompson, Vice President and Chief
Financial Officer of the Company, dated as of January 1, 2000 (the "Thompson
Agreement"). The Thompson Agreement provides that effective February 1, 2000,
Mr. Thompson is to receive a base salary of $275,000 per year, which amount is
subject to adjustment. Effective February 1, 2001, Mr. Thompson's salary was
increased to $300,000. In addition, the Thompson Agreement provides that Mr.
Thompson is eligible to receive an incentive payment each year of employment in
an amount equal to up to 104% of his base salary for such year. Mr. Thompson is
also eligible for additional payments in the discretion of the Compensation and
Stock Option Committee awarded in accordance with the terms of the Company's
Executive Incentive Plan. Under the terms of the Thompson Agreement, Mr.
Thompson is also entitled to reimbursement of health, disability and life
insurance benefits. The Thompson Agreement's initial term expired on December
31, 2000, but is renewable each successive year thereafter for an additional
one-year term unless either party provides written notice of termination. No
such notice of termination was provided by either party. Mr. Thompson is
currently being paid pursuant to the terms of the Thompson Agreement.
Upon any event of earlier termination of either of the O'Donnell Agreement or
the Thompson Agreement, each of Mr. O'Donnell and/or Mr. Thompson, as the case
may be, is entitled to receive his respective base salary through the date of
termination. In the event of either of Mr. O'Donnell's and/or Mr. Thompson's
death or "disability" (as defined in the respective employment agreement), each
of Mr. O'Donnell and/or Mr. Thompson, as the case may be, is entitled to receive
his respective base salary for an additional year from the date of termination
plus the full incentive payment under the Executive Incentive Plan to which he
would have been entitled if the termination had occurred at the end of the
calendar year during which such termination occurred (the "Full Incentive
Payment"), except that payments of base salary for the additional year will be
offset by certain company-sponsored insurance benefits payable during such
period. In the event that either of Mr. O'Donnell's or Mr. Thompson's employment
is terminated by the Company without "cause" (as defined in the respective
employment agreement) or by either of Mr. O'Donnell or Mr. Thompson due to the
Company's "substantial breach" (as defined in the respective employment
agreement), each of Mr. O'Donnell and/or Mr. Thompson, as the case may be, is
entitled to receive his respective base salary plus the Full Incentive Payment
through the date of termination plus an amount equal to the product of his
respective base salary and the Full Incentive Payment multiplied by two, payable
over a 24-month period provided that the last 12 monthly payments shall not be
made if either of Mr. O'Donnell or Mr. Thompson, as the case may be, is found to
be in breach of certain non-disclosure, non-compete or non-solicitation
agreements. Messrs. O'Donnell and Thompson are each also entitled to receive
reimbursement of expenses of outplacement-related services up to $45,000. In the
event of the Company's termination of either of Mr. O'Donnell's and/or Mr.
Thompson's employment, as the case may be, without "cause", or termination of
either agreement by Mr. O'Donnell or Mr. Thompson due to the Company's
"substantial breach" following a "change of control" (as defined in the
16
respective employment agreement), each of Mr. O'Donnell and/or Mr. Thompson, as
the case may be, is entitled to receive within 10 days from the date of
termination (a) a lump-sum payment equal to the product of the sum of his
respective base salary and the Full Incentive Payment multiplied by three and
(b) an amount to cover certain excise taxes that may be incurred by Mr.
O'Donnell and/or Mr. Thompson as a result of payment received by either of them
following such "change of control". In the event the Company does not renew
either Agreement, each of Mr. O'Donnell and/or Mr. Thompson, as the case may be,
shall generally be entitled to receive his respective base salary and Full
Incentive Pay for an additional two years from the date of termination.
Certain options granted to the Named Executives become immediately exercisable
in the event of a "change of control" and certain other options become
immediately exercisable if a Named Executive's employment is terminated within
six months after a "change of control" of the Company pursuant to the terms of
the stock option plan under which the options were granted.
COMPENSATION AND STOCK OPTION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation and Stock Option Committee of the Company's Board of Directors
is comprised of three individuals, each of whom is an Outside Director. The
Compensation and Stock Option Committee is responsible for establishing the
overall philosophy and strategy of the Company's executive compensation program
and overseeing the executive compensation plans developed to execute the
Company's compensation strategy.
THE COMPANY'S EXECUTIVE COMPENSATION STRATEGY
The Company's executive compensation program has been designed to promote
shareholder interests and to:
o Link key executives' compensation to the Company's business
objectives;
o Promote human resource goals to attract, hire and retain quality
talent;
o Reward teamwork and individual performance for achieving annual
business results;
o Balance short and long-term considerations through compensation for
achievement of annual goals that are consistent with long-term
objectives; and
o Provide motivation to key executives to excel by offering
competitive incentive and total compensation.
It is the Company's intention to ensure that all compensation paid to its
executives is tax deductible under Section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code"). Although Section 162(m) of the Code imposes
limits on deductibility for certain non-approved compensation to certain
executives exceeding $1 million per year, the Company, as a result of the
structure of the compensation paid to its executives, does not currently
anticipate any limitations of this deduction.
COMPENSATION OF EXECUTIVE OFFICERS
The Company's executive compensation program includes two principal elements:
annual cash compensation and long-term awards. The Company uses survey data of
comparable companies in its industry with comparable revenue levels in assessing
cash compensation and long-term awards. This evaluation also considers
competitive data of the Company's Selected Peer Group included in the Stock
Performance Graph set forth below.
17
Annual cash compensation includes both base salaries and annual incentive awards
pursuant to the Company's Executive Incentive Plan. Executives' base salaries
are evaluated each year based upon an assessment of market data of comparable
companies. Subject to the applicable terms of any employment agreement,
executives are eligible for adjustments in base salary based upon an assessment
of individual performance and changes in principal job duties and
responsibilities. In fiscal year 2001, based upon assessments of the individual
performances, the Company awarded an increase in base salary to Messrs.
O'Donnell, Thompson, Aebli, Wussow, and Blake.
Executives are eligible to receive annual incentive awards under the Company's
Executive Incentive Plan. Each executive participating in the plan has a
targeted annual incentive award based upon competitive practice that represents
a stated percentage of the executive's base salary. The performance of
executives with corporate-wide responsibilities is evaluated based upon the
achievement of corporate financial targets measured by the Company's net income
and revenue growth. The performance of executives with divisional and/or
subsidiary responsibility is evaluated based upon the achievement of divisional
or subsidiary financial targets measured by divisional net income, revenue
growth and cash flow. The financial targets for fiscal year 2001 were developed
from the Company's annual planning process. The Compensation and Stock Option
Committee reviews and approves the targets each year based upon fairness, degree
of difficulty and reasonableness. Further, the Company must achieve a minimum
net income performance threshold before corporate executives are entitled to
receive a financial target payout under the Executive Incentive Plan. There may
be no incentive payout if the Company is not profitable on a company-wide basis.
Aggregate annual incentive awards are limited to no more than 10% of the
Company's net income, excluding extraordinary items, before total after-tax cost
of the aggregate executive annual incentive payout, unless otherwise approved by
the Compensation and Stock Option Committee and the Board of Directors.
Long-term incentive compensation includes payments under the 2000 Performance
Equity Plan. The 2000 Performance Equity Plan permits the Company to grant
non-qualified stock options to selected executives at an exercise price no less
than the fair market value of the Common Stock on the date of grant.
Each year the Compensation and Stock Option Committee reviews and approves
annual salaries, annual incentive awards, grants of long-term incentives and the
performance targets and criteria established for both the annual and long-term
incentive plans. In addition, the Compensation and Stock Option Committee
reviews the performance of the Company and its divisions and subsidiaries and
exercises the final authority in approving the payout of executive incentive
awards. During fiscal year 2001, the Compensation and Stock Option Committee
engaged executive compensation consultants and used compensation data for
comparable companies to support its decisions.
In the beginning of fiscal year 2001, the Compensation and Stock Option
Committee reviewed and approved the financial targets to be included in the
fiscal year 2001 Executive Incentive Plan for the Chief Executive Officer and
the Company's other executive officers. Based upon the Compensation and Stock
Option Committee's review of the Company's performance and the Chief Executive
Officer and the Company's other executive officers following conclusion of the
2001 fiscal year, we did not grant awards to the Chief Executive Officer or any
of our other executive officers who had been with the Company for the entire
fiscal year 2001 under the 2001 Executive Incentive Plan.
DETERMINATION OF COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER
Mr. O'Donnell's base salary during fiscal year 2001 was increased to $560,000.
The increased base salary of Mr. O'Donnell was based largely upon an assessment
of market data of comparable companies, as described above. On April 4, 2001 and
on October 24, 2001, the Company, pursuant to the 2000 Performance Equity Plan,
granted Mr. O'Donnell non-qualified stock options to purchase 70,000 shares of
Common Stock at an exercise price of $9.188 and $7.20 per share, respectively.
The terms of these options are for 58 months from the date of grant and are
exercisable as follows: (i) 50% vesting any time after the second anniversary of
the date of grant if the closing price of a share of Common Stock equals or
18
exceeds 115% of the exercise price for any 20 of 30 consecutive trading days
after the date of such grant, (ii) 100% vesting any time after the third
anniversary if the closing price of a share of Common Stock equals or exceeds
130% of the exercise price per share for any 20 of 30 consecutive trading days
after the date of such grant and (iii) to the extent not previously exercisable,
100% after 58 months from the date of grant. In addition, Mr. O'Donnell received
non-qualified stock options to purchase 7,500 shares of Common Stock on each of
March 27, 2001, March 28, 2001, March 29, 2001 and March 30, 2001, at exercise
prices of $11.16, $10.09, $10.44 and $10.81, respectively, each pursuant to the
Company's Executive Ownership Program pursuant to which participants are
eligible to receive stock option grants based on certain stock ownership
positions in the Company's Common Stock. The terms of these options are for five
years from the date of issue and are exercisable as follows: (i) 50% vesting any
time after the first anniversary of the date of issue, and (ii) the remaining
50% vesting any time after second anniversary of the date of issue.
Members of the Compensation and Stock Option Committee:
Phillip A. O'Reilly, Chairman
Bert Sager
Lewis Solomon
AUDIT COMMITTEE REPORT
Management is responsible for the Company's internal controls and the financial
reporting process. Arthur Andersen LLP, the Company's independent auditor, is
responsible for performing an independent audit of the Company's consolidated
financial statements in accordance with generally accepted auditing standards.
The Audit Committee's responsibility is to monitor and oversee these processes.
In this context, the Audit Committee reviewed and discussed the audited
financial statements with both the Company management and Arthur Andersen LLP.
Specifically, the Audit Committee has discussed with Arthur Andersen LLP matters
required to be discussed by SAS 61 (Codification of Statements on Auditing
Standards, AU Section 380).
The Audit Committee received from Arthur Andersen LLP the written disclosures
and the letter required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and has discussed with Arthur
Andersen LLP the issue of its independence from the Company.
Based on the Audit Committee's review of the audited financial statements and
its discussions with both management and Arthur Andersen LLP noted above, the
Audit Committee recommended to the Company's Board of Directors that the audited
consolidated financial statements be included in the Company's Annual Report on
Form 10-K for the fiscal year ended December 28, 2001.
The Company paid Arthur Andersen LLP $679,000 in aggregate fees for professional
services rendered for the audit of the Company's fiscal year 2001 annual
financial statements, the review of financial statements included in the
Company's quarterly reports on Form 10-Q and statutory audits of subsidiaries.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
During 2001, the Company paid Arthur Andersen LLP $582,000 for financial
information systems design and implementation services provided to the Company
in fiscal year 2000.
19
ALL OTHER FEES
The Company paid Arthur Andersen LLP an additional $223,000 for other services,
including the audit of the Company's benefit plan, accounting and tax assistance
on proposed transactions and acquisition due diligence provided to the Company
in fiscal year 2001.
The Audit Committee has considered whether the provision of non-audit services
by Arthur Anderson LLP was compatible with maintaining its independence and has
determined that the nature and substance of the non-audit services did not
impair the status of Arthur Andersen LLP as the Company's independent auditors.
AUDIT COMMITTEE:
Edward S. Croft, III, Chairman
Dr. Fred C. Lee
Lawrence J. Matthews
Phillip A. O'Reilly
Ronald D. Schmidt
STOCK PERFORMANCE GRAPH
The line graph below compares the cumulative total stockholder return (assuming
reinvestment of dividends) on the Company's Common Stock, over the most recent
five-year period up to and including December 31, 2001 with the cumulative total
return of companies on the Russell 2000(R) Index and the S&P SmallCap Electrical
Components and Equipment Index (the "Electrical Components and Equipment
Index"), a published line-of-business index. In the preceding fiscal year we had
compared the cumulative total shareholder return on the Company's Common Stock
with the S&P SmallCap Electrical Equipment Index; however, this index is no
longer tracked or published. In light of the Company's continuing focus on its
power conversion business, the Electrical Components and Equipment Index, which
includes the Company's Common Stock in its constituency, was selected because we
believe this index provides a meaningful comparison to the Company's
performance.
CUMULATIVE TOTAL RETURN
Based on an investment of $100 and reinvestment of dividends beginning on
December 31, 1996
[GRAPHIC CHART OMITTED]
Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 Dec-01
Artesyn Technologies, Inc. $100 $116 $72 $108 $81 $48
Russell 2000 $100 $121 $116 $139 $133 $135
S&P SmallCap Electrical $100 $117 $115 $186 $204 $167
Components & Equipment
Index
INDEPENDENT AUDITORS
In light of the current circumstances surrounding Arthur Andersen LLP, the
Company has not made a decision on the selection of the independent certified
public accountants for the Company's fiscal year ending December 27, 2002. The
Audit Committee anticipates making a recommendation for the selection of its
independent certified public accountants to the Company's Board of Directors at
its upcoming Board meeting on May 9, 2002.
20
SUBMISSION OF STOCKHOLDER PROPOSALS
At the date of this Proxy Statement, the Board of Directors has no knowledge of
any business that will be presented for consideration at the Meeting, other than
as described above. In accordance with the Company's By-laws and Rules 14a-4(c)
and 14a-5(e) promulgated under the Exchange Act, the Company hereby notifies its
stockholders that since it did not receive notice by February 6, 2002 of any
other proposed matter to be submitted for stockholder vote at the Meeting, all
proxies received in respect of the Meeting will be voted in the discretion of
the Company's management on any other matters which may properly come before the
Meeting.
Any proposal which is intended to be presented by any stockholder for action at
the 2003 Annual Meeting of Stockholders must be received in writing by the
Secretary of the Company, at 7900 Glades Road, Suite 500, Boca Raton, Florida
33434, not later than November 23, 2003 in order for such proposal to be
considered for inclusion in the proxy statement and form of proxy relating to
the 2003 Annual Meeting of Stockholders.
The Company hereby further notifies its stockholders that if the Company does
not receive notice by February 19, 2003 of a proposed matter to be submitted for
stockholders vote at the 2003 Annual Meeting of Stockholders, then any proxies
held by members of the Company's management in respect of such meeting may be
voted at the discretion of such management members on such matter if it shall
properly come before such meeting, without any discussion of such proposed
matter in the proxy statement to be distributed in respect of such meeting.
By Order of the Board of Directors
RICHARD J. THOMPSON
Secretary
Dated: April 5, 2002
21
ARTESYN TECHNOLOGIES, INC.
PROXY FOR ANNUAL MEETING TO BE HELD ON MAY 9, 2002
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder(s) of ARTESYN TECHNOLOGIES, INC., a Florida
corporation (the "Company"), hereby constitute(s) and appoint(s) PHILLIP A.
O'REILLY and BERT SAGER, and each of them, with full power of substitution in
each, as the agent, attorneys and proxies of the undersigned, for and in the
name, place and stead of the undersigned, to vote at the Annual Meeting of
Stockholders of the Company to be held at Pete's Grand Terrace, 7880 Glades
Road, Boca Raton, Florida, on May 9, 2002 at 10:00 A.M. (local time), and any
adjournment(s) thereof, all of the shares of common stock which the undersigned
would be entitled to vote if then personally present at such meeting in the
manner specified and on any other business as may properly come before the
Meeting.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN ON THE
REVERSE SIDE. IF NO INSTRUCTIONS ARE GIVEN, THIS PROXY WILL BE VOTED FOR ITEM 1
AND IN THE PROXIES' DISCRETION, UPON ANY OTHER MATTERS THAT MAY PROPERLY COME
BEFORE THE MEETING AND ANY ADJOURNMENT(S) THEREOF.
(Continued and to be signed and dated on the reverse side.)
1. ELECTION OF DIRECTORS
FOR ALL NOMINEES /_/ WITHHOLD AUTHORITY /_/ *EXCEPTIONS /_/
listed below to vote for all nominees
listed below
Nominees: Edward S. Croft, III, Fred C. Lee, Lawrence J. Matthews, Joseph
M. O'Donnell, Stephen A. Ollendorff, Phillip A. O'Reilly, Bert
Sager, A. Eugene Sapp, Jr., Ronald D. Schmidt, Lewis Solomon,
John M. Steel
*EXCEPTIONS
------------------------------------------------------------------
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting and any adjournment(s)
thereof and as provided by Rule 14a-4(c) of the Securities Exchange Act of
1934, as amended.
Please sign exactly as name appears to the
left. When shares are held by joint tenants,
both should sign. When signed as attorney,
executor, administrator, trustee or
guardian, please give full title as such. If
a corporation, please sign in full corporate
name by President or other authorized
officer. If a partnership, please sign in
partnership name by authorized person.
Dated
--------------------------------, 2002
--------------------------------------------
Signature
--------------------------------------------
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
VOTES MUST BE INDICATED (X) IN BLACK OR BLUE INK. /_/