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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-12
INRANGE TECHNOLOGIES CORPORATION
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(Name of Registrant as Specified in Its Charter)
INRANGE TECHNOLOGIES CORPORATION
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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:
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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 the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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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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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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[INRANGE LOGO]
100 MT. HOLLY BY-PASS
P.O. BOX 440
LUMBERTON, NEW JERSEY 08048
Telephone: (609) 518-4000
Facsimile: (609) 518-4400
April 4, 2001
Fellow Stockholders:
You are cordially invited to attend the Inrange Technologies Corporation
Annual Meeting of Stockholders on Friday, April 20, 2001 at 9:00 a.m. (Eastern
Time) at our offices located at 100 Mt. Holly By-Pass, Lumberton, New Jersey
08048.
This will be our first Annual Meeting as a public company, and we look
forward to discussing our 2000 performance. This Notice of Annual Meeting and
Proxy Statement describes the business to be transacted at the meeting and
provides other information concerning Inrange that you should be aware of when
you vote your shares. The principal business of the Annual Meeting will be to
elect three directors who will each serve for a three-year term and to ratify
the appointment of Arthur Andersen LLP as our independent accountants.
All stockholders are welcome to attend the Annual Meeting, but it is
important that your shares are represented at the Annual Meeting whether or not
you plan to attend. To ensure that you will be represented, we ask you to sign,
date and return the enclosed proxy card or proxy voting instruction form as soon
as possible. You may also be able to vote by telephone or over the Internet, and
if you are able to and choose one of those forms of voting, you do not need to
return your proxy card. In any event, please vote as soon as possible.
On behalf of the board of directors and our management team, I would like
to express our appreciation for your interest in the affairs of Inrange.
Sincerely,
Gregory R. Grodhaus
President and Chief Executive Officer
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INRANGE TECHNOLOGIES CORPORATION
100 MT. HOLLY BY-PASS
P.O. BOX 440
LUMBERTON, NEW JERSEY 08048
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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FRIDAY, APRIL 20, 2001
9:00 A.M.
100 MT. HOLLY BY-PASS
LUMBERTON, NEW JERSEY 08048
The purpose of our 2001 Annual Meeting is to elect three directors who will
each serve for a three-year term beginning at the Annual Meeting and to ratify
the appointment of Arthur Andersen LLP as our independent public accountants.
The board of directors recommends that you vote FOR each of the director
nominees and FOR the ratification of the appointment of Arthur Andersen LLP as
our independent public accountants.
You can vote at the Annual Meeting in person or by proxy if you were a
stockholder of record on March 9, 2001. You may revoke your proxy at any time
prior to the Annual Meeting.
We have enclosed a copy of our 2001 Annual Report to Stockholders.
By order of the board of directors,
Kenneth H. Koch
Vice President, General
Counsel and Secretary
April 4, 2001
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INRANGE TECHNOLOGIES CORPORATION
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PROXY STATEMENT
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TABLE OF CONTENTS
PAGE
----
Questions and Answers....................................... 1
Election of Directors....................................... 4
Board of Directors and Its Committees....................... 6
Director Compensation....................................... 7
Ownership of Common Stock................................... 7
Section 16(a) Beneficial Ownership Reporting Compliance..... 9
Executive Compensation...................................... 10
Report of the Compensation Committee on Executive
Compensation.............................................. 13
Company Performance......................................... 17
Certain Relationships Between Inrange and SPX............... 17
Report of the Audit Committee............................... 23
Appointment of Independent Public Accountants............... 24
Audit Committee Charter..................................... A-1
ANNUAL REPORT ON FORM 10-K
YOU MAY OBTAIN A FREE COPY OF OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 2000, INCLUDING SCHEDULES, THAT IS ON FILE WITH THE
SECURITIES AND EXCHANGE COMMISSION. PLEASE CONTACT KENNETH H. KOCH, SECRETARY,
INRANGE TECHNOLOGIES CORPORATION, 100 MT. HOLLY BY-PASS, P.O. BOX 440,
LUMBERTON, NEW JERSEY 08048.
This proxy statement and form of proxy are first being sent to stockholders
on or about April 4, 2001.
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QUESTIONS AND ANSWERS
Following are questions often asked by stockholders of publicly held
companies. We hope that the answers will assist you in casting your vote.
WHAT AM I VOTING ON?
Inrange's board of directors is soliciting your vote on:
1. the election of three directors to each serve for a three-year term
beginning at the Annual Meeting; and
2. the ratification of the appointment of Arthur Andersen LLP as our
independent public accountants.
WHO MAY VOTE?
Holders of our common stock at the close of business on March 9, 2001, the
record date, may vote. On that date, there were 75,633,333 shares of our Class A
common stock and 8,855,000 shares of our Class B common stock outstanding.
HOW MANY VOTES DO I HAVE?
As an owner of Class B common stock, you are entitled to one vote for each
share that you hold. SPX Corporation, which owns all of the outstanding Class A
common stock, is entitled to cast five votes for each share that it holds.
Generally, the Class A stockholders and the Class B stockholders vote together
as one class, including for the election of directors and the ratification of
accountants.
HOW DO I VOTE?
All stockholders may vote by mail. You also may vote by telephone or over
the Internet if you hold your shares through a bank or broker that offers either
of those options. To vote by mail, please sign, date and mail your proxy in the
postage paid envelope provided. If you choose to vote in person at the Annual
Meeting, we will give you a ballot at the meeting. If you wish to vote in person
and your shares are held in the name of your broker, bank or other nominee, you
need to bring an account statement or letter from the nominee indicating that
you were the beneficial owner of the shares on March 9, 2001, the record date
for voting.
HOW DOES DISCRETIONARY VOTING AUTHORITY APPLY?
If you sign, date and return your proxy card or vote by telephone or
Internet, your vote will be cast as you direct. If you do not indicate how you
want to vote, you give authority to Jay Zager and Kenneth H. Koch to vote for
the election of directors, the ratification of the appointment of Arthur
Andersen LLP as our independent public accountants and any other matter that is
properly raised at the Annual Meeting. In that event, your proxy will be voted
FOR the election of each director nominee, FOR the ratification of the
appointment of Arthur Andersen LLP and FOR or AGAINST any other properly raised
matters at the discretion of Messrs. Zager and Koch.
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MAY I REVOKE MY PROXY?
Yes, you may revoke your proxy at any time before it is exercised in one of
four ways:
1. Notify our Secretary in writing before the Annual Meeting that you
are revoking your proxy.
2. Submit another proxy with a later date.
3. Vote by telephone or Internet after you have given your proxy.
4. Vote in person at the Annual Meeting.
WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY CARD?
Your shares are likely registered differently or are in more than one
account. You should sign and return all proxy cards to guarantee that all of
your shares are voted.
WHAT CONSTITUTES A QUORUM?
The presence, in person or by proxy, of the holders of one-third of Inrange
shares entitled to vote at the Annual Meeting constitutes a quorum. You will be
considered part of the quorum if you return a signed and dated proxy card, if
you vote by telephone or Internet, or if you attend the Annual Meeting.
Abstentions and broker non-votes are counted as "shares present" at the
Annual Meeting for purposes of determining whether a quorum exists. A broker
non-vote occurs when a broker submits a proxy that does not indicate a vote for
a proposal because he or she does not have voting authority and has not received
voting instructions from you.
WHAT VOTE IS REQUIRED TO ELECT THE DIRECTOR NOMINEES?
A plurality of the votes cast will elect directors. This means that the
three nominees who receive the highest number of votes will be elected. If you
do not want to vote your shares for a particular nominee, you may indicate that
by following the instructions on the proxy card or withhold authority as
prompted during telephone or Internet voting or in person at the meeting.
Abstentions and broker non-votes will have no effect on the election of the
directors.
SPX is the beneficial owner of all of our Class A stock. This represents
approximately 98% of the combined voting power of both classes of Inrange common
stock. As a result, SPX has the vote required to elect the three nominees for
director. SPX has indicated that it will vote its shares for each nominee in
accordance with the recommendation of our board.
WHAT VOTE IS REQUIRED TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS OUR
ACCOUNTANTS?
This proposal will be approved if more than one-half of the votes cast on
this proposal are in favor of the ratification of Arthur Andersen LLP as our
independent public accountants. Abstentions and broker non-votes will have no
effect on the outcome of this proposal.
Since SPX is the beneficial owner of all of our Class A stock, it holds
approximately 98% of the combined voting power of both classes of our common
stock and has the vote required to ratify the selection of Arthur Andersen. SPX
has indicated that it will vote its shares for the ratification of the
appointment of Arthur Andersen in accordance with the recommendation of our
board.
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HOW DO I SUBMIT A STOCKHOLDER PROPOSAL?
You may submit a proposal to be included in our proxy statement for the
2002 annual meeting no later than December 5, 2001. Your proposal must be in
writing and must comply with the proxy rules of the Securities and Exchange
Commission. You may also submit a proposal that you do not want included in the
proxy statement but that you want to raise at the 2002 annual meeting. If you
want to do this, we must receive your written proposal on or after January 4,
2002, but on or before February 3, 2002. If you submit your proposal after the
deadline and we choose to consider it at the meeting, then Securities and
Exchange Commission rules permit the individuals named in the proxies solicited
by Inrange's board of directors for that meeting to exercise discretionary
voting power as to that proposal, but they are not required to do so.
To be properly brought before an annual meeting, our by-laws require that
your proposal include: (1) your name and address, or the name and address of the
beneficial owner for whom you are acting, as they appear on our stock records;
(2) a brief description of the business you want to bring before the meeting;
(3) the reasons for conducting the business at the meeting; (4) any material
interest you or the beneficial owner have in the business you want to bring
before the meeting; and (5) the class and number of Inrange shares that you or
the beneficial owner own beneficially and of record. You should send any
proposal to our Secretary at our address on the cover of this proxy statement.
HOW DO I NOMINATE A DIRECTOR?
If you wish to nominate an individual for election as director at the 2002
annual meeting, we must receive your nomination on or after January 4, 2002, but
on or before February 3, 2002. In addition, if we increase the size of our board
and do not publicly announce the nominees or the size of the increased board on
or before January 10, 2002, then you may submit a nomination through the 10th
day following the announcement.
Our by-laws require that for each person you propose to nominate you
provide: (1) your name and address, or the name and address of the beneficial
owner for whom you are acting, as they appear on our stock records; (2) the
class and number of shares of Inrange stock that you or the beneficial owner own
beneficially and of record; (3) the nominee's written statement that he or she
is willing to be named in the proxy statement as a nominee and to serve as a
director if elected; and (4) any other information regarding the nominee that
would be required by the Securities and Exchange Commission to be included in a
proxy statement had Inrange's board of directors nominated that individual. You
should send your proposed nomination to our Secretary at our address on the
cover of this proxy statement.
WHO PAYS TO PREPARE, MAIL AND SOLICIT THE PROXIES?
Inrange will pay all of the costs of preparing and mailing the proxy
statement and soliciting the proxies. We will ask brokers, dealers, banks,
voting trustees and other nominees and fiduciaries to forward the proxy
materials and our Annual Report to the beneficial owners of Inrange common stock
and to obtain the authority to execute proxies. We will reimburse them for their
reasonable expenses upon request. In addition to mailing proxy materials, our
directors, officers and employees may solicit proxies in person, by telephone or
otherwise. These individuals will not be specially compensated.
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ELECTION OF DIRECTORS
Nine directors currently serve on our board of directors. The directors are
divided into three classes. At this Annual Meeting, you will be asked to elect
three directors. Each director will serve for a term of three years, until a
qualified successor director has been elected, or until he resigns or is removed
by the board. The remaining six directors will continue to serve on the board as
described below. The nominees, David L. Chapman, Robert B. Foreman and
Christopher J. Kearney, are currently Inrange directors.
We will vote your shares as you specify on the enclosed proxy card or
during telephone or Internet voting. If you do not specify how you want your
shares voted, we will vote them FOR the election of the nominees. If unforeseen
circumstances (such as death or disability) make it necessary for the board of
directors to substitute another person for any of the nominees, we will vote
your shares FOR that other person. The board of directors does not anticipate
that any nominee will be unable to serve. The nominees have provided the
following information about themselves. Ages are as of March 1, 2001.
NOMINEES
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DAVID L. CHAPMAN, 66, has been a member of our board of directors since
September 2000. He has been Chief Executive Officer of Northpoint Software
Ventures, a developer of software tools to perform risk and value assessments of
information technology projects, since 1992. Prior to that time, he was a
general partner in Landmark Venture Partners. Mr. Chapman also serves on the
boards of directors of Northpoint Software Ventures, Northpoint Software and
Services, Brooktrout, Inc., Enteron and Template Graphics Software.
ROBERT B. FOREMAN, 43, has been a member of our board of directors since
June 2000. He has been Vice President, Human Resources of SPX Corporation since
May 1999. From 1991 through April 1999, he served as Vice President, Human
Resources at PepsiCo International, based in Asia-Pacific, where he worked for
both the Pepsi and the Frito-Lay International businesses.
CHRISTOPHER J. KEARNEY, 45, has been a member of our board of directors
since October 1998. He has been Vice President, Secretary and General Counsel of
SPX Corporation since February 1997. From April 1995 through January 1997, he
served as Senior Vice President and General Counsel of Grimes Aerospace Company.
From September 1988 through April 1995, he was Senior Counsel at the GE Plastics
business group of General Electric Company.
DIRECTORS CONTINUING UNTIL 2002 ANNUAL MEETING
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LEWIS M. KLING, 56, has been a member of our board of directors since June
2000. Since December 1998, Mr. Kling has been Vice President, Communications and
Technology Systems, of SPX Corporation. From June 1997 through October 1998, he
served as President, Dielectric Communications, a subsidiary of General Signal
Corp. From December 1994 to June 1997, he served as Senior Vice President and
General Manager of the Commercial Avionic Systems business of Allied Signal
Corporation.
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PATRICK J. O'LEARY, 43, has been a member of our board of directors since
October 1998. He has been Vice President, Finance, Treasurer and Chief Financial
Officer of SPX Corporation since September 1996. From 1994 through 1996, he
served as Chief Financial Officer and director at Carlisle Plastics, Inc. From
1982 through 1994, he served at various managerial capacities at Deloitte &
Touche LLP, becoming a Partner in 1988.
BRUCE J. RYAN, 57, has been a member of our board of directors since
September 2000. He has been Executive Vice President and Chief Financial Officer
of Global Knowledge Network, Inc., a provider of information technology and
computer software training programs and certifications, since 1998. From 1994 to
1998, he was Executive Vice President and Chief Financial Officer of Amdahl
Corporation, a provider of Internet based information technology solutions. Mr.
Ryan also serves on the board of directors of Ross Systems, Inc.
DIRECTORS CONTINUING UNTIL 2003 ANNUAL MEETING
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JOHN B. BLYSTONE, 47, has been a member of our board of directors since
June 2000. He has been Chairman, President and Chief Executive Officer of SPX
Corporation since 1995. From July 1994 through December 1995, he served as
President and Chief Executive Officer of Nuovo Pignone, an 80% owned subsidiary
of General Electric Company, and President and Chief Executive Officer of Europe
Power Pole Plus of GE Power Systems. From November 1991 through August 1994, he
served as Vice President, General Manager, GE Superabrasives of General Electric
Company. Mr. Blystone also serves on the boards of directors of SPX Corporation
and Worthington Industries, Inc., and on the advisory board of Stern Stewart.
GREGORY R. GRODHAUS, 53, has been a member of our board of directors since
June 2000. Mr. Grodhaus has been our President and Chief Executive Officer since
August 1999. From September 1995 through March 1999, he was Senior Vice
President of Amdahl Corporation. From March 1993 through September 1995, he
served as President and Chief Executive Officer of IPL Systems, Inc., a
manufacturer and distributor of open-architecture storage systems.
DAVID B. WRIGHT, 51, has been a member of our board of directors since
September 2000. He has been President and Chief Executive Officer of Legato
Systems since October 2000. He had previously been President and Chief Executive
Officer of Amdahl Corporation since 1997. From 1995 to 1997, he was the
Executive Vice President of the Amdahl Systems Group, and before 1995 he served
in various other senior executive positions at Amdahl Corporation.
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BOARD OF DIRECTORS AND ITS COMMITTEES
Inrange's board of directors met one time during fiscal year 2000. In
addition to meetings of the full board, directors attended meetings of board
committees. The board of directors has standing audit, compensation and
governance committees. Each director attended all of the meetings of the board
and of the committees on which he served, except for Mr. Wright who was unable
to attend the Compensation Committee meeting due to unanticipated travel delays.
AUDIT COMMITTEE
Meetings: One
Members: Bruce J. Ryan (Chairman)
David L. Chapman
David B. Wright
Function: Recommends the annual appointment of our auditors with whom
the committee reviews the scope of audit and non-audit
assignments and related fees, accounting principles we use in
financial reporting, internal auditing procedures and the
adequacy of our internal control procedures. Additional
information on the committee and its activities is included in
the Report of the Audit Committee and the Audit Committee
Charter, which is included as Appendix A to this proxy
statement.
COMPENSATION COMMITTEE
Meetings: One
Members: David L. Chapman (Chairman)
Robert B. Foreman
David B. Wright
Function: Reviews and approves the compensation and benefits for our key
executive officers, administers our employee benefit plans and
makes recommendations to the board regarding grants of stock
options and other incentive compensation arrangements.
Additional information on the committee and its activities is
included in the Report of the Compensation Committee on
Executive Compensation.
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GOVERNANCE COMMITTEE
Meetings: None
Members: David B. Wright (Chairman)
Gregory R. Grodhaus
Christopher J. Kearney
Lewis M. Kling
Function: Evaluates and makes recommendations on the size, structure and
composition of the board of directors, changes in director
compensation, the selection and retention criteria for
directors, and candidates for election to the board.
DIRECTOR COMPENSATION
ANNUAL RETAINER
Directors who are our employees or employees of SPX receive no fees for
their services as directors. Directors who are not our employees or employees of
SPX receive a $14,000 annual retainer fee covering all regular and special board
meetings and the annual meeting. In addition, these non-employee directors are
reimbursed for travel expenses and other out-of-pocket costs that they incur in
connection with attending meetings.
OPTIONS TO PURCHASE INRANGE COMMON STOCK
We will annually grant to directors who are not Inrange or SPX employees an
option to purchase 13,000 shares of our Class B common stock under our 2000
Stock Compensation Plan. Partially compensating directors with options is
intended to link an element of director compensation directly to stockholder
interests. The exercise price per share of an option may not be less than the
fair market value of our Class B common stock on the grant date of the option.
The compensation committee may specify any period of time, up to ten years,
following the grant date during which options are exercisable. At the time of
our initial public offering in September 2000, we granted to each of our non-
employee directors an option to purchase 52,000 shares of our Class B common
stock, which represents a one-time grant covering four years of service.
OWNERSHIP OF COMMON STOCK
DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
The following table shows the beneficial ownership as of January 31, 2001
of the outstanding shares of our Class B common stock and of the outstanding
shares of the common stock of SPX, our parent, by:
- each director of Inrange;
- each executive named in the Summary Compensation Table; and
- all executive officers and directors of Inrange as a group.
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Beneficial ownership is a technical term broadly defined by the Securities
and Exchange Commission to mean more than ownership in the usual sense. In
general, beneficial ownership includes any shares a stockholder can vote or
transfer and stock options that are exercisable currently or become exercisable
within 60 days. The number of shares beneficially owned includes shares in
employee benefit plans. Except as otherwise noted, the stockholders named in
this table have sole voting and investment power for all shares shown as
beneficially owned by them.
The percent of Inrange Class B common stock owned and the percent of
Inrange voting power is based on 8,855,000 Class B shares and 75,633,333 Class A
shares outstanding as of January 31, 2001. The percent of SPX common stock owned
is based on 31,139,762 shares of SPX common stock outstanding as of the same
date.
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INRANGE COMMON STOCK SPX COMMON STOCK
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PERCENT OF
NUMBER OF PERCENT OF SPX
CLASS B PERCENT OF INRANGE NUMBER OF COMMON
NAME OF BENEFICIAL OWNER SHARES(1) CLASS B VOTING POWER SHARES(2) STOCK
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John B. Blystone 710,000 7.43% * 393,835(3) 1.3%
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David L. Chapman 0 -- -- 0 --
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Robert B. Foreman 73,500 * * 742 *
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Christopher J. Kearney 80,000 * * 65,016 *
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Lewis M. Kling 80,000 * * 25,328(4) *
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Patrick J. O'Leary 210,000 2.32% * 95,712 *
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Bruce J. Ryan 0 -- -- 0 --
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David B. Wright 0 -- -- 0 --
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Gregory R. Grodhaus 428 * * 179 *
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Charles A. Foley 163 * * 99 *
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Anthony J. Fusarelli 407 * * 1,319 *
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Jay Zager 326 * * 77 *
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All directors and executive
officers as a group (12
persons) 1,154,824 11.59% * 582,301 1.9%
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* Less than 1%.
(1) Includes options to purchase shares of our Class B common stock that are
exercisable within 60 days as follows: Mr. Blystone, 700,000 shares; Mr.
Foreman, 70,000 shares; Mr. Kearney 70,000 shares; Mr. Kling, 70,000; and
Mr. O'Leary, 200,000 shares.
(2) Includes options to purchase shares of SPX common stock that are exercisable
within 60 days as follows: Mr. Blystone, 179,600 shares; Mr. Kearney, 53,396
shares; Mr. Kling, 21,521 shares; Mr. O'Leary, 76,984; and Mr. Fusarelli,
1,000 shares.
(3) Includes 114,242 SPX shares held by the John B. Blystone Investment Partners
L.P., a limited family trust. Does not include 250 SPX shares held by The
Blystone Foundation as to which Mr. Blystone disclaims beneficial ownership.
Mr. Blystone, his wife and Mr. Kearney are directors of The Blystone
Foundation.
(4) Includes 235 SPX shares held by Mr. Kling's wife.
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OTHER PRINCIPAL SHAREHOLDERS
This table shows all shareholders other than directors, nominees and named
executive officers that we know to be beneficial owners of more than 5% of
either class of Inrange common stock. The percent of Inrange Class B owned and
percent of Inrange voting power is based on 8,855,000 Class B shares and
75,633,333 Class A shares outstanding as of January 31, 2001.
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INRANGE CLASS A INRANGE CLASS B
COMMON STOCK COMMON STOCK PERCENT OF
------------------------------------------------------------------- INRANGE
NAME AND ADDRESS NUMBER OF PERCENT OF NUMBER OF PERCENT OF VOTING
OF BENEFICIAL OWNER SHARES CLASS A SHARES CLASS B POWER
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SPX Corporation(1) 75,633,333 100.0% -- -- 97.7%
700 Terrace Point Drive
P.O. Box 3301
Muskegon, Michigan 49443
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Putnam Investments, Inc.(2) -- -- 2,600,856 29.4% *
One Post Office Square
Boston, Massachusetts 02109
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* Less than 1%
(1) SPX exercises sole voting and dispositive power over the shares of Class A
common stock that it holds. Mr. Blystone is also a director and executive
officer of SPX. Messrs. Foreman, Kearney, Kling and O'Leary are also
executive officers of SPX. These individuals disclaim beneficial ownership
of the shares of Class A common stock beneficially owned by SPX.
(2) This information was provided in a Schedule 13G filed with the Securities
and Exchange Commission on March 12, 2001 by Putnam Investment, LLC on
behalf of itself, its parent holding company, Marsh & McLennan Companies,
Inc., and its two wholly owned registered investment advisors, Putnam
Investment Management, LLC and Putnam Advisory Company LLC. If you wish, you
may obtain a copy of this report from the Commission. The reported shares
consist of shares beneficially owned by Putnam Investment Management and
Putnam Advisory Company, which in turn include shares beneficially owned by
their clients. Putnam Investment Management is the investment adviser to the
Putnam family of mutual funds and Putnam Advisory Company is the investment
adviser to Putnam Investments' institutional clients. Putnam Investment
Management reports shared power to dispose of 2,427,836 shares and Putnam
Advisory reports shared power to dispose of 173,020 shares and to vote 3,700
shares. The Schedule 13G includes a disclaimer that the filing is not an
admission that either Putnam Investments or Marsh & McLennan are, for the
purposes of Sections 13(d) and 13(g), the beneficial owners of any
securities covered by the Schedule 13G, and that neither of them has any
power to vote or dispose of, or direct the voting or disposition of, any of
the securities covered by the Schedule 13G.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that
Inrange's executive officers, directors and 10% stockholders file reports of
ownership and changes of ownership of Inrange Class B common stock with the
Securities and Exchange Commission and the Nasdaq Stock Market. Based on a
review of copies of these reports provided to us and written representations
from executive officers and directors, we believe that all filing requirements
were met during 2000, except that SPX filed its initial ownership report on Form
3 late.
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EXECUTIVE COMPENSATION
This table summarizes the compensation of Gregory R. Grodhaus, our Chief
Executive Officer, and our other three most highly compensated executive
officers during fiscal year 2000. These individuals are sometimes referred to as
the named executive officers. The table excludes all executive officers whose
total annual salary and bonus for 2000 was $100,000 or less.
SUMMARY COMPENSATION
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LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION SECURITIES
NAME AND OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
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Gregory R. Grodhaus 2000 $244,231 $231,418 $23,789(1) 440,000(2) $28,521(4)
President and Chief 12,000(3)
Executive Officer 1999 83,942 86,196 86,339(1) 6,000(3) 24,060(4)
(since August 5,
1999)
- -----------------------------------------------------------------------------------------------------------
Charles R. Foley 2000 $ 162,692 $106,270 $110,669(1) 220,000(2) $14,000(5)
Executive Vice 2,000(3)
President, Chief
Technology Officer
(since February 29,
2000)
- -----------------------------------------------------------------------------------------------------------
Anthony J. Fusarelli 2000 $257,672(6) $135,388 $103,914(1) 220,000(2) $21,484(7)
Executive Vice 2,000(3)
President, Sales 1999 294,239(6) -- -- 5,000(3) 15,432(7)
- -----------------------------------------------------------------------------------------------------------
Jay Zager 2000 $ 110,769 $104,532 $ 16,205(1) 220,000(2) $11,389(8)
Executive Vice 6,000(3)
President, Chief
Financial Officer
(since May 29, 2000)
- -----------------------------------------------------------------------------------------------------------
(1) Consists of relocation expense reimbursement.
(2) Consists of options to acquire shares of Inrange common stock.
(3) Consists of options to acquire shares of SPX common stock.
(4) Consists of car allowance of $12,000 in 2000 and $5,000 in 1999, matching
contributions under SPX's defined contribution plan of $16,521 in 2000 and
$5,697 in 1999 and a $13,363 payment for income taxes attributable to
relocation expenses in 1999.
(5) Consists of car allowance of $6,000 and $8,000 in matching contributions
under SPX's defined contribution plan.
(6) Includes commissions of $57,804 in 2000 and $117,700 in 1999.
(7) Consists of car allowance of $7,200 in 2000 and $7,200 in 1999 and matching
contributions under SPX's defined contribution plan of $14,284 in 2000 and
$8,232 in 1999.
(8) Consists of car allowance of $4,350 and matching contributions under SPX's
defined contribution plan of $7,039.
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OPTION GRANTS IN FISCAL YEAR 2000
This table gives information relating to Class B common stock option grants
to the named executive officers during fiscal year 2000. The options were
granted under our 2000 Stock Compensation Plan and have ten-year terms and
exercise prices equal to the fair market value on the grant date. The options
become exercisable over a six-year period, vesting as to 12 1/2% on the second
anniversary of the grant date, 25% on each of the third, fourth and fifth
anniversaries of the grant date and the remaining 12 1/2% on the sixth
anniversary of the grant date.
The officer may pay the exercise price and withholding tax obligations in
cash, by tendering previously owned Class B shares, by asking Inrange to
withhold shares, by delivering other approved property or by a combination of
these methods. In addition, a restorative option right applies to these options,
which means that "reload options" may be granted to replace shares surrendered
in payment of the exercise price and withholding tax obligations related to
option exercises. A reload option has an exercise price equal to the
then-current market value and expires at the same time that the exercised option
would have expired.
The table also provides information relating to grants of options on SPX
common stock to the named executive officers during 2000. These options were
granted under SPX's 1992 Stock Compensation Plan to compensate them for services
performed for us. The options are non-qualified options with a ten-year term.
Their exercise price equals the fair market value on the grant date. The options
vest as to half of the shares subject to the option two years after the grant
date and as to the remaining shares three years after the grant date. Like
Inrange options, the officer may pay the exercise price and withholding taxes in
cash, previously owned SPX stock or withheld shares, and a reload option right
applies.
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INDIVIDUAL GRANTS
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO GRANT DATE
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION PRESENT VALUE
NAME GRANTED FISCAL YEAR PER SHARE DATE (1)(2)
- --------------------------------------------------------------------------------------------------------------
Gregory R. Grodhaus
Inrange Class B 440,000 5.15% $ 16.00 9/22/10 $4,952,939
SPX common stock 12,000 0.35 77.81 1/3/10 449,167
- --------------------------------------------------------------------------------------------------------------
Charles R. Foley
Inrange Class B 220,000 2.58% $ 16.00 9/22/10 $2,476,470
SPX common stock 2,000 0.06 86.06 2/29/10 82,799
- --------------------------------------------------------------------------------------------------------------
Anthony J. Fusarelli
Inrange Class B 220,000 2.58% $ 16.00 9/22/10 $2,476,470
SPX common stock 2,000 0.06 77.81 1/3/10 74,861
- --------------------------------------------------------------------------------------------------------------
Jay Zager
Inrange Class B 220,000 2.58% $ 16.00 9/22/10 $2,476,470
SPX common stock 6,000 0.17 102.00 5/30/10 294,403
- --------------------------------------------------------------------------------------------------------------
(1) The estimated present value of each Inrange Class B option on the grant date
is calculated using the Black-Scholes model. The model assumes: (a) six
years expected until exercise of the option; (b) a
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6.0% interest rate, which represents the average interest rate at the date
of grant on a U.S. Treasury security with a maturity date corresponding to
the expected option term; (c) a 75.0% expected stock volatility; and (d) a
0% dividend yield. The model does not adjust for vesting requirements, non-
transferability or forfeiture risk.
(2) The estimated present value of each SPX option on the grant date is
calculated using the Black-Scholes model. The model assumes: (a) six years
expected until exercise of the option; (b) a 5.0% interest rate, which
represents the average interest rate at the date of grant on a U.S. Treasury
security with a maturity date corresponding to the expected option term; (c)
a 41.5% expected stock volatility; and (d) a 0% dividend yield. The model
does not adjust for vesting requirements, non-transferability or forfeiture
risk.
OPTION EXERCISES IN FISCAL YEAR 2000 AND
FISCAL YEAR-END 2000 OPTION VALUES
This table provides information regarding the exercise of options during
fiscal year 2000 and options outstanding at the end of fiscal year 2000 for the
named executive officers. The "value realized" is calculated using the
difference between the option exercise price and the price of Inrange Class B
common stock on the date of exercise multiplied by the number of shares
underlying the option. The "value of unexercised in-the-money options at fiscal
year end" is calculated using the difference between the option exercise price
and the closing price on December 29, 2000, the last trading day of the fiscal
year, multiplied by the number of shares underlying the option. On December 29,
the closing price of Inrange Class B common stock was $16.9375, and the closing
price of SPX common stock was $108.1875. An option is in-the-money if the market
value of the underlying stock is greater than the option's exercise price.
- --------------------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED VALUE OPTIONS AT FISCAL YEAR END FISCAL YEAR END
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------------------------------------------------------------------------------------------------
Gregory R. Grodhaus
Inrange Class B -- -- -- 440,000 -- $412,500
SPX common stock -- -- -- 18,000 -- 500,625
- --------------------------------------------------------------------------------------------------------------------------
Charles R. Foley
Inrange Class B -- -- -- 220,000 $206,250
SPX common stock -- -- -- 2,000 -- 44,249
- --------------------------------------------------------------------------------------------------------------------------
Anthony J. Fusarelli
Inrange Class B -- -- -- 220,000 -- $206,250
SPX common stock -- -- -- 7,000 -- 226,500
- --------------------------------------------------------------------------------------------------------------------------
Jay Zager
Inrange Class B -- -- -- 220,000 -- $206,250
SPX common stock -- -- -- 6,000 -- 37,125
- --------------------------------------------------------------------------------------------------------------------------
SPX PENSION PLANS
As of December 31, 2000, Messrs. Grodhaus and Fusarelli participated in
SPX's cash balance pension plan. Messrs. Foley and Zager had not yet met the
one-year-of-service requirement for participation in the plan. Under the cash
balance plan, SPX provides annual principal credits in the amount of 4% of a
participant's eligible compensation up to the Social Security Taxable Wage Base
and in the amount of 8% of eligible compensation
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over the Social Security Taxable Wage Base. Eligible compensation includes base
salary and bonuses as reflected in the Summary Compensation Table. In addition,
SPX provides annual interest credits at a rate equal to the interest paid on
five-year U.S. Treasury Notes. Any eligible compensation that the plan cannot
take into account because of Internal Revenue Code limitations for tax-qualified
plans is taken into account under a non-qualified supplemental retirement plan.
Participants in these plans vest in their accounts after five years of
continuous service. The December 31, 2000 account balances of our named
executive officers who participated in these plans were as follows: Mr.
Grodhaus, $29,977 and Mr. Fusarelli, $145,348.
The estimated monthly benefit payable at normal retirement age earned
through 2000 for each of the participating named executive officers, based on
present interest credits and annuity conversion rate, under these plans is as
follows: Mr. Grodhaus, $518 and Mr. Fusarelli, $2,273. In addition, Mr.
Fusarelli is eligible for a transition benefit payable to certain employees who
formerly participated in the General Signal Corporate Benefits Plan if he should
elect early retirement after age 55. At normal retirement age there is no
transition benefit.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
COMPENSATION POLICY
During fiscal year 2000, the compensation committee of the board of
directors was composed of three independent non-employee directors. The
committee reviews and recommends the compensation arrangements for the executive
officers with respect to salaries, bonuses and options grants under Inrange's
2000 Stock Compensation Plan.
The committee strives to:
- provide compensation and benefits at levels that enable Inrange to
attract and retain high-quality executives;
- provide strong financial incentives, at reasonable cost to Inrange, for
senior management to maximize EVA (Economic Value Added) and shareholder
value; and
- align the interests of officers and directors with the interests of
Inrange stockholders through potential stock ownership.
EXECUTIVE OFFICER COMPENSATION
Executive officer compensation includes cash-based and stock-based
components. Cash-based compensation consists of base salary and an annual bonus,
if one is warranted under the criteria of the EVA Incentive Compensation Plan.
Stock-based compensation consists of option grants under the 2000 Stock
Compensation Plan.
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CASH-BASED COMPENSATION
Base Salary
Inrange targets base salary at the median of similarly sized high
technology companies. Actual base salaries reflect individual experience and
performance in addition to competitive salary levels for positions with similar
duties and responsibilities.
ANNUAL BONUSES
Our employees participate in the Inrange economic value added incentive
compensation plans, which are based on the SPX economic value added incentive
compensation plans. The economic value added plans provide for bonuses based on
improvements in economic value added. Economic value added is equal to the net
operating profit after tax minus a charge for all capital employed in our
business, including our equity capital. The charge for capital is equal to our
weighted average cost of debt and equity at our targeted debt-to-equity ratio,
times the total capital employed in our business.
The economic value added plan bonus is based on three key components:
- a target bonus,
- the EVA improvement in excess of expected EVA improvement (called excess
EVA improvement, which may be negative), and
- a bonus bank.
The bonus that an executive officer may earn for any fiscal year is the sum
of his or her target bonus plus a fixed share of the excess EVA improvement.
Target bonuses are a percentage of salary and are designed to provide
competitive levels of cash compensation. Poor performance in one year is not
rewarded the next year by reducing performance targets; and a year of superior
performance is not penalized the next year by raising performance targets.
Excess EVA improvement can be positive or negative without limitation.
The committee determines the bonus earned by each executive officer
following the release of Inrange's financial statements for the applicable
fiscal year. That amount is then credited to his or her bonus bank, which has an
initial balance of zero. The bonus available to be paid is the executive's bonus
bank balance up to his or her target bonus, plus one-third of the remaining
bonus bank balance. The executive receives 80% of that amount without further
conditions and the remaining 20% if he or she attains individual performance
goals. The EVA bonuses paid to our executive officers for 2000 were: Mr.
Grodhaus, $231,418; Mr. Foley, $106,270; Mr. Fusarelli, $135,388; and Mr. Zager,
$104,832. The bonus bank remaining for each of our executive officers is as
follows: Mr. Grodhaus, $242,337; Mr. Foley, $111,284; Mr. Fusarelli, $141,775;
and Mr. Zager, $78,049.
The bonus available to be paid to the executive officer is charged against
his or her bonus bank balance to determine the beginning balance for the next
fiscal year. No bonus is paid when the bonus bank balance (following credits for
any economic value added bonus earned during the year) is negative, and negative
bonus bank balances are carried forward to offset future bonuses earned.
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Stock-Based Compensation
Executive officers participate in Inrange's 2000 Stock Compensation Plan.
Inrange's option grant guidelines were designed, in mid-2000, to provide
competitive option grant levels. The guidelines provide for grants on a fixed
number of shares without regard to the price of the stock at the time of grant.
Under this fixed share approach, the target number of shares granted is not
increased to offset a decline in the stock price or decreased to offset an
increase in the stock price. The actual number of option shares granted to each
executive officer may be above or below the target number of shares based on an
evaluation of his or her performance and is subject to the committee's approval.
Options granted under the plan must have an exercise price at least equal to the
fair market value of Inrange Class B common stock on the grant date. The
committee views option grants as an effective incentive for executive officers
to create value for stockholders since the ultimate value of a stock option is
directly related to the increase in the market price of Inrange's common stock.
To provide a stronger incentive to maximize shareholder value, the
committee approved pre-initial public offering grants equal to four years of the
target annual grant. Fiscal year 2000 option grants to the named executive
officers were as follows: Mr. Grodhaus, 440,000 shares; Mr. Foley, 220,000
shares; Mr. Fusarelli, 220,000 shares; and Mr. Zager, 220,000 shares.
Additionally, prior to our initial public offering, each executive officer
received option grants of SPX common stock under the SPX stock compensation plan
as follows: Mr. Grodhaus, 12,000 shares; Mr. Foley, 2,000 shares; Mr. Fusarelli,
2,000 shares; and Mr. Zager, 6,000 shares.
Inrange does not re-calibrate its compensation program each year to achieve
a particular competitive compensation objective. Inrange's compensation programs
are designed to provide stronger incentives to maximize shareholder value by
making current compensation opportunities dependent on past performance. Under
the fixed share option grant guidelines, superior performance increases the
amount of stock under option above competitive levels, and poor performance
reduces the amount of stock under option below competitive levels. Similarly,
under the EVA bonus plan, superior performance increases the expected bonus
payout above the target bonus, and poor performance reduces the expected bonus
payout below the target bonus. The committee believes that Inrange's total
compensation program provides strong incentives to maximize shareholder value
with a reasonable balance between Inrange's need to retain strong senior
management and the cost to the shareholders.
CHIEF EXECUTIVE OFFICER COMPENSATION
Gregory R. Grodhaus became Inrange's President and Chief Executive Officer
on August 5, 1999. His annual base salary for 2000 was $245,000, and he was
eligible for a bonus under the terms of the economic value added incentive plan.
Determination of Mr. Grodhaus' base salary was primarily based on his background
and experience, and compensation levels of executives in similar positions in
comparable businesses.
Mr. Grodhaus' EVA target bonus was 45% of his annual salary in 2000. For
2000, his declared bonus was $473,755, based on a target bonus of $110,250 and
the Inrange corporate EVA plan bonus multiple for 2000 of 4.2971. His declared
bonus was credited to his bonus bank, which had a zero balance at the beginning
of 2000. Mr. Grodhaus received
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the maximum bonus available to him under the EVA plan, 80% of which was paid
automatically and 20% of which was paid upon the Compensation Committee's
determination that he attained all of his personal performance goals for 2000.
The remainder of Mr. Grodhaus' bonus bank balance, $242,337, will be carried
forward to 2001.
DEDUCTIBILITY OF COMPENSATION
The policy of the compensation committee with respect to Section 162(m) is
to establish and maintain a compensation program that will optimize the
deductibility of compensation. The committee, however, reserves the right to use
its judgment, where merited by the need for flexibility to respond to changing
business conditions or by an executive officer's individual performance, to
authorize compensation that may not, in a specific case, be fully deductible by
Inrange.
The Compensation Committee:
David L. Chapman, Chairman
Robert B. Foreman
David B. Wright
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COMPANY PERFORMANCE
This graph shows a comparison of cumulative total return for Inrange, the
Nasdaq Stock Market (U.S.) and the Nasdaq Computer Manufacturer Stocks (SIC Code
357) from September 21, 2000 (the date Inrange Class B common stock was first
offered to the public at an initial public offering price of $16.00 per share)
through December 29, 2000. The Nasdaq Computer Manufacturer Stocks group
includes firms that produce computers, office equipment, and electronic
components/accessories. The graph assumes an investment of $100 at September 21,
2000 and the reinvestment of any dividends.
COMPANY PERFORMANCE GRAPH
- --------------------------------------------------------------------------------------------------------------------
9/21/00 9/30/00 10/31/00 11/30/00 12/31/00
- --------------------------------------------------------------------------------------------------------------------
j Inrange Technologies Corporation $100 $331.25 $226.56 $ 81.25 $105.8625
- --------------------------------------------------------------------------------------------------------------------
m Nasdaq Stock Market (U.S.) 100 95.73 87.93 67.72 64.15
- --------------------------------------------------------------------------------------------------------------------
d Nasdaq Computer Manufacturer Stocks 100 94.24 85.70 58.22 47.86
- --------------------------------------------------------------------------------------------------------------------
CERTAIN RELATIONSHIPS BETWEEN INRANGE AND SPX
SPX IS OUR CONTROLLING STOCKHOLDER
SPX beneficially owns all of the outstanding Class A common stock and 89.5%
of the outstanding shares of our Class A and Class B common stock combined,
which represents approximately 98% of the combined voting power of all classes
of our voting stock. Until SPX beneficially holds less than 50% of the combined
voting power of our stock, SPX will be able to control the vote on all matters
submitted to our stockholders, including the election of directors and the
approval of extraordinary corporate transactions, such as mergers.
SPX has not made any decision regarding whether or for how long it will
retain its Inrange stock ownership. At present, SPX has no plan or intention to
dispose of its shares of our Class A common stock. If SPX decides to divest
itself of its entire stockholdings in our company, SPX may do so by distributing
all of its shares of our Class A common
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stock to the holders of SPX's common stock, a process we refer to as a
distribution. A distribution could be accomplished through one of the following:
- Split-Off -- an exchange offer by SPX in which holders of its common
stock would be offered the opportunity to tender some or all of their SPX
shares in exchange for shares of our Class A common stock; or
- Spin-Off -- a distribution by SPX of its shares of our Class A common
stock to holders of its common stock based on the number of SPX shares
held by each holder.
SPX is free to dispose of all or some of its shares of our Class A common
stock through means other than a distribution. SPX has the sole discretion to
determine the timing, structure and all terms of any divestiture of its
stockholdings in our company. SPX has also advised us that it would not complete
a divestiture if its board of directors determines that a divestiture is not in
the best interests of SPX and its stockholders. SPX has further advised us that
it currently expects that the principal factors that it would consider in making
this determination, as well as the principal factors that it would consider in
making the determination as to the timing, structure and terms of a divestiture,
would be:
- the business prospects for us and SPX;
- the business reasons for a divestiture;
- the market price of our Class B common stock;
- the market price of SPX's common stock;
- SPX being satisfied that a divestiture by means of a distribution would
be tax-free to SPX and its stockholders and as to the other tax
consequences of the transactions; and
- the availability of other strategic alternatives.
Under current law, SPX will not be able to effect a distribution to its
stockholders on a tax-free basis before October 2003, which is five years from
the date SPX acquired General Signal Corporation.
ARRANGEMENTS WITH SPX
We have entered into various agreements with SPX that relate to our ongoing
relationship with SPX after our initial public offering. These agreements
include:
- a loan agreement;
- a management services agreement;
- a tax sharing agreement;
- a registration rights agreement;
- an employee matters agreement; and
- a trademark license agreement.
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All of the these agreements became effective upon completion of our initial
public offering. Because we entered into these agreements when we were an
indirect wholly owned subsidiary of SPX, they are not the result of arm's-length
negotiations between the parties. The agreements were made in the context of an
affiliated relationship and negotiated in the overall context of the offering.
The prices and other terms of these agreements may be less favorable to us than
those we could obtain in arm's-length negotiations with unaffiliated third
parties for similar services. Because we did not negotiate with a third party
for any of the services provided for under our agreements with SPX, however, it
is difficult to determine whether the terms of those agreements are more
favorable or less favorable to us than those we could obtain in arm's-length
negotiations with an unaffiliated third party. Following are summaries of these
agreements.
LOAN AGREEMENT WITH SPX
We have used a portion of the proceeds from our initial public offering to
repay amounts that we borrowed from SPX to pay for our recent acquisitions and
will use the remaining amounts for general corporate purposes. Pending their
use, we invested $15 million in investment grade securities and loaned the
remaining amounts to SPX. As part of our cash management system, we also lend to
SPX, on a daily basis, our cash and cash equivalents in excess of $15 million.
We lend these amounts to SPX under a loan agreement that allows us to demand
repayment of outstanding amounts at any time. Even after SPX repays us the
amount due under the loan agreement, however, as part of our cash management
system we will continue to be obligated to lend, on a daily basis, all of our
cash and cash equivalents in excess of $15 million to SPX until the termination
of the loan agreement. The loan agreement will terminate when SPX owns less than
50% of our outstanding shares of Class A common stock and Class B common stock
or if there is an event of default under SPX's credit agreement. Amounts loaned
under the loan agreement are unsecured. Loans made prior to October 1, 2000,
accrue interest quarterly at a rate of 8 1/2%, and loans made on or after
October 1, 2000 accrue interest quarterly at the weighted average rate of
interest paid by SPX for revolving loans under its credit agreement for the
prior quarter. SPX's ability to repay the amounts that we lend will be subject
to SPX's financial condition and liquidity, including its ability to borrow
under its credit agreement or otherwise.
MANAGEMENT SERVICES AGREEMENT
Under the management services agreement, SPX provides administrative and
corporate support services to us. These include human resources, accounting,
treasury, tax, facilities, legal and information services. SPX charges us for
these services at cost, including all out-of-pocket, third-party costs and
expenses incurred by SPX in providing the services. If SPX incurs third-party
expenses on behalf of us as well as an SPX entity, SPX will allocate these
expenses in good faith between us and the SPX entity, as SPX determines in the
exercise of its reasonable judgment. The agreement provides for monthly
invoicing of service charges.
The management services agreement provides that the services provided by
SPX will be substantially similar in scope, quality and nature to those services
provided to us when we were an indirect wholly owned subsidiary of SPX prior to
our initial public offering.
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SPX is also required to provide the services to us through the same or similarly
qualified personnel, but the selection of personnel to perform the various
services is within the sole control of SPX. In addition, SPX is not required to
materially increase the volume, scope or quality of the services provided beyond
the level at which they were performed for us in the past. The agreement
provides that SPX may have a third party provide any service to us rather than
providing the service itself, and that SPX is not responsible for the
performance of services provided in this manner as long as it reasonably selects
the provider. SPX is not required to provide any service to the extent the
performance of the service becomes impracticable due to a cause outside the
control of SPX, such as natural disasters, governmental actions or similar
events of force majeure. Similarly, SPX is not required to provide any service
if doing so would require SPX to violate any laws, rules or regulations. The
agreement also provides that SPX and Inrange may agree to additional services to
be provided by SPX. The terms and costs of these additional services will be
mutually agreed upon by SPX and us. These additional services may include
services that were not provided to us when we were a wholly owned subsidiary of
SPX.
The management services agreement will continue until SPX owns less than
50% of the aggregate amount of our outstanding shares of Class A common stock
and Class B common stock. We may also terminate the management services
agreement with respect to one or more of the services provided under the
agreement effective upon the date that is the later of (1) the end of the fiscal
year in which the notice of termination is given and (2) six months from the
date notice of termination is given. In addition, either SPX or Inrange will be
able to terminate the management services agreement with respect to one or more
of the services provided under the agreement if the other party has failed to
perform any material obligation relating to the services to be terminated and
the failure continues for a period of 30 days after the other party receives
notice of the failure from the terminating party.
TAX SHARING AGREEMENT
Even though we have completed our initial public offering, we will continue
to be included in SPX's consolidated federal income tax group, and our federal
income tax liability will continue to be included in the consolidated federal
income tax liability of SPX. Pursuant to the tax sharing agreement, the amount
of tax we pay to SPX or we receive from SPX with respect to consolidated,
unitary or combined returns of SPX, in which we are included generally, will be
determined as though we file separate federal, state, local and foreign income
tax returns.
In general, we will be included in SPX's consolidated group for federal
income tax purposes for so long as SPX beneficially owns at least 80% of the
combined total voting power and value of our outstanding common stock. By law,
each member of a consolidated group is jointly and severally liable for the
federal income tax liability of each other member of the consolidated group.
Accordingly, although the tax sharing agreement allocates tax liabilities
between Inrange and SPX during the period in which we are included in SPX's
consolidated group, we could be liable for any shortfall if any federal tax
liability is incurred, but not discharged, by any other member of SPX's
consolidated group. Similar principles may apply for state or local income tax
purposes.
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REGISTRATION RIGHTS AGREEMENT
The registration rights agreement provides SPX with registration rights
relating to the shares of our Class A common stock that it holds. SPX is able to
require us to register under the Securities Act of 1933 all or any portion of
our shares covered by the registration rights agreement. In addition, the
registration rights agreement provides for various piggyback registration rights
for SPX. Whenever we propose to register any of our securities under the
Securities Act for ourselves or others, subject to market cut-back exceptions,
we are required to provide prompt notice to SPX and include in that registration
all shares of our stock that SPX owns and requests to be included.
The registration rights agreement sets forth customary registration
procedures, including an agreement by us to make available our employees and
personnel for roadshow presentations. We will pay all registration expenses
incurred in connection with any registration, other than underwriting
commissions. In addition, we are required to reimburse SPX for the fees and
disbursements of its outside counsel retained in connection with the
registration. The registration rights agreement also imposes customary
indemnification and contribution obligations on us for the benefit of SPX and
any underwriters with respect to liabilities resulting from untrue statements or
omissions in any registration statement used in any registration, although SPX
must indemnify us for any liabilities resulting from information provided by
SPX.
SPX's rights under the registration rights agreement remain in effect with
respect to the shares covered by the agreement until those shares have been:
- sold under an effective registration statement under the Securities Act;
- sold to the public under Rule 144 under the Securities Act; or
- transferred in a transaction where a subsequent public distribution of
those shares would not require registration under the Securities Act.
EMPLOYEE MATTERS AGREEMENT
The employee matters agreement sets forth our mutual understanding with
respect to the responsibilities, obligations and liabilities relating to the
compensation and benefits of our employees in connection with our initial public
offering. Under this agreement, with agreed upon exceptions, SPX will continue
to administer compensation programs for our employees, and our employees will
continue to participate in SPX's employee benefit plans. In turn, we will pay
SPX for providing these administrative services and for these benefits. The
principal exceptions to this rule are our 2000 Stock Compensation Plan and
Employee Stock Purchase Plan, and SPX's Economic Value Added Incentive
Compensation Plan, which we assumed as it relates to our employees to provide
cash-based incentive compensation to our employees following our initial public
offering.
TRADEMARK LICENSE AGREEMENT
We or one of our subsidiaries own most of the trademarks used in our
business. We do not own the trademark "SPX", which we sometimes use in our
marketing materials. SPX owns that trademark and has entered into a license
agreement with us that governs our use of the trademark. Under the agreement,
SPX grants to us a worldwide royalty-free
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license to use the "SPX" trademark solely in connection with the manufacture,
sale or distribution of products related to our business. The license includes
the right to use the term "SPX" as a trade name, either individually or in
combination with other terms. This license also includes the right to grant
sublicenses to our wholly owned subsidiaries, for so long as they remain wholly
owned subsidiaries. We may not transfer or assign the license without SPX's
prior written consent.
Under the agreement, we agree to refrain from various actions that could
interfere with SPX's ownership of the "SPX" trademark. The agreement contains
provisions regarding:
- the creation of quality standards of our products;
- the ability of SPX to inspect our products and facilities; and
- our obligation to cease production of, and correct or properly destroy,
any products marketed under the licensed trademarks that fail to meet the
quality standards.
The trademark license agreement will terminate in September 2001. Prior to
the scheduled termination date, our license to use the trademarks may be
terminated for various reasons, including our breach of the agreement or a
change in our control.
We will indemnify SPX and its directors, officers and employees from claims
for personal injury or property damage if SPX is found liable to any third party
under any tort or products liability or similar action in connection with our
use of the licensed trademarks.
OPTION GRANTS TO SPX EMPLOYEES
We have granted options to acquire 1,331,000 shares of our Class B common
stock under our 2000 Stock Compensation Plan to the SPX employees who serve as
Inrange directors and to a limited group of SPX employees with supervisory
authority over us.
CORPORATE OPPORTUNITIES AND CONFLICTS OF INTEREST
All of our directors have fiduciary duties to our company and our
stockholders under Delaware law. Specifically, our directors are charged with a
duty of care and a duty of loyalty to our company and our stockholders. This
duty of care generally requires our directors to inform themselves of all
material information relevant to business decisions they make on behalf of
Inrange. This duty of loyalty generally requires our directors to act in the
best interests of our company and our stockholders and to refrain from conduct
that would injure Inrange or our stockholders or deprive Inrange of an advantage
or opportunity to which we are entitled.
Five members of our board of directors are also directors or executive
officers of SPX and have similar fiduciary duties to SPX. As a result of their
duties and obligations to both companies, these directors may have conflicts of
interest with respect to matters involving or affecting us, such as acquisitions
and other corporate opportunities that may be suitable for Inrange and SPX. Our
certificate of incorporation and bylaws do not contain any special provisions
setting forth rules governing these potential conflicts. In addition, a number
of our directors and executive officers own SPX stock and options on SPX stock
that they acquired as employees of SPX. This ownership could create, or appear
to create,
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potential conflicts of interest when these directors and officers are faced with
decisions that could have different implications for Inrange and SPX.
REPORT OF THE AUDIT COMMITTEE
The audit committee of the Inrange board of directors is composed of three
directors who are independent, as defined in Rule 4200(a)(15) of the National
Association of Securities Dealers' listing standards. The committee reviews
Inrange's financial reporting process on behalf of the board of directors and is
responsible for ensuring the integrity of the financial information reported by
Inrange. Management has the primary responsibility for the financial statements
and the reporting process, including the system of internal controls.
In this context, the committee has met and held discussions with management
and Arthur Andersen LLP, Inrange's independent public accountants. Management
represented to the committee that Inrange's consolidated financial statements
were prepared in accordance with generally accepted accounting principles, and
the committee has reviewed and discussed the consolidated financial statements
with management and Arthur Andersen. The committee discussed with Arthur
Andersen the matters required to be discussed by Statement of Auditing Standard
No. 61 (Communication with Audit Committees), under which Arthur Andersen must
provide us with additional information regarding the scope and results of its
audit of Inrange's financial statements.
In addition, the committee has discussed with Arthur Andersen its
independence from Inrange and its management, including matters in the written
disclosures required by the Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees).
The committee discussed with Inrange's independent public accountants the
overall scope and plans for their respective audits. The committee meets with
Arthur Andersen, with and without management present, to discuss the results of
its examinations, the evaluations of Inrange's internal controls, and the
overall quality of Inrange's financial reporting.
In reliance on the reviews and discussions referred to above, the committee
recommended to the board of directors, and the board has approved, that the
audited financial statements be included in Inrange's Annual Report on Form 10-K
for the year ended December 31, 2000 filed with the Securities and Exchange
Commission.
The Audit Committee:
Bruce J. Ryan, Chairman
David L. Chapman
David B. Wright
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APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP has been Inrange's independent public accounting firm
since October 1998. The board has engaged Arthur Andersen as its independent
public accountants for 2001.
During 2000, we retained Arthur Andersen to perform services in the
following categories and amounts:
Audit Fees $285,000
All Other Fees
Tax planning and acquisition due diligence $163,000
Initial public offering 565,000
Total All Other Fees 728,000
We have not retained Arthur Andersen for financial information systems,
design and implementation during 2000. The Audit Committee has considered
whether the provision of non-audit services by our principal auditor is
compatible with maintaining auditor independence.
If you do not ratify the appointment of Arthur Andersen as our independent
public accountants, the audit committee will investigate the reasons for your
rejection and the board of directors will reconsider the appointment.
Representatives of Arthur Andersen will be present at the Annual Meeting.
They will have the opportunity to make a statement if they so desire and to
respond to questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS OUR INDEPENDENT PUBLIC ACCOUNTANTS.
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APPENDIX A
AUDIT COMMITTEE CHARTER
The Board of Directors of Inrange Technologies Corporation (the "Company")
has established an Audit Committee (the "Committee") with general responsibility
and specific duties as described below.
COMPOSITION:
The Committee shall be comprised of not less than three Directors who shall
meet the requirements of the Nasdaq National Market. Committee membership shall
be approved by the Board of Directors.
RESPONSIBILITY:
The Committee's responsibility is to assist the Board of Directors in
fulfilling its fiduciary responsibilities as to accounting policies and
reporting practices of the Company. The Committee is empowered to retain persons
having special competence as necessary to assist the Committee in fulfilling its
responsibility. While the Committee has the responsibilities and powers set
forth in this Charter, it is not the duty of the Committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
This is the responsibility of management and the independent accountant. The
independent accountant is ultimately accountable to the Board of Directors and
the Committee.
ATTENDANCE:
Members of the Committee should endeavor to be present, in person or by
telephone, at all meetings; however, two Committee members shall constitute a
quorum. As necessary, the Chairperson may request members of management, the
director of internal audit, and representatives of the independent accountant to
be present at meetings.
MINUTES OF MEETINGS:
Minutes of each meeting shall be prepared and sent to Committee members and
presented to Company Directors who are not members of the Committee.
SPECIFIC DUTIES:
The Committee is to:
1. Review with the Company's management, the independent accountant, and the
director of internal audit, the Company's policies and procedures, as
appropriate, to reasonably assess the adequacy of internal accounting and
financial reporting controls.
2. Review the Committee's Charter annually, and update as appropriate.
3. Recommend to the Board of Directors the independent accountant to be
selected (subject to ratification by the stockholders), evaluate the
independent accountant, approve the compensation of the independent
accountant, and review and approve any discharge of the independent
accountant.
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4. Review and concur in the appointment, replacement, reassignment, or
dismissal of the director of internal audit.
5. Receive periodic written statements from the independent accountant
regarding its independence and delineating all relationships between it and
the Company, discuss such reports with the independent accountant, and if so
determined by the Committee, recommend that the Board take appropriate
action.
6. Become familiar with the accounting and reporting principles and practices
applied by the Company in preparing its financial statements.
7. Review with management and the director of internal audit the adequacy and
the scope of the annual internal audit plan, and any significant audit
findings.
8. Review, prior to the annual audit, the scope and general extent of the
independent accountant's audit examinations.
9. Review with management and the independent accountant, upon completion of
their audit, financial results for the year prior to their release to the
public. Discuss with the independent accountant the matters required to be
discussed by the Statement on Auditing Standards No. 61 relating to the
conduct of the year-end audit.
10. Discuss with the independent accountant the quality of the Company's
financial accounting personnel, and any relevant recommendations that the
independent accountant may have.
11. Report Committee actions to the Board of Directors with such
recommendations, as the Committee may deem appropriate.
12. Prepare the report required by the rules of the Securities and Exchange
Commission to be included in the Company's annual proxy statement,
commencing with the proxy statement for the 2001 Annual Meeting.
13. Perform such other functions as may be required by law, the Company's
Certificate of Incorporation or By-Laws of the Board.
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[INRANGE LOGO]
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---- |
[X] PLEASE MARK YOUR | | 6080
VOTES AS IN THIS | |
EXAMPLE. -------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSALS:
FOR WITHHELD
FOR AGAINST ABSTAIN
1. Election of [ ] [ ] 2. Ratification of the appointment of Arthur Andersen LLP [ ] [ ] [ ]
Directors (see as the independent public accountants of the Company
reverse side)
(For, except vote withheld from 3. In their discretion, the proxies are authorized to vote upon such other
the following nominee(s)) business as may properly come before the meeting.
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Please sign exactly as name(s) appear(s) on this proxy. Joint
owners, trustees, executors, etc. should indicate the capacity in
which they are signing.
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SIGNATURE(S) DATE
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PROXY
INRANGE TECHNOLOGIES CORPORATION
100 MT. HOLLY BY-PASS
LUMBERTON, NEW JERSEY 08048
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints JAY ZAGER and KENNETH H. KOCH as proxies
(each with the power to act alone and to appoint his substitute) and hereby
authorizes them to represent and to vote, as designated herein, all the shares
of Class B common stock of Inrange Technologies Corporation held of record by
the undersigned on March 9, 2001, at the annual meeting of stockholders to be
held on April 20, 2001 and at any and all adjournments thereof.
Nominees: for three year terms ending at the annual shareholders meeting
2004:
David L. Chapman, Robert B. Foreman and Christopher J. Kearney
IF NO INDICATION IS GIVEN, PROXIES HELD BY THE CHAIRMAN OF THE MEETING
WILL BE VOTED TO ELECT THE THREE NOMINEES AND IN FAVOR OF THE RESOLUTIONS
PROPOSED BY THE BOARD OF DIRECTORS.
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