-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SwJxcI9nrqb8+Px3fFGT1+sXnMDF7EfkGsaopEH+U3wqymosMC7D8SfwSzOzoV7g sCjZg3hXn+gmnzPLInfQDQ== 0000808064-98-000010.txt : 19980525 0000808064-98-000010.hdr.sgml : 19980525 ACCESSION NUMBER: 0000808064-98-000010 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980131 FILED AS OF DATE: 19980522 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: C&D TECHNOLOGIES INC CENTRAL INDEX KEY: 0000808064 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES [3690] IRS NUMBER: 133314599 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 001-09389 FILM NUMBER: 98630457 BUSINESS ADDRESS: STREET 1: 1400 UNION MEETING ROAD CITY: BLUE BELL STATE: PA ZIP: 19422 BUSINESS PHONE: 2156192700 MAIL ADDRESS: STREET 1: 1400 UNION MEETING ROAD CITY: BLUE BELL STATE: PA ZIP: 19422 DEF 14A 1 May 26, 1998 Dear Stockholder: You are cordially invited to attend the Annual Meeting of Stockholders of C&D TECHNOLOGIES, INC. to be held on Tuesday, June 30, 1998, at 10:00 A.M., at The Union League of Philadelphia, 140 South Broad Street, Philadelphia, Pennsylvania. Your Board of Directors and management look forward to personally greeting those stockholders able to attend. This year, in addition to electing directors and ratifying the appointment of Coopers & Lybrand L.L.P. as independent accountants for the Company, you are being asked to consider and approve (i) an amendment to the Company's Restated Certificate of Incorporation to increase the number of shares of Common Stock the Company is authorized to issue to 75,000,000 and (ii) the C&D TECHNOLOGIES, INC. 1998 Stock Option Plan covering option grants and/or issuances of up to 300,000 shares of Common Stock to eligible participants. Your Board of Directors recommends that you vote FOR these proposals. They are more fully described in the accompanying Proxy Statement, which you are urged to read carefully. Whether or not you plan to attend, you can assure that your shares are represented and voted at the Annual Meeting by promptly completing, signing, dating and returning the enclosed proxy card in the envelope provided. Thank you for your cooperation and continued support. Sincerely, ALFRED WEBER Chairman of the Board, President and Chief Executive Officer C&D TECHNOLOGIES, INC. 1400 UNION MEETING ROAD BLUE BELL, PENNSYLVANIA 19422 NOTICE OF ANNUAL MEETING OF STOCKHOLDERS JUNE 30, 1998 The Annual Meeting of Stockholders of C&D TECHNOLOGIES, INC. (the "Company") will be held at The Union League of Philadelphia, 140 South Broad Street, Philadelphia, Pennsylvania, on Tuesday, June 30, 1998, at 10:00 A.M., for the following purposes: 1. To elect directors of the Company for the ensuing year. 2. To approve an amendment to the Company's Restated Certificate of Incorporation to increase the number of shares of Common Stock the Company is authorized to issue to 75,000,000. 3. To approve the C&D TECHNOLOGIES, INC. 1998 Stock Option Plan covering option grants and/or issuances of up to 300,000 shares of Common Stock to eligible participants. 4. To ratify the appointment of Coopers & Lybrand L.L.P. as independent accountants for the Company for the fiscal year ending January 31, 1999. 5. To transact such other business as may properly come before the meeting and any adjournments thereof. The Board of Directors has fixed the close of business on May 11, 1998 as the record date for the determination of stockholders entitled to notice of and to vote at the meeting and at any adjournments thereof. IF YOU ARE UNABLE TO BE PRESENT PERSONALLY, PLEASE SIGN AND DATE THE ENCLOSED PROXY, WHICH IS BEING SOLICITED BY THE BOARD OF DIRECTORS, AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. BY ORDER OF THE BOARD OF DIRECTORS GLENN M. FEIT SECRETARY MAY 26, 1998 C&D TECHNOLOGIES, INC. 1400 UNION MEETING ROAD BLUE BELL, PENNSYLVANIA 19422 PROXY STATEMENT ANNUAL MEETING OF STOCKHOLDERS JUNE 30, 1998 GENERAL INFORMATION The accompanying proxy is solicited by and on behalf of the Board of Directors of C&D TECHNOLOGIES, INC. (the "Company") to be used at the Annual Meeting of Stockholders to be held at The Union League of Philadelphia, 140 South Broad Street, Philadelphia, Pennsylvania, on Tuesday, June 30, 1998, at 10:00 A.M., and at any adjournments thereof. When the accompanying proxy is properly executed and returned, the shares of common stock of the Company, par value $.01 per share (the "Common Stock"), it represents will be voted at the meeting in accordance with any directions noted thereon and, if no direction is indicated, the shares it represents will be voted: (i) FOR the election of the nominees for directors set forth below; (ii) FOR the approval of an amendment to the Company's Restated Certificate of Incorporation to increase the number of shares of Common Stock the Company is authorized to issue to 75,000,000; (iii) FOR the approval of the C&D TECHNOLOGIES, INC. 1998 Stock Option Plan (the "Plan") covering option grants and/or issuances of up to 300,000 shares of Common Stock to eligible participants; (iv) FOR the ratification of the appointment of Coopers & Lybrand L.L.P. as independent public accountants for the Company for the fiscal year ending January 31, 1999; and (v) in the discretion of the holders of the proxy with respect to any other business that may properly come before the meeting. Any stockholder signing and delivering a proxy may revoke it at any time before it is voted by delivering to the Secretary of the Company a written revocation or a duly executed proxy bearing a date later than the date of the proxy being revoked. Any stockholder attending the meeting in person may withdraw his proxy and vote his shares. The cost of this solicitation of proxies will be borne by the Company. Solicitations will be made initially by mail; however, officers and regular employees of the Company may solicit proxies personally or by telephone or telegram. Those persons will not be compensated specifically for such services. The Company may reimburse brokers, banks, custodians, nominees, and fiduciaries holding shares of Common Stock in their names or in the names of their nominees for their reasonable charges and expenses in forwarding proxies and proxy material to the beneficial owners of such shares. The approximate date on which this Proxy Statement first will be mailed to stockholders of the Company is May 26, 1998. VOTING RIGHTS Only holders of record of shares of Common Stock at the close of business on May 11, 1998 will be entitled to vote at the Annual Meeting of Stockholders. On that date, there were outstanding 6,169,895 shares of Common Stock, the holders of which are entitled to one vote per share on each matter to come before the meeting. Voting rights are non-cumulative. The presence, in person or by proxy, of stockholders holding a majority of the outstanding shares of Common Stock entitled to vote will constitute a quorum at the Annual Meeting. Directors will be elected at the Annual Meeting by a plurality of the votes cast (i.e., the seven nominees receiving the greatest number of votes will be elected as directors). The amendment of the Company's Restated Certificate of Incorporation requires the affirmative vote of a majority of the outstanding shares of Common Stock entitled to vote thereon. The ratification of the independent accountants, the approval of the Plan and any other business that may properly come before the meeting and adjournments thereof require the affirmative vote of a majority of the shares present in person or represented by proxy. Abstentions and broker non-votes (which occur when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received instructions from the beneficial owner) are counted for purposes of determining the presence or absence of a quorum at the meeting. Abstentions are counted in tabulations of the votes cast on proposals presented to stockholders, but broker non-votes are not counted for purposes of determining whether a proposal has been approved. PRINCIPAL STOCKHOLDERS As of April 30, 1998, the persons listed in the following table were the only persons known to the Company (based solely on information set forth in Schedules 13D, 13G and 13G/A filed with the Securities and Exchange Commission or otherwise provided to the Company by these persons) to be the beneficial owners of more than five percent of the Company's outstanding shares of Common Stock. Shares of Name and address of Common Stock Percent Beneficial Owner Benifically Owned of Class ---------------- ----------------- -------- Westport Asset Management, Inc. (1)........ 520,100 8.4% 253 Riverside Avenue Westport, Connecticut 06880 Paradigm Capital Management, Inc. (2)...... 426,400 6.9% 9 Elk Street Albany, New York 12207 Kennedy Capital Management, Inc. (3)....... 405,992 6.6% 10829 Olive Boulevard St. Louis, Missouri 63141 Shell Pensions Trust Limited (4)........... 397,200 6.4% Shell Centre London SE1 7NA England - -------------------- (1) Based on the Schedule 13G/A, dated February 20, 1998, filed by Westport Asset Management, Inc. This party has shared voting and dispositive power with respect to all the shares listed opposite its name in the table. (footnotes continue on following page) 2 (2) Based on the Schedule 13G/A, dated March 6, 1998, filed by Paradigm Capital Management, Inc. This party has no voting power and sole dispositive power with respect to all the shares listed opposite its name in the table. (3) Based on the Schedule 13G, dated February 10, 1998, filed by Kennedy Capital Management, Inc. This party has sole voting power with respect to 342,792 of the shares and sole dispositive power with respect to 405,992 of the shares listed opposite its name in the table. (4) Based on the Schedule 13D, dated February 2, 1996, filed by Shell Pensions Trust Limited as Trustee of the Shell Contributory Pension Fund. This party has sole voting and dispositive power with respect to all the shares listed opposite its name in the table. ELECTION OF DIRECTORS At the Annual Meeting of Stockholders, the entire Board of Directors is to be elected. In the absence of instructions to the contrary, the shares of Common Stock represented by a proxy delivered to the Board of Directors will be voted FOR the seven nominees named under "Management" below, each of whom is a current director of the Company other than Pamela S. Lewis (Warren A. Law, a current director, is retiring effective with the 1998 Annual Meeting of Stockholders). Each nominee has consented to being named as a nominee in this Proxy Statement and to serve if elected. However, if any such nominee should become unable to serve as a director for any reason, votes will be cast instead for a substitute nominee designated by the Board of Directors or, if none is so designated, will be cast according to the judgment of the person or persons voting the proxy. MANAGEMENT The table below and the paragraphs that follow it present certain information concerning the nominees for directors and the executive officers of the Company. Directors are elected annually to serve until the next annual meeting of stockholders and until their successors have been elected. Officers are elected by and serve at the discretion of the Board of Directors. There are no family relationships among any of the directors and executive officers of the Company.
Shares of Common Stock Positions and Beneficially Percent Offices with Owned as of of Nominees for Directors the Company Age April 30, 1998 Class(6) ---------------------- ----------- --- -------------- -------- Alfred Weber (1)........................ Chairman of the Board, 66 194,923 3.1% President and Chief Executive Officer Kevin P. Dowd (2)(3)(4)................. Director 49 500 * Glenn M. Feit (3)....................... Director and Secretary 68 1,000 * William Harral, III (3)(4)(5)........... Director 58 2,500 * Pamela S. Lewis (2)..................... Nominee for Director 41 -- * Alan G. Lutz (5)........................ Director 52 500 * John A. H. Shober (2)(5)................ Director 64 2,000 * (table continues on following page) 3 Executive Officers Who are not Directors ----------------- A. Gordon Goodyear (1).................. Vice President and General 49 26,167 * Manager - Power Electronics Division Leslie S. Holden (1).................... Vice President - Battery 61 7,655 * Technology Apostolos T. Kambouroglou (1)........... Vice President - Operations 55 18,166 * Robert T. Marley ....................... Treasurer 45 - * Stephen E. Markert, Jr. (1)............. Vice President - Finance and 46 9,867 * Chief Financial Officer Larry W. Moore (1)...................... Vice President and General 55 500 * Manager - Powercom Division John J. Murray, Jr...................... Vice President and General 54 - Manager - Motive Power Division Stephen J. Weglarz (1).................. Vice President - Corporate 52 4,000 * Services and Corporate Counsel All directors and officers as a group (15 persons)...... 267,778 4.2% - --------------- * Less than 1% of outstanding shares of Common Stock
(1) The figures for shares of Common Stock beneficially owned as of April 30, 1998 include fully vested and presently exercisable options to purchase (a) 121,333 shares for Mr. Weber, (b) 26,167 shares for Dr. Goodyear, (c) 2,667 shares for Dr. Holden, (d) 16,166 shares for Mr. Kambouroglou, (e) 5,833 shares for Mr. Markert and (f) 4,000 shares for Mr. Weglarz. The figures for Percent of Class assume, as to each individual only, that all shares issuable to such individual upon exercise of his options have been issued. (2) Member, or to become a member, of the Audit Committee. (3) Member of the Compensation Committee. (4) Member of the Stock Option Subcommittee of the Compensation Committee. (5) Member of the Corporate Governance and Nominating Committee. (6) Based upon shares outstanding as of April 30, 1998, excluding Treasury Stock. Alfred Weber has been President since joining the Company in April 1989, became Chief Executive Officer in December 1992 and became Chairman of the Board on November 1, 1995. From 1964 to 1987, Mr. Weber held various managerial positions with Uniroyal, Inc. and its subsidiaries, rising to the position of President and Chief Executive Officer of Uniroyal Plastics Company, Inc. Mr. Weber is also a director of Microwave Power Devices, Inc. ("MPD"), a manufacturer of power amplifiers and related subsystems for the wireless telecommunications market, and a director and President of Battery Council International, a worldwide manufacturers' association. 4 Kevin P. Dowd has been a director of the Company since January 1997. He has been a director, President and Chief Executive Officer of Checkpoint Systems, Inc. ("Checkpoint"), a manufacturer and supplier of electronic security systems for retail and commercial customers, since January 1995. Mr. Dowd was President and Chief Operating Officer of Checkpoint from 1993 to 1995 and prior to that he served as the Executive Vice President of Checkpoint. Glenn M. Feit has been a director and the Secretary of the Company since January 1986. He is a member of the law firm of Proskauer Rose LLP, general counsel to the Company. Mr. Feit has been engaged in the practice of law in New York since 1957. William Harral, III has been a director of the Company since July 1996. He is currently Senior Counselor for The Tierney Group, a strategic communications company. He was President and Chief Executive Officer of Bell Atlantic - Pennsylvania, Inc. (formerly Bell of Pennsylvania) from 1994 to March 1997. Prior to 1994 he held the position of Vice President - External Affairs and Chief Financial Officer of Bell of Pennsylvania. Mr. Harral also served as a director of Bell Atlantic - Pennsylvania, Inc. and serves on the board of The Bryn Mawr Trust Company, a commercial bank. Pamela S. Lewis, Ph.D., is a nominee for director at the Annual Meeting of Stockholders. Dr. Lewis has been a Professor of Management and Dean of the College of Business and Administration at Drexel University in Philadelphia, Pennsylvania since June 1997. From 1987 to 1997, she served on the faculty of the College of Business at the University of Central Florida. During that time, she also served as the Chair of the Department of Management and Director of the Executive Education Center. In addition, Dr. Lewis currently serves on the Board of Directors for the Pennsylvania Economy League. Alan G. Lutz has been a director of the Company since July 1996. He is a Senior Vice President and Group General Manager of the Communications Products Group of Compaq Computer Corporation in Houston, Texas. He was Executive Vice President and President of the Computer Systems Group at Unisys Corporation, an information management company, from 1994 to 1996. From 1993 to 1994, he was a consultant affiliated with the Kassandra Group. Prior to 1993, he was Senior Vice President and President of the Public Networks Group of Northern Telecom, Ltd., a manufacturer and distributor of telecommunications equipment. John A. H. Shober has been a director of the Company since July 1996. He has been a director of Penn Virginia Corporation, a natural resources company, since 1989, Vice Chairman of the board of directors from 1992 to 1996, and President and Chief Executive Officer from 1989 to 1992. Mr. Shober is Chairman and a director of the Anker Coal Group, a mining company, and is also a director of Airgas, Inc., a distributor of industrial gases and related products, BetzDearborn Inc., a specialty chemical company, and is Vice Chairman and a director of MIBRAG mbH, a German company principally involved in coal mining and electric power production. A. Gordon Goodyear, Ph.D., was, in April 1994, appointed Vice President and General Manager - International Power Systems, Inc., which was recently renamed the Power Electronics Division. He joined the Company in March 1991 as Vice President and General Manager - Power Electronics. Prior to joining the Company, Dr. Goodyear was President of IRD Mechanalysis (Canada). Leslie S. Holden, F.R.I.C., Ph.D., was appointed Vice President - Battery Technology when he joined the Company in September 1989. Prior to joining the Company, Dr. Holden was Director - Technology of Altus Corp., a manufacturer of sealed recombinant calcium lead acid batteries primarily for the uninterruptible power systems market. 5 Apostolos T. Kambouroglou was appointed Vice President - Operations effective November 1997. He held the title of Vice President and General Manager - - Motive Power Systems from February 1995 until November 1997. He joined the Company in March 1991 as Plant Manager of the Conyers, Georgia plant, and subsequently held the positions of Senior Director - Standby Operations and Vice President - Operations, C&D Powercom. Prior to joining the Company, Mr. Kambouroglou was President of Enicon Engineered Containers, Inc. Robert T. Marley was appointed Treasurer of the Company in August 1995. He joined the Company in 1991 as Manager of Treasury Services and later held the position of Treasurer of the Company's subsidiaries. Prior to joining the Company, Mr. Marley was the Treasury Manager with Kulicke & Soffa Industries, Inc. Stephen E. Markert, Jr. was appointed Vice President - Finance and Chief Financial Officer in February 1995. He joined the Company in May 1989 as Corporate Controller. Prior to that time, Mr. Markert was a divisional controller of Decision Data Computer Corporation. Larry W. Moore was appointed Vice President and General Manager - Powercom Division in January 1997. He joined the Company in December 1996 as Vice President of Marketing for C&D Powercom and Ratelco Electronics. From 1995 to 1996, he was President of MooreCom, a communications consulting firm he founded. Prior to that time, through 1995, Mr. Moore spent over 30 years with AT&T where he held various sales and marketing positions, rising to Associate Vice President, CATV Global Business Unit of Network Systems. John J. Murray, Jr. was appointed Vice President and General Manager - Motive Power Division in October 1997. Mr. Murray served in a variety of sales, marketing and business management roles with E. I. DuPont de Nemours & Co. from 1965 to 1993. He was the Principal of J. J. Murray Associates, a marketing and management consultancy serving Fortune 500 clients, from 1993 to 1995, Vice President of Marketing and Sales for Gordon Wahls Company, a national executive search company, from 1995 to 1996 and Senior Consultant for Right Management Consultants, a global management consulting firm from 1996 to 1997. Stephen J. Weglarz was appointed Vice President - Corporate Services and Corporate Counsel in August 1995. He joined the Company in April 1990 as Manager of Human Resources/Labor Counsel and subsequently held the position of Internal Counsel/Director of Labor Relations. Prior to joining the Company, Mr. Weglarz was a partner in the law firm of Peckner, Dorfman, Wolffe, Rounick & Cabot. The Board of Directors has established a Compensation Committee (including a Stock Option Subcommittee), an Audit Committee and a Corporate Governance and Nominating Committee. The Compensation Committee reviews the compensation of executives (including awards pursuant to the Company's Incentive Compensation Plan) and through its Stock Option Subcommittee administers the Company's Stock Option Plan. The Audit Committee, which is comprised of directors who are not officers or employees of the Company, reviews the scope of the independent audit, the Company's year-end financial statements and such other matters relating to the Company's financial affairs as its members deem appropriate. The Corporate Governance and Nominating Committee identifies and evaluates candidates for election as members of the Board of Directors and reviews corporate policies (it will consider nominees recommended by stockholders of the Company in writing to the Chairman of the Board). The Board of Directors held four regular meetings and two special meetings during the year ended January 31, 1998. The Compensation Committee and Audit Committee each held two meetings and the Stock Option Subcommittee and Corporate Governance and Nominating Committee each held one meeting. Each of the directors attended 75% or more of the regularly scheduled meetings of the Board of Directors and 50% or more of the Special meetings of the Board of Directors and meetings of committees of which he was a member in the year ended January 31, 1998. 6 EXECUTIVE COMPENSATION The following table sets forth information concerning annual and long-term compensation paid by the Company for each of the last three fiscal years to its Chairman of the Board, President and Chief Executive Officer and four other most highly compensated executive officers as of January 31, 1998 whose total annual salary and bonus from the Company for the year then ended exceeded $100,000.
Long Term Annual Compensation Compensation ------------------- ------------ Securities Other Underlying All Name Annual Options Other & Principal Fiscal Salary Bonus Compensation Granted Compensation Position Year ($) (1) ($) (2) ($) (3) (#) ($) (4) - -------- ------ -------- -------- ------------ ---------- ------------ Alfred Weber 1998 $430,161 $294,800 -- 12,000 $107,035 (5) Chairman of 1997 392,312 191,500 $2,360,600 34,000 4,905 the Board, 1996 351,987 221,000 -- -- 4,680 President and Chief Executive Officer A. Gordon Goodyear 1998 177,917 66,900 -- 6,000 4,783 Vice President 1997 165,833 60,000 -- 14,000 4,652 and General 1996 142,500 50,000 -- -- 8,740 (6) Manager - Power Electronics Division Leslie S. Holden 1998 158,499 60,800 285,625 4,200 4,242 Vice President - 1997 151,684 34,000 -- 8,000 4,288 Battery Technology 1996 139,181 55,000 197,500 -- 4,454 Apostolos T. Kambouroglou 1998 166,441 60,600 -- 6,700 4,125 Vice President - 1997 136,682 40,000 -- 10,000 3,634 Operations 1996 120,012 45,000 -- -- 3,040 Stephen E. Markert, Jr. 1998 145,921 66,000 50,625 4,500 4,773 Vice President - 1997 136,682 45,500 -- 10,000 4,877 Finance and Chief 1996 120,012 53,000 -- -- 1,967 Financial Officer ---------------
(1) Does not include the value of certain personal benefits. The estimated value of such personal benefits for each listed officer did not exceed the lesser of $50,000 or 10% of the total annual salary and bonus paid to that officer for the relevant fiscal year. (footnotes continue on following page) 7 (2) Represents incentive compensation under the Company's Incentive Compensation Plan. Also includes payments to Mr. Weber and Dr. Goodyear of $20,000 each, and to Mr. Markert of $7,500 related to the acquisition of Power Convertibles Corporation and LH Research, Inc. in fiscal 1997. (3) Represents amounts earned relating to the exercise of stock options. (4) Represents employer matching contributions under the Company's Savings Plan. (5) Includes $102,168 paid to Mr. Weber in fiscal 1998 to reimburse him, on an after tax basis, for interest on a Promissory Note (see "Certain Relationships and Related Transactions" below). (6) Includes $4,560 relocation and tax gross-up reimbursement in fiscal 1996. - --------------- The Company has entered into an employment agreement with Mr. Weber as of April 1, 1996 providing for a base salary of $400,000 per year, increasing by $35,000 per year in each of the next three years. The agreement has a term of three years, and is thereafter renewable automatically for successive one-year terms unless terminated by either party on three months advance notice. Mr. Weber is subject to certain restrictions on competition with the Company for a period of one year following termination of employment. If Mr. Weber's employment is terminated without cause or as a result of nonrenewal of the agreement, the Company is obligated to pay Mr. Weber his base salary in effect at the date of the termination for a one year period and continue certain benefits for that period. If, after a Change in Control of the Company (as defined in the employment agreement), Mr. Weber's employment is either terminated by the Company (other than for death, disability or for cause) or not renewed by the Company or is terminated by Mr. Weber for Good Reason (as defined in the employment agreement), Mr. Weber will be entitled to receive a lump sum severance payment. This payment generally will consist of two years of base salary, plus two times the average annual bonus based on the past two fiscal years. Under these circumstances, the Company will also continue medical and certain other benefits for up to two years and accelerate the vesting of stock options. The Company has also entered into employment agreements with Drs. Goodyear and Holden and Messrs. Kambouroglou and Markert. Their annual base salaries under these agreements are subject to increase during the course of the year by the Compensation Committee of the Board of Directors. Upon such review, effective April 1998, the base salaries of Drs. Goodyear and Holden and Messrs. Kambouroglou and Markert are $191,000, $165,000, $140,000 and $165,000, respectively. Each of these agreements are renewable automatically for successive terms of one month each, unless terminated by either party upon 60 days written notice. The agreements restrict each of Drs. Goodyear and Holden and Messrs. Kambouroglou and Markert from competing with the Company for a period of one year following the termination of his employment. Each of the agreements also provide that if employment is terminated by the Company without cause or as a result of the nonrenewal of the agreement, the Company is obligated to pay the employee his base salary in effect at the date of termination for a one year period. PENSION PLANS The C&D TECHNOLOGIES, INC. Pension Plan for Salaried Employees (the "Pension Plan") covers certain nonunion salaried employees of the Company who either have participated in its predecessor company's pension plan or have completed one year of service with the Company. The Pension Plan was amended during 1994, 1995 and 1998 to provide participation to salaried employees of certain of the Company's subsidiaries. The Pension Plan was amended in 1997 to eliminate the one year of service eligibility requirement for covered employees. The Pension Plan is a qualified plan under Section 401(a) of the Internal Revenue Code of 1986, 8 as amended. The Pension Plan is a noncontributory defined benefit plan that provides for normal retirement benefits beginning at age 65 but permits early retirement benefits in certain cases, subject to a reduction of benefits for employees who retire earlier than age 62. Under the Pension Plan, the pension payable at normal or late retirement equals 2.1% of a participant's "average pay" (as defined below) during the highest paid five consecutive years of the participant's last ten years of employment multiplied by the number of years of credited service up to 15 (including service with the Company's predecessor company), plus 1.6% of such average pay for each year in excess of 15 years up to a maximum of 15 additional years, reduced by .5% (the "Offset") of Covered Compensation (35-year average of the Social Security wage base ending the year prior to Social Security Normal Retirement Age) multiplied by the participant's years of credited service up to 30 years. The term "average pay" as used in the Pension Plan was amended January 1, 1994 to include salary, overtime, executive incentive compensation, sales bonuses, 30% of sales commissions, and any tax deferred contributions to the Company's savings plan. An unreduced disability benefit is provided after ten years of eligibility service, and a death benefit to a surviving spouse equal to approximately 50% of the value of the participant's pension benefit at the time of death is provided after five years of eligibility service or age 65. The Code places certain maximum limitations on the amount of benefit which may be payable under a qualified pension plan such as the Pension Plan. The current limitation on an employee's annual benefit is the lesser of $125,000 or the employee's average compensation for the three years that he was most highly compensated. The following table illustrates the total estimated annual pension benefits that would be provided upon retirement under the benefit formula described above to salaried employees for the specified remuneration and years of credited service classifications set forth below. Benefit amounts shown are computed on a straight life basis, prior to the Offset described above.
Years of Credited Service (1)(2)(3) ------------------------------------------------ Average Pay 5 10 20 30 40 ----------- --- ---- ---- ---- --- $125,000.......................... $13,125 $26,250 $49,375 $69,375 $69,375 150,000.......................... 15,750 31,500 59,250 83,250 83,250 160,000 or greater(4)............ 16,800 33,600 63,200 88,800 88,800 - ---------------
(1) It is expected that Mr. Weber, Dr. Goodyear, Dr. Holden, Mr. Kambouroglou and Mr. Markert will have 10, 22, 13, 17 and 27 years of credited service, respectively, at normal retirement. (2) For the plan year ended December 31, 1997, the amount of remuneration, for purposes of calculations under the Pension Plan, for Messrs. Weber, Kambouroglou and Markert and Drs. Goodyear and Holden was $160,000. (3) The maximum annual benefit of $125,000 will be reduced for pension benefits which begin before, and increased for pension benefits which begin after, the participant's Social Security Normal Retirement Age. (4) Effective January 1, 1997, the maximum compensation limit is $160,000. The limit was $150,000 from January 1, 1994 through December 31, 1996 and for years prior to January 1, 1994 the limit was $235,840. After reflecting these limits, Mr. Weber's projected retirement benefit is $40,535 prior to the Offset. 9 The Company has adopted two Supplemental Executive Retirement Plans ("SERPs"), one covering Mr. Weber and the other covering executives specified from time to time by the Board of Directors (presently including each of the four other most highly compensated executive officers). The SERPs are non-qualified, unfunded defined benefit compensation plans whose purpose is to provide additional retirement benefits to participants whose benefits under the Pension Plan have been restricted by federal law. The normal form of benefit under the SERPs for an unmarried participant is a monthly annuity ceasing on the participant's death and for married persons is a joint and survivor annuity, but other optional benefit forms are available. The maximum annual benefit is $150,000 for Mr. Weber and $100,000 for the other participants, in each case indexed annually by 4% beginning September 30, 1998, and less (i) the annual accrued benefit as of the retirement or other qualifying event (based on a monthly single life annuity) payable with respect to Mr. Weber at age 66 and with respect to all other participants at normal retirement age (as defined in the Pension Plan); (ii) one-half of the participant's social security benefit as of the retirement or other qualifying event; and (iii) the annual single life annuity payable at age 66 to Mr. Weber and at age 65 to all other participants based on the Actuarial Equivalent (as defined in the SERPs) of the participant's account under the Company's Savings Plan as of the retirement or other qualifying event solely attributable to matching contributions made by the Company. The actual benefits payable are the percentages set forth below of the maximum annual benefit, based on the number of years of employment prior to retirement or other qualifying event: Years of Employment Prior to Qualifying Event Percentage Benefit ------------------------- ------------------ less than 7.5 0% 7.5 50% 8 53.3% 9 60% 10 66.7% 11 73.3% 12 80% 13 86.7% 14 93.3% 15 or more 100% For Mr. Weber, if the qualifying event is a change of control or the expiration of his employment agreement, the actual benefit is determined by multiplying the maximum annual benefit by 100%. For other participants who have been continuously employed by the Company or an affiliate for at least five years, if the qualifying event is a change of control, the actual benefit is determined by multiplying the maximum annual benefit by a fraction (not to exceed 1), the numerator of which is the number of years the participant would have been employed if he were continuously employed by the Company or an affiliate through age 65, and the denominator of which is 15. For other participants who have been continuously employed by the Company or an affiliate for less than five years, the actual benefit is 50% of the amount referred to in the previous sentence. A participant's SERP benefit may be forfeited in certain circumstances including where the participant is terminated for cause or violates a covenant not to compete. 10 OPTION GRANTS IN FISCAL 1998 The following table presents certain information concerning the stock options granted by the Company to its Chairman of the Board, President and Chief Executive Officer and the four other most highly compensated executive officers pursuant to the Company's Stock Option Plan in the year ended January 31, 1998.
Individual Grants ------------------------------------------------------------------------------- Number of % of Total Grant Securities Options Exercise Date Underlying Granted to Price Present Options Granted Employees in per Expiration Value Name (#) Fiscal Year Share Date (3) ($)(4) - ---- --------------- ------------ -------- ---------- ------- Alfred Weber 12,000 (1) 8.5% $45.875 09/30/07 $219,480 A. Gordon Goodyear 6,000 (1) 4.2% $45.875 09/30/07 109,740 Leslie S. Holden 4,200 (1) 3.0% $45.875 09/30/07 76,818 Apostolos T. Kambouroglou 4,200 (1) 3.0% $45.875 09/30/07 76,818 Apostolos T. Kambouroglou 2,500 (2) 1.8% $34.500 02/01/07 34,625 Stephen E. Markert, Jr. 4,500 (1) 3.2% $45.875 09/30/07 82,305 - ---------------
(1) The first 33 1/3% of the shares covered by the Option shall vest on September 30, 1998. The second 33 1/3% of the shares covered by the Option shall vest on September 30, 1999 and the remaining 33 1/3% of the shares covered by the Option shall vest on September 30, 2000. (2) The first 33 1/3% of the shares covered by the Option vested on February 1, 1998. The second 33 1/3% of the shares covered by the Option shall vest on February 1, 1999. The remaining 33 1/3% of the shares covered by the Option shall vest on February 1, 2000. (3) Each option is subject to earlier termination if the officer's employment with the Company is terminated. (4) The stock options were valued using the Black-Scholes pricing model. 11 OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL 1998 YEAR-END OPTION VALUES The following table presents certain information concerning the amount and value of all unexercised stock options held by the Company's Chairman of the Board, President and Chief Executive Officer and the four most highly compensated executive officers as of January 31, 1998.
Value of Unexercised In- Number of Securities the-Money Options at 1/31/98 Underlying Unexercised ---------------------------- Shares Options at 1/31/98 Exercisable Unexercisable Acquired ------------------ ----------- ------------- on Value Exercise Realized Exercisable Unexercisable Shares Value (1) Shares Value (1) Name (#) ($) (#) (#) (#) ($) (#) ($) - ---- -------- -------- ----------- ------------- ------ --------- ------ --------- Alfred Weber -- -- 121,333 34,667 121,333 $4,653,158 34,667 $599,842 A. Gordon Goodyear -- -- 26,167 15,333 26,167 946,405 15,333 250,158 Leslie S. Holden 13,000 $285,625 2,667 9,533 2,667 66,342 9,533 145,258 Apostolos T. -- -- 15,333 13,367 15,333 546,033 13,367 214,380 Kambouroglou Stephen E. Markert, Jr. 1,500 50,625 5,833 11,167 5,833 175,096 11,167 179,342 - -------------------- (1) Represents the excess of (i) the number of shares covered by the option multiplied by the closing price for shares of Common Stock ($48.875 a share) on January 31, 1998 over (ii) the aggregate exercise price of the option. COMPENSATION OF DIRECTORS For periods prior to the 1998 Annual Meeting of Stockholders, the Company paid non-employee directors an annual retainer of $10,000, plus $1,000 for each meeting of the Board of Directors or any of its committees or subcommittees attended. Commencing with the 1998 Annual Meeting of Stockholders, the Company has agreed to pay non-employee directors (i) an annual retainer of $12,000 (payable in stock or in a combination of stock and a sufficient amount of cash to pay income taxes owing on that amount), (ii) for members of a committee of the Board of Directors other than the chairperson, $1,000 for each in-person meeting and $500 for each telephonic meeting of a committee attended and (iii) for the chairperson of a committee of the Board of Directors, $1,500 for each in-person meeting or $750 for each telephonic meeting of a committee attended; and, in addition, subject to the approval by the stockholders of the Company of the C&D TECHNOLOGIES, INC. 1998 Stock Option Plan, to grant annually to each non-employee director options to purchase 1,000 shares of common stock. The Company believes that the new non-employee director compensation structure is more typical of similarly situated companies than the old structure. COMPOSITION OF COMPENSATION COMMITTEE During fiscal 1998 the Compensation Committee consisted of Messrs. Dowd, Feit, Harral and Law. The Stock Option Subcommittee thereof consisted of Messrs. Dowd, Harral and Law. 12 COMPENSATION COMMITTEE REPORT COMPENSATION PHILOSOPHY. The principal goal of the Company's compensation program as administered by the Compensation Committee is to help the Company attract, motivate and retain the executive talent required to develop and achieve the Company's strategic and operating goals with a view to maximizing shareholder value. The key elements of this program and the objectives of each element are as follows: BASE SALARY o Establish base salaries that are competitive with those payable to executives holding comparable positions at similar-sized industrial companies. o Provide periodic base salary increases as appropriate, consistent with the Company's overall operating and financial performance, with a view to rewarding successful individual performance and keeping pace with competitive compensation practices. ANNUAL INCENTIVE o Encourage both superlative individual effort and effective "team play" by creating potential for earning annual incentive awards based in part on Company achievement of budgeted earnings objectives and in part on achievement of individual performance objectives measuring the individual executive's contribution to the key performance targets of the internal business unit within which the executive functions or for which he is responsible. o Set potential awards at levels that offer covered executives the opportunity to earn incentive amounts equal to a significant percentage (ordinarily at least 35% for the most senior executives) of their base salaries for full achievement of all Company and individual objectives, with the opportunity to selectively grant even larger awards to recognize outstanding individual performance. LONG-TERM INCENTIVE o Facilitate the alignment of executives' interests with those of the Company's shareholders by providing opportunities for meaningful stock ownership. SUMMARY OF ACTIONS TAKEN WITH RESPECT TO THE CHIEF EXECUTIVE OFFICER. The Compensation Committee reviews the performance of Mr. Weber at least once a year. The actions taken by the Compensation Committee for the year ended January 31, 1998 with respect to Mr. Weber are described and discussed below. BASE SALARY. The Company has employment agreements with its principal executive officers that provide for annual reviews of their base salary. Pursuant to the agreement with Mr. Weber, at the end of fiscal year 1998, his base salary was $435,000. ANNUAL INCENTIVE. Criteria for earning incentive awards pursuant to the Company's Incentive Compensation Plan for the fiscal year ended January 31, 1998 were established for the principal executive officers by the Compensation Committee early in the fiscal year, based in part on substantial achievement of the Company's budgeted earnings per share and in part on achievement of specified individual performance objectives. Based on Company and individual performance and the report of 13 an independent consultant who examined the Company's compensation policies, the Compensation Committee granted a bonus award to Mr. Weber in the amount of $294,800. STOCK OPTIONS. Based on the report of an independent consultant who examined the Company's compensation policies, the Stock Option Subcommittee of the Compensation Committee granted Mr. Weber options to purchase 12,000 shares of the Company's common stock in September 1997. Kevin P. Dowd Glenn M. Feit William Harral, III Warren A. Law COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Messrs. Feit, Harral and Law served on the Compensation Committee for the entire fiscal year ended January 31, 1998 and Mr. Dowd served on the Compensation Committee since June 1997. Mr. Feit is a member of the law firm of Proskauer Rose LLP, which provides legal services to the Company, and also owns 1,000 shares of Common Stock. Mr. Dowd owns 500 shares of Common Stock, Mr. Harral owns 2,500 shares of Common Stock and Professor Law owns 1,500 shares of Common Stock. 14 STOCK PRICE PERFORMANCE GRAPH The following graph compares on a cumulative basis the yearly percentage change, assuming quarterly dividend reinvestment over the last five fiscal years, in the total shareholder return on the Common Stock, with the total return on the New York Stock Exchange Market Value Index (the "NYSE Market Value Index"), a broad entity market index and the total return on a selected peer group index (the "SIC Code Peer Group Index"). The SIC Code Peer Group is based on the standard industrial classification codes ("SIC Codes") established by the government. The index chosen was "Miscellaneous Electrical Equipment and Supplies" and is comprised of all publicly traded companies having the same 3-digit SIC Code (369) as the Company. The price of each unit has been set at $100 on January 31, 1993 for the purpose of preparation of the graph. COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN Among C&D TECHNOLOGIES, INC., NYSE Market Value Index and SIC Code Peer Group Index Performance Results through January 31, 1998 Fiscal Year Company NYSE Peer Group ----------- ------- ---- ---------- 1993 100.0 100.0 100.0 1994 219.1 117.5 145.5 1995 386.3 112.0 159.2 1996 495.7 151.8 193.6 1997 648.2 186.0 231.7 1998 921.1 233.2 326.4 15 COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934 Section 16(a) of the Securities Exchange Act of 1934 requires the Company's directors, executive officers, and beneficial owners of more than 10% of the Company's Common Stock to file with the Securities and Exchange Commission initial reports of ownership and periodic reports of changes in ownership of the Company's Common Stock and to provide copies of such filings to the Company. Based upon a review of such copies and written representations, the Company believes that for the year ended January 31, 1998, each of the officers listed under "Management" failed to timely file a Form 5 with respect to options granted on September 30, 1997, except for Mr. Kambouroglou and Mr. Moore who also failed to timely file with respect to options granted on February 1, 1997 and September 30, 1997. In addition, Dr. Holden failed to file two reports with respect to five transactions; Mr. Markert failed to timely file one report with respect to two transactions; Mr. Marley failed to timely file two reports with respect to three transactions; Mr. Weglarz failed to timely file one report with respect to two transactions; Mr. Harral failed to timely file two reports with respect to two transactions; and Mr. Dowd failed to timely file one report with respect to one transaction. All reports referred to in this paragraph have been filed. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS On April 30, 1996, Mr. Weber exercised an option to purchase 110,000 shares of Common Stock at $6.04 per share, pursuant to an Option Agreement dated May 30, 1989, as amended. The options would have expired on April 30, 1996 had they not been exercised. Under the terms of the Option Agreement, Mr. Weber paid the exercise price with an interest-free promissory note in the original principal amount of $664,400 that was secured by the shares received on exercise. The note matured on October 31, 1997, and was repaid. The Company loaned Mr. Weber $1,057,138 to pay the tax withholding on the exercise of such option, evidenced by a promissory note (the "Weber Tax Note"), bearing interest at 5.33% per annum payable annually, and due on April 29, 1997, subject to extension until April 29, 1999 at the option of Mr. Weber. Mr. Weber extended the note on April 29, 1997 until April 29, 1999, but repaid it in full on April 29, 1998. The Weber Tax Note was secured by 90,000 of the shares received on exercise of such option. The Company further agreed to make payments to Mr. Weber in an amount sufficient to reimburse him, on an after-tax basis, for all interest on the Weber Tax Note incurred through the earlier of April 29, 1997 or the prepayment of the Weber Tax Note. PROPOSAL TO APPROVE AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION TO INCREASE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK The Board of Directors has approved a proposed amendment to the Company's Restated Certificate of Incorporation which would increase the number of shares of Common Stock the Company is authorized to issue to seventy-five million (75,000,000). The Company is currently authorized to issue ten million (10,000,000) shares of Common Stock. The proposed increase in authorized shares is being made primarily to provide the Company with the flexibility to issue additional shares as consideration in future mergers and/or acquisitions, to declare stock dividends or effect stock splits, to raise additional capital and to issue additional shares for other general corporate purposes. Although there are, at present, no plans, understandings, agreements or arrangements concerning the issuance of additional shares of the Company's Common Stock except for those shares presently reserved for issuance, the Board of Directors believes that it is in the best interest of the Company to have a sufficient number of shares available to take advantage of opportunities as they arise. Authorized but unissued shares of the Company's Common Stock may be issued for such consideration as the Board of Directors determines to be adequate. The stockholders may or may not be given the opportunity to vote thereon, depending upon the nature of any such transactions, applicable law, the rules 16 and policies of The New York Stock Exchange and the judgement of the Board of Directors. Stockholders have no preemptive rights to subscribe to newly issued shares of Common Stock. The Board of Directors recommends that shareholders vote FOR approval of the amendment to the Restated Certificate of Incorporation to increase the number of shares of Common Stock the Company is authorized to issue. APPROVAL OF THE C&D TECHNOLOGIES, INC. 1998 STOCK OPTION PLAN The Board of Directors has adopted the Plan and directed that it be submitted to the stockholders for approval. The following description is qualified in its entirety by the provisions of the Plan, a copy of which is annexed hereto as Exhibit A. PURPOSE. The purpose of the Plan is to enhance the profitability and value of the Company for the benefit of the Company's stockholders by enabling the Company to offer employees and consultants of the Company and its affiliates, as well as directors of the Company who are not employees of the Company ("Non-Employee Directors"), options ("Stock Options") to purchase Common Stock and to offer Non-Employee Directors shares of Common Stock. The intent of such offering is to raise the level of stock ownership by these persons in order to attract, retain and reward them and strengthen the mutuality of interests between them and the Company's stockholders. TERM. The Plan has been adopted by the Board of Directors to become effective as of June 30, 1998 (the "Effective Date"), subject to and conditioned upon stockholder approval at the 1998 Annual Meeting of Stockholders. ADMINISTRATION. The Plan will be administered by a committee or subcommittee of the Board of Directors appointed from time to time by the Board (the "Committee"), consisting of two or more directors qualified as "non-employee directors" under Rule 16b-3 ("Rule 16b-3") promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and "outside directors" under Section 162(m) of the Code ("Section 162(m)"). All questions of interpretation and application of the Plan will be determined by the Committee. PARTICIPATION. All employees (including executive officers) and consultants of the Company and its affiliates are eligible to receive Stock Options, but the actual recipients, number of shares and exercise price of Stock Options to be granted in any year will be determined by the Committee (the recepients, number of shares and exercise price of Stock Options to be granted, or which would have been granted in the last fiscal year if the Plan had been in effect, are therefore not determinable at this time). All Non-Employee Directors (collectively with employees and consultants who are granted Stock Options, the "Participants") will receive both shares of Common Stock and Stock Options. The value of the shares of Common Stock and, if elected as described below, cash, is $12,000 per director per year (an aggregate of $72,000 of such shares and cash, or 2,014 shares if no cash payments were elected, would have been granted if the Plan had been in effect in the last fiscal year). As described below, the Stock Options will cover 1,000 shares per director per year, at an exercise price that is not determinable at this time (Stock Options to purchase an aggregate of 6,000 shares would have been granted to Non-Employee Directors, at an exercise price of $35.75 per share, if the Plan had been in effect in the last fiscal year). SHARES OF STOCK AVAILABLE FOR GRANT. The number of Stock Options that may be granted to any person under the Plan is subject to two limitations: (i) the aggregate number of shares of Common Stock which may be issued and with respect to which Stock Options may be granted may not exceed 300,000 17 shares, which may be either authorized and unissued Common Stock or Common Stock held in or acquired for the treasury of the Company and (ii) the maximum number of shares of Common Stock with respect to which Stock Options may be granted during any calendar year of the Company to any employee is 100,000 shares (both limitations being subject to adjustment by the Committee, in the event of stock dividend, stock split or any other change in capital structure or business of the Company). If any stock option expires, terminates or is canceled for any reason without having been exercised in full, the number of shares of Common Stock underlying any unexercised option will again be available under the Plan. To the extent that shares of Common Stock for which Stock Options are permitted to be granted to a Participant during a calendar year of the Company are not covered by a grant of a Stock Option in the Company's calendar year, such shares of Common Stock will be available for grant or issuance to the Participant in any subsequent calendar year during the term of the Plan. STOCK OPTIONS. The Plan provides for the grant of incentive stock options ("ISOs") and nonqualified stock options ("NQSOs"). The Committee will have the full authority to grant to any employee of the Company or a majority-owned subsidiary one or more ISOs, NQSOs or both types of Stock Options. The Committee will also have the full authority to grant to any employee of another affiliate of the Company or a consultant one or more NQSOs. The exercise price per share of Common Stock subject to a Stock Option granted to an employee or consultant will be determined by the Committee, at the time of grant but may not be less than 100% of the fair market value of a share of Common Stock at the time of grant; PROVIDED, that if an ISO is granted to a ten percent stockholder of the Company or its subsidiaries ("Ten Percent Stockholder"), the exercise price per share may be no less than 110% of the fair market value of the Common Stock. The term of such Stock Option will be fixed by the Committee, but no Stock Option will be exercisable more than 10 years after the date the Stock Option is granted; PROVIDED, that the term of an ISO granted to a Ten Percent Stockholder may not exceed five years. On the date of the Annual Meeting of Stockholders of the Company held in 1998 and on the date of the Annual Meeting of Stockholders held in each year thereafter while shares of Common Stock remain available for the grant of Stock Options under the Plan, each Non-Employee Director will be automatically granted NQSOs to purchase 1,000 shares of Common Stock. A Non-Employee Director who is first elected or appointed to the Board after the Annual Meeting of Stockholders in any year will upon such election or appointment automatically be granted a PRO RATA portion of the NQSOs referred to in the preceding sentence, based upon the portion of the period between Annual Meetings of Stockholders that such Non-Employee Director is expected to serve in such capacity. The exercise price per share of Common Stock subject to such NQSO will be equal to 100% of the fair market value of Common Stock at the time of grant, exercisable immediately upon grant. Except as otherwise provided in the Plan, if not previously exercised each such NQSO will expire upon the tenth anniversary of the date of the grant thereof. GRANT OF SHARES OF COMMON STOCK TO NON-EMPLOYEE DIRECTORS. On the date of the Annual Meeting of Stockholders of the Company held in 1998 and on the date of the Annual Meeting of Stockholders of the Company held in each year thereafter in which shares of Common Stock remain available for grant under the Plan each Non-Employee Director will be automatically granted shares of Common Stock having fair market value of $12,000 or, at election of a Non-Employee Director made in writing to the Chief Financial Officer of the Company within 30 days prior to the date of grant, a combination of such shares and an amount of cash sufficient for such Non-Employee Director to pay the federal, state and local income taxes he or she may reasonably be expected to owe as a result of the receipt of such shares of Common Stock (as determined by the Committee). Any Non-Employee Director who is first elected or appointed to the Board after the grant of shares of Common Stock under the Plan in any year will upon such election or appointment be automatically granted a PRO RATA portion of the shares of Common Stock and cash referred to in the preceding sentence, based upon the portion of the period between Annual Meetings of Stockholders that such Non-Employee Director is expected to serve in such capacity. 18 FEDERAL TAX CONSEQUENCES. The rules concerning the federal income tax consequences with respect to Stock Options are highly technical. In addition, the applicable statutory provisions are subject to change and their application may vary in individual circumstances. Therefore, the following is designed to provide a general understanding of the federal income tax consequences as of the date hereof; it does not set forth any state or local income tax or estate tax consequences that may be applicable. INCENTIVE STOCK OPTIONS. Stock Options granted under the Plan may be "incentive stock options" as defined in the Code, provided that such Stock Options satisfy the requirements under the Code therefor. In general, neither the grant nor the exercise of an ISO will result in taxable income to the Participant or a deduction to the Company. The sale of Common Stock received pursuant to the exercise of a Stock Option which satisfied all the requirements of an ISO, as well as the holding period requirement described below, will result in a long-term capital gain or loss to the optionee equal to the difference between the amount realized on the sale and the exercise price and will not result in a tax deduction to the Company. To receive ISO treatment, the Participant must not dispose of the Common Stock purchased pursuant to the exercise of a Stock Option either (i) within two years after the Stock Option is granted or (ii) within one year after the date of exercise. If the Common Stock is held for more than eighteen months after the date of exercise the Participant will be taxed at a lower rate applicable to capital gains for such Participant. Capital gains rates may be further reduced in the case of a longer holding period. If all requirements for ISO treatment other than the holding period rules are satisfied, the recognition of income by the Participant is deferred until disposition of the Common Stock, but, in general, any gain (in an amount equal to the lesser of (i) the fair market value of the Common Stock on the date of exercise (or, with respect to officers, the date that sale of such stock would not create liability ("Section 16(b) liability") under Section 16(b) of the Exchange Act) minus the exercise price or (ii) the amount realized on the disposition minus the exercise price) is treated as ordinary income. Any remaining gain is treated as long-term or short-term capital gain depending on the Participant's holding period for the stock disposed of. The Company generally will be entitled to a deduction at that time equal to the amount of ordinary income realized by the Participant. The Plan provides that a Participant may pay for Common Stock received upon the exercise of a Stock Option (including an ISO) with other shares of Common Stock held for at least six months. In general a Participant's transfer of stock acquired pursuant to the exercise of an ISO, to acquire other stock in connection with the exercise of an ISO may result in ordinary income if the transferred stock has not met the minimum statutory holding period necessary for favorable tax treatment as an ISO. For example, if a Participant exercises an ISO and uses the stock so acquired to exercise another ISO within the two year or one year holding periods discussed above, the Participant may realize ordinary income under the rules summarized above. NON-QUALIFIED STOCK OPTIONS. A Participant will realize no taxable income at the time he or she is granted a NQSO. Such conclusion is predicated on the assumption that, under existing Treasury Department regulations, a NQSO, at the time of its grant, has no readily ascertainable fair market value. Ordinary income will be realized when a NQSO is exercised. The amount of such income will be equal to the excess of the fair market value on the exercise date of the shares of Common Stock issued to a Participant over the exercise price. The Participant's holding period with respect to the shares acquired will begin on the date of exercise. The tax basis of the Common Stock acquired upon the exercise of any NQSO will be equal to the sum of (i) the exercise price of such NQSO and (ii) the amount included in income with respect to such NQSO. Any gain or loss on a subsequent sale of the Common Stock will be either a long-term or short-term capital gain or loss, depending on the Participant's holding period for the Common Stock disposed of. Subject to the limitation under Sections 162(m) and 280G of the Code (as described below), the Company 19 generally will be entitled to a deduction for federal income tax purposes at the same time and in the same amount as the Participant is considered to have realized ordinary income in connection with the exercise of the NQSO. CERTAIN OTHER TAX ISSUES. In addition to the foregoing, (i) officers of the Company subject to Section 16(b) liability may be subject to special rules regarding the income tax consequences concerning their awards; (ii) any entitlement to a tax deduction on the part of the corporation is subject to the applicable federal tax rules (including, without limitation, Section 162(m) regarding the $1,000,000 limitation on deductible compensation); (iii) in the event that the exercisability or vesting of any award is accelerated because of an Extraordinary Transaction, payments relating to the awards (or a portion thereof), either alone or together with certain other payments, may constitute parachute payments under Section 280G of the Code, which excess amounts may be subject to excise taxes and may be nondeductible by the Company; and (iv) the exercise of an ISO may have implications in the computation of alternative minimum taxable income. In general, Section 162(m) denies a publicly held corporation a deduction for federal income tax purposes for compensation in excess of $1,000,000 per year per person to its chief executive officer and the four other most highly compensated executive officers subject to certain exceptions. Stock Options will generally qualify under one of these exceptions if they are granted under a plan that states the maximum number of shares with respect to which options may be granted to any employee during a specified period and the plan under which the options are granted is approved by stockholders and is administered by a compensation committee comprised of outside directors. The Plan is intended to satisfy these requirements with respect to Stock Options. The Plan is not subject to any of the requirements of the Employee Retirement Income Security Act of 1974, as amended. The Plan is not, nor is it intended to be, qualified under Section 401(a) of the Code. TERMINATION OR AMENDMENT OF PLAN. Notwithstanding any other provision of the Plan, the Committee may at any time, and from time to time, amend, prospectively or retroactively, in whole or in part, any or all of the provisions of the Plan, or suspend or terminate it entirely, retroactively or otherwise; PROVIDED, that, unless otherwise required by law or specifically provided in the Plan, the rights of a Participant with respect to Stock Options granted prior to such amendment, suspension or termination, may not be impaired without the consent of such Participant; and PROVIDED FURTHER, that without the approval of the stockholders of the Company in accordance with the laws of the State of Delaware, to the extent required by the applicable provisions of Rule 16b-3, Section 162(m) or (with respect to ISOs) Section 422 of the Code, no amendment may be made which would: (i) increase the aggregate number of shares of Common Stock that may be issued under the Plan; (ii) increase the maximum individual Participant limitations for a fiscal year under the Plan; (iii) change the classification of employees and Consultants eligible to receive awards under the Plan; (iv) decrease the minimum exercise price of any Stock Option; or (v) extend the maximum option term under the Plan. EXTRAORDINARY TRANSACTION. In the event of an Extraordinary Transaction (as defined in the Plan), the Committee may, in its sole discretion, terminate all outstanding Stock Options, effective as of the date of the Extraordinary Transaction, by delivering notice of termination to each such Participant at least 30 days prior to the date of consummation of the Extraordinary Transaction; PROVIDED, that during the period from the date on which such notice of termination is delivered to the consummation of the Extraordinary Transaction, each such Participant shall have the right to exercise in full all his or her Stock Options that are then outstanding (whether vested or not vested) but contingent on the occurrence of the Extraordinary Transaction; and PROVIDED, FURTHER, that, if the Extraordinary Transaction does not take place within a specified period after giving such notice for any reason whatsoever, the notice and exercise shall be null and void. RECOMMENDATION. The Board of Directors recommends a vote FOR the approval of the C&D TECHNOLOGIES, INC. 1998 Stock Option Plan. 20 RATIFICATION OF INDEPENDENT ACCOUNTANTS Based upon the recommendation of the Audit Committee, the Board of Directors has reappointed Coopers & Lybrand L.L.P. as the Company's independent accountants for the fiscal year ending January 31, 1999. In the absence of instructions to the contrary, the shares of Common Stock represented by a proxy delivered to the Board of Directors will be voted FOR the ratification of the appointment of Coopers & Lybrand L.L.P. A representative of Coopers & Lybrand L.L.P. is expected to be present at the Annual Meeting of Stockholders and will be available to respond to appropriate questions and make such statements as he may desire. The Board of Directors recommends a vote FOR the ratification of Coopers & Lybrand L.L.P. as the Company's independent accountants for the fiscal year ending January 31, 1999. STOCKHOLDER PROPOSALS Stockholders of the Company who intend to submit proposals at the 1999 Annual Meeting of Stockholders must submit such proposals to the Company no later than January 21, 1999. Stockholder proposals should be submitted to C&D TECHNOLOGIES, INC., 1400 Union Meeting Road, Blue Bell, Pennsylvania 19422 Attention: Vice President - Finance and Chief Financial Officer. ANNUAL REPORT The Company's Annual Report for the fiscal year ended January 31, 1998 is being mailed together with this Proxy Statement to those persons who were stockholders of record of the Company at the close of business on May 11, 1998. This Proxy Statement incorporates by reference to the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission (which is included within the Annual Report accompanying this Proxy Statement) the financial statements, supplementary financial information and management's discussion and analysis of financial condition and results of operations contained therein. OTHER BUSINESS The Board of Directors does not know of any other business to be presented to the meeting and does not intend to bring any other matters before the meeting. However, if any other matters properly come before the meeting or any adjournments thereof, it is intended that the persons named in the accompanying proxy will vote thereon according to their best judgment in the interests of the Company. BY ORDER OF THE BOARD OF DIRECTORS GLENN M. FEIT Secretary STOCKHOLDERS ARE REQUESTED TO DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED, SELF-ADDRESSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. YOUR PROMPT RESPONSE WILL BE HELPFUL, AND YOUR COOPERATION WILL BE APPRECIATED. 21 PROXY C&D TECHNOLOGIES, INC. 1400 UNION MEETING ROAD, BLUE BELL, PENNSYLVANIA 19422 SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS ON JUNE 30, 1998. The undersigned hereby appoints ALFRED WEBER, STEPHEN E. MARKERT, JR. and GLENN M. FEIT, or any of them, with the power of substitution, as proxies and hereby authorizes them to represent and to vote, as designated below, all shares of Common Stock of C&D TECHNOLOGIES, INC. (the "Company") held of record by the undersigned at the close of business on May 11, 1998, at the Annual Meeting of Stockholders to be held on Tuesday, June 30, 1998, and at any adjournments thereof. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3 AND 4. 1. ELECTION OF DIRECTORS: o FOR ALL NOMINEES LISTED BELOW (EXCEPT AS MARKED TO THE CONTRARY BELOW): Alfred Weber Kevin P. Dowd Glenn M. Feit Pamela S. Lewis Alan G. Lutz William Harral, III John A. H. Shober o WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES LISTED ABOVE. (INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE.) 2. APPROVAL OF AN AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK THE COMPANY IS AUTHORIZED TO ISSUE TO 75,000,000: o FOR o AGAINST o ABSTAIN 3. APPROVAL OF THE C&D TECHNOLOGIES, INC. 1998 STOCK OPTION PLAN: o FOR o AGAINST o ABSTAIN 4. RATIFICATION OF THE APPOINTMENT OF COOPERS & LYBRAND L.L.P. AS INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR ENDING JANUARY 31, 1999: o FOR o AGAINST o ABSTAIN (Continued and to be SIGNED on other side) (Continued from other side) 5. In their discretion, the Proxies are authorized to vote upon any other business that may properly come before the meeting and any adjournments thereof. WHEN PROPERLY EXECUTED THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3 AND 4. PLEASE SIGN EXACTLY AS NAME APPEARS BELOW. Dated: _____________________________________________, 1998 --------------------------------------------------------- Signature --------------------------------------------------------- Signature, if held jointly Please sign exactly as your name appears on this Proxy. If shares are registered in more than one name, the signatures of all such persons are required. A corporation should sign in its full corporate name by a duly authorized officer, stating such officer's title. Trustees, guardians, executors and administrators should sign in their official capacity giving their full title as such. A partnership should sign in the partnership name by an authorized person, stating such person's title and relationship to the partnership. PLEASE COMPLETE, DATE, SIGN AND RETURN THIS PROXY PROMPTLY, USING THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES OF AMERICA. EXHIBIT INDEX Exhibit A - C&D TECHNOLOGIES, INC. 1998 Stock Option Plan.
EX-1 2 EXHIBIT A C&D TECHNOLOGIES, INC. 1998 STOCK OPTION PLAN TABLE OF CONTENTS PAGE ARTICLE I. PURPOSE............................................A-1 ARTICLE II. DEFINITIONS........................................A-1 ARTICLE III. ADMINISTRATION.....................................A-3 ARTICLE IV. SHARE AND OTHER LIMITATIONS........................A-5 ARTICLE V. STOCK OPTIONS......................................A-6 ARTICLE VI. NON-EMPLOYEE DIRECTOR STOCK OPTIONS................A-8 ARTICLE VII. GRANT OF SHARES OF COMMON STOCK TO NON-EMPLOYEE DIRECTORS..........................A-9 ARTICLE VIII. NON-TRANSFERABILITY AND TERMINATION OF EMPLOYMENT/CONSULTANCY PROVISIONS.................A-10 ARTICLE IX. TERMINATION OR AMENDMENT OF PLAN..................A-11 ARTICLE X. UNFUNDED PLAN.....................................A-12 ARTICLE XI. GENERAL PROVISIONS................................A-12 ARTICLE XII. EFFECTIVE DATE OF PLAN............................A-13 ARTICLE XIII. TERM OF PLAN......................................A-14 ARTICLE XIV. NAME OF PLAN......................................A-14 (i) C&D TECHNOLOGIES, INC. 1998 STOCK OPTION PLAN ARTICLE I. PURPOSE The purpose of the C&D TECHNOLOGIES, INC. 1998 Stock Option Plan (the "PLAN") is to enhance the profitability and value of C&D TECHNOLOGIES, INC. (the "COMPANY") and its Affiliates for the benefit of the Company's stockholders by enabling the Company to offer Eligible Employees and Consultants of the Company and its Affiliates, as well as Non-Employee Directors of the Company, Stock Options in the Company, and to offer Non-Employee Directors shares of Common Stock. The intent of such offering is to raise the level of stock ownership by Eligible Employees, Consultants and Non-Employee Directors in order to attract, retain and reward such individuals and strengthen the mutuality of interests between them and the Company's stockholders. ARTICLE II. DEFINITIONS For purposes of this Plan, the following terms shall have the following meanings: "AFFILIATE" shall mean (i) any Subsidiary; or (ii) any corporation, trade or business (including, without limitation, a partnership or limited liability company) which is controlled 50% or more (whether by ownership of stock, assets or an equivalent ownership interest or voting interest) by the Company or one of its Affiliates. "BOARD" shall mean the Board of Directors of the Company. "CAUSE" shall mean (i) if the Participant is a party to an employment agreement with the Company or an Affiliate, the grounds for termination for cause thereunder and (ii) in all other cases, whatever a court of competent jurisdiction would consider grounds for termination for cause under the circumstances. "CODE" shall mean the Internal Revenue Code of 1986, as amended, including the rules and regulations thereunder. Any reference to any section of the Code shall also be a reference to any successor provision. "COMMITTEE" shall mean a committee or subcommittee of the Board appointed from time to time by the Board, which committee or subcommittee shall consist of two or more non-employee directors, each of whom is intended to be, to the extent required by Rule 16b-3 and Section 162(m) of the Code, a "non-employee director" as defined in Rule 16b-3 and an "outside director" as defined under Section 162(m) of the Code. To the extent that no Committee exists which has the authority to administer this Plan, the functions of the Committee shall be exercised by the Board and the term "Committee" as used in this Plan shall refer to the Board. If for any reason the appointed Committee does not meet the requirements of Rule 16b-3 or Section 162(m) of the Code, such noncompliance with the requirements of Rule 16b-3 and Section 162(m) of the Code shall not affect the validity of awards, grants, interpretations or other actions of the Committee. "COMMON STOCK" shall mean the common stock, $.01 par value, of the Company. "COMPANY" shall mean C&D TECHNOLOGIES, INC., a Delaware corporation. "CONSULTANT" shall mean any natural person who is an adviser or consultant to the Company or its Affiliates. "DISABILITY" shall mean total and permanent disability, as defined in Section 22(e)(3) of the Code. "EFFECTIVE DATE" shall mean the effective date of this Plan as defined in ARTICLE XII. "ELIGIBLE EMPLOYEE" shall mean any employee of the Company or its Affiliates. Notwithstanding the foregoing, with respect to the grant of Incentive Stock Options, Eligible Employee shall mean any employee of the Company or any Subsidiary. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended. "EXTRAORDINARY TRANSACTION" shall have the meaning set forth in SECTION 4.2(d). "FAIR MARKET VALUE", unless otherwise required by any applicable provision of the Code or any regulations issued thereunder, shall mean, as of any date, the last sales price reported for the Common Stock on the applicable date: (i) as reported on the principal national securities exchange on which it is then traded or the Nasdaq Stock Market, Inc. or (ii) if not traded on any such national securities exchange or the Nasdaq Stock Market, Inc., as quoted on an automated quotation system sponsored by the National Association of Securities Dealers. If the Common Stock is not readily tradable on a national securities exchange, the Nasdaq Stock Market, Inc., or any automated quotation system sponsored by the National Association of Securities Dealers, its Fair Market Value shall be set in good faith by the Committee. "INCENTIVE STOCK OPTION" shall mean any Stock Option intended to be and designated as an "incentive stock option" within the meaning of Section 422 of the Code. "NON-EMPLOYEE DIRECTOR" shall mean any director of the Company who is not an employee of the Company or any Affiliate. "NON-QUALIFIED STOCK OPTION" shall mean any Stock Option that is not an Incentive Stock Option. "PARTICIPANT" shall mean any Eligible Employee, Consultant or Non-Employee Director to whom a Stock Option has been granted. "RULE 16b-3" shall mean Rule 16b-3 under Section 16(b) of the Exchange Act as then in effect or any successor provisions. A-2 "SECTION 162(m) OF THE CODE" shall mean the exception for performance-based compensation under Section 162(m) of the Code. "STOCK OPTION" shall mean any option to purchase shares of Common Stock granted to Eligible Employees or Consultants pursuant to ARTICLE V or granted to Non-Employee Directors pursuant to ARTICLE VI. "SUBSIDIARY" shall mean any subsidiary corporation of the Company within the meaning of Section 424(f) of the Code. "TEN PERCENT STOCKHOLDER" shall mean a person owning stock possessing more than 10% of the total combined voting power of all classes of stock of the Company, any Subsidiary or any parent corporation, as defined in Section 424(e) of the Code. "TERMINATION OF CONSULTANCY" shall mean, with respect to a Consultant, that the Consultant is no longer acting as a Consultant to the Company and its Affiliates. In the event an entity shall cease to be an Affiliate, there shall be deemed a Termination of Consultancy of any individual who is a consultant of that entity and is not otherwise a Consultant of the Company or another Affiliate at the time the entity ceases to be an Affiliate. "TERMINATION OF DIRECTORSHIP" shall mean, with respect to a Non-Employee Director, that the Non-Employee Director has ceased to be a director of the Company. "TERMINATION OF EMPLOYMENT" shall mean: (i) a termination of service of a Participant from the Company and its Affiliates; or (ii) when an entity which is employing a Participant ceases to be an Affiliate, unless the Participant thereupon becomes employed by the Company or another Affiliate. "TRANSFER" OR "TRANSFERRED" shall mean anticipate, alienate, attach, sell, assign, pledge, encumber, charge or otherwise transfer. ARTICLE III. ADMINISTRATION 3.1. THE COMMITTEE. This Plan shall be administered and interpreted by the Committee. Subject to the other provisions of this Plan, the Committee shall have the authority to adopt, alter and repeal such administrative rules governing this Plan and perform all acts, including the delegation of its administrative responsibilities, as it shall, from time to time, deem advisable; to construe and interpret this Plan and any Stock Option granted hereunder (and any agreements relating thereto). The Committee may correct any defect, supply any omission or reconcile any inconsistency in this Plan or in any agreement relating thereto in the manner and to the extent it shall deem necessary to carry this Plan into effect, but only to the extent any such action would be permitted under the applicable provisions of both Rule 16b-3 and Section 162(m) of the Code. The Committee may adopt rules for persons who are residing in, or subject to, the taxes of, countries other than the United States to comply with applicable tax and securities laws. To the extent applicable, this Plan is intended to comply with the applicable requirements of Rule 16b-3 and Section 162(m) of the Code and shall be limited, construed and interpreted in a manner so as to comply therewith. The Board, its directors, the Committee, its members and any person to whom authority is delegated A-3 pursuant to this SECTION 3.1 shall not be liable for any action or determination made in good faith with respect to this Plan. 3.2. AWARDS. The Committee shall have full authority to grant Stock Options to Eligible Employees and Consultants and to otherwise administer this Plan. In particular, the Committee shall have the authority: (a) to select Eligible Employees and Consultants to whom Stock Options may from time to time be granted hereunder; (b) to determine the number of shares of Common Stock to be covered by each Stock Option granted to an Eligible Employee or Consultant, and the terms and conditions of the Stock Option (including, but not limited to, the exercise or purchase price (if any), any restriction or limitation, any vesting schedule or acceleration thereof or any forfeiture restrictions or waiver thereof, regarding any Stock Option, and the shares of Common Stock relating thereto, based on such factors, if any, as the Committee shall determine in its sole discretion); (c) to modify or extend a Stock Option, subject to SECTION 9.1 herein; and (d) to offer to buy out a Stock Option previously granted, based on such terms and conditions as the Committee shall establish and communicate to the Participant at the time such offer is made. 3.3. DECISIONS FINAL. Any decision, interpretation or other action made or taken in good faith by or at the direction of the Company, the Board or the Committee (or any of its members) arising out of or in connection with this Plan shall be within the absolute discretion of the Company, the Board or the Committee, as the case may be, and shall be final, binding and conclusive on the Company and its Affiliates and all employees and Participants and their respective heirs, executors, administrators, successors and assigns. 3.4. RELIANCE ON COUNSEL. The Company, the Board or the Committee may consult with legal counsel, who may be counsel for the Company or other counsel, with respect to its obligations or duties hereunder, or with respect to any action or proceeding or any question of law, and shall not be liable with respect to any action taken or omitted by it in good faith pursuant to the advice of such counsel. The Company, the Board or the Committee may also engage consultants or agents with regard to the plan. Expenses incurred in the engagement of any such counsel, consultant or agent shall be paid by the Company. 3.5. PROCEDURES. If the Committee is appointed, the Board shall designate one of the members of the Committee as chairman and the Committee shall hold meetings, subject to the By-Laws of the Company, at such times and places as the Committee shall deem advisable. A majority of the Committee members shall constitute a quorum. All determinations of the Committee shall be made by a majority of its members. Any decision or determination reduced to writing and signed by all the Committee members in accordance with the By-Laws of the Company shall be fully as effective as if it had been made by a vote at a meeting duly called and held. A-4 ARTICLE IV. SHARE AND OTHER LIMITATIONS 4.1. SHARES. (a) The aggregate number of shares of Common Stock which may be issued and with respect to which Stock Options may be granted under this Plan shall not exceed 300,000 shares (subject to any increase or decrease pursuant to SECTION 4.2) which may be either authorized and unissued Common Stock or Common Stock held in or acquired for the treasury of the Company. If any Stock Option expires, terminates or is canceled for any reason without having been exercised in full, the number of shares of Common Stock underlying any unexercised Stock Option shall again be available under this Plan. In addition, in determining the number of shares of Common Stock available under the Plan other than for the granting of Incentive Stock Options, if Common Stock has been exchanged by a Participant as full or partial payment to the Company in connection with the exercise of a Stock Option, the number of shares of Common Stock exchanged as payment in connection with the exercise shall again be available under this Plan. (b) The maximum number of shares of Common Stock with respect to which Stock Options may be granted under this Plan during any calendar year of the Company to each Eligible Employee shall be 100,000 shares (subject to any increase or decrease pursuant to this SECTION 4.2). To the extent that shares of Common Stock for which Stock Options are permitted to be granted to a Participant pursuant to SECTION 4.1(b) during a calendar year of the Company are not covered by a grant of a Stock Option in the Company's calendar year, such shares of Common Stock shall be available for grant or issuance to the Participant in any subsequent calendar year during the term of this Plan. 4.2. CHANGES. (a) The existence of this Plan and the shares of Common Stock and Stock Options granted hereunder shall not affect in any way the right or power of the Board or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company's capital structure or its business, any merger or consolidation of the Company or Affiliates, any issue of bonds, debentures, preferred or prior preference stock ahead of or affecting Common Stock, the authorization or issuance of additional shares of Common Stock, the dissolution or liquidation of the Company or Affiliates, any sale or transfer of all or part of its assets or business or any other corporate act or proceeding. (b) In the event of any change in the capital structure or business of the Company by reason of any stock dividend, stock split or reverse stock split, recapitalization, reorganization, merger, consolidation, split-up, combination or exchange of shares, distribution with respect to its outstanding Common Stock or capital stock other than Common Stock, reclassification of its capital stock, any sale or transfer of all or part of the Company's assets or business, or any similar change affecting the Company's capital structure or business, and if the Committee determines an adjustment is appropriate under this Plan, then the aggregate number and kind of shares which thereafter may be issued under this Plan, the number and kind of shares or other property (including cash) to be issued upon exercise of an outstanding Stock Option granted under this Plan and the purchase or exercise price thereof shall be appropriately adjusted. Any such adjustment shall be consistent with such change and be made in a manner that the Committee deems equitable to prevent substantial dilution or enlargement of the rights A-5 granted to, or available for, Participants under this Plan or as otherwise necessary to reflect the change. Any such adjustment determined by the Committee in good faith shall be binding and conclusive on the Company and all Participants and employees and their respective heirs, executors, administrators, successors and assigns. (c) Fractional shares of Common Stock resulting from any adjustment in Stock Options pursuant to SECTION 4.2(a) or (b) shall be aggregated until, and eliminated at, the time of exercise by rounding-down for fractions less than one-half and rounding-up for fractions equal to or greater than one-half. No cash settlements shall be made with respect to fractional shares eliminated by rounding. Notice of any adjustment shall be given by the Committee to each Participant whose Stock Option has been adjusted and such adjustment (whether or not such notice is given) shall be effective and binding for all purposes of this Plan. (d) In the event of (i) a merger or consolidation in which the Company is not the surviving entity or in which the Company is the surviving entity but the holders of the Common Stock outstanding immediately prior to the consummation of the transaction are not the holders of a majority of the Common Stock outstanding immediately subsequent to the transaction, or (ii) in the event of any transaction that results in the acquisition of all or substantially all of the Company's outstanding Common Stock by a single person or entity or by a group of persons and/or entities acting in concert, or in the event of the sale or transfer of all or substantially all of the Company's assets (all of the foregoing being referred to as "EXTRAORDINARY TRANSACTIONS"), then in any such event the Committee may, in its sole discretion, terminate all outstanding Stock Options, effective as of the date of the Extraordinary Transaction by delivering notice of termination to each such Participant at least 30 days prior to the date of consummation of the Extraordinary Transaction; PROVIDED, that during the period from the date on which such notice of termination is delivered to the consummation of the Extraordinary Transaction, each such Participant shall have the right to exercise in full all of his or her Stock Options that are then outstanding (whether vested or not vested) but contingent on the occurrence of the Extraordinary Transaction; PROVIDED, FURTHER, that, if the Extraordinary Transaction does not take place within a specified period after giving such notice for any reason whatsoever, the notice and exercise shall be null and void. If an Extraordinary Transaction occurs, to the extent the Committee does not terminate the outstanding Stock Options pursuant to this SECTION 4.2(d), then the provisions of SECTION 4.2(b) shall apply. ARTICLE V. STOCK OPTIONS 5.1. STOCK OPTIONS. Each Stock Option granted hereunder shall be one of two types: (i) an Incentive Stock Option intended to satisfy the requirements of Section 422 of the Code, or (ii) a Non-Qualified Stock Option. 5.2. GRANTS. The Committee shall have the authority to grant to any Eligible Employee one or more Incentive Stock Options, Non-Qualified Stock Options, or both types of Stock Options. To the extent that any Stock Option does not qualify as an Incentive Stock Option (whether because of its provisions or the time or manner of its exercise or otherwise), such Stock Option or the portion thereof which does not so qualify shall constitute a separate Non-Qualified Stock Option. The Committee shall have the authority to grant to any Consultant one or more Non-Qualified Stock Options. Notwithstanding any other provision of this Plan to the contrary or any provision in an agreement evidencing the grant of a Stock Option to the A-6 contrary, any Stock Option granted to an Employee of an Affiliate (other than a Subsidiary), a Non-Employee Director or a Consultant shall be a Non-Qualified Stock Option. 5.3. TERMS OF STOCK OPTIONS. Stock Options shall be subject to the following terms and conditions, and shall be in such form and contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem desirable: (a) The exercise price per share of Common Stock subject to a Stock Option granted under this ARTICLE V shall be determined by the Committee at the time of grant but shall not be less than 100% of the Fair Market Value of a share of Common Stock at the time of grant; provided, however, that if an Incentive Stock Option is granted to a Ten Percent Stockholder, the exercise price per share shall be no less than 110% of the Fair Market Value of the Common Stock. (b) The term of each Stock Option shall be fixed by the Committee but no Stock Option shall be exercisable more than 10 years after the date the Stock Option is granted; PROVIDED, HOWEVER, the term of an Incentive Stock Option granted to a Ten Percent Stockholder may not exceed five years. (c) Stock Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee at the time of grant. If the Committee provides, in its discretion, that any Stock Option is exercisable subject to certain limitations (including, without limitation, that it is exercisable only in installments or within certain time periods), the Committee may waive such limitations on the exercisability at any time at or after the time of grant in whole or in part, based on such factors, if any, as the Committee shall determine in its sole discretion. (d) Subject to whatever installment exercise and waiting period provisions apply under SECTION 5.3(c), Stock Options may be exercised in whole or in part at any time during the Stock Option term, by giving written notice of exercise to the Company specifying the number of shares to be purchased. Common Stock purchased pursuant to the exercise of a Stock Option shall be paid for at the time of exercise as follows: (i) in cash or by check, bank draft or money order payable to the order of Company; (ii) if the Common Stock is traded on a national securities exchange, the Nasdaq Stock Market, Inc. or quoted on a national quotation system sponsored by the National Association of Securities Dealers, through the delivery of irrevocable instructions to a broker to deliver promptly to the Company an amount equal to the purchase price; or (iii) on such other terms and conditions as may be acceptable to the Committee or the Board, as applicable (which may include payment in full or part in the form of Common Stock owned by the Participant (and for which the Participant has good title free and clear of any liens and encumbrances) based on the Fair Market Value of the Common Stock on the payment date as determined by the Committee or the Board or the surrender of vested Stock Options owned by the Participant). No shares of Common Stock shall be issued until payment therefor, as provided herein, has been made or provided for. (e) To the extent that the aggregate Fair Market Value (determined as of the time of grant) of the Common Stock with respect to which Incentive Stock Options are exercisable for the first time by an Eligible Employee during any calendar year under this Plan and/or any other stock option plan of the Company, any Subsidiary or any parent corporation (within the meaning of Section 424(e) of the Code) exceeds $100,000, such Stock Options shall be treated as Non-Qualified Stock Options. In addition, if an Eligible Employee's employment by the Company, a Subsidiary or a parent corporation (within the meaning of Section 424(e) of the Code) terminates more than three months prior to the date of exercise (or such other period as required by applicable law), such Stock Option shall be treated as a Non-Qualified Stock Option. Should the foregoing provision not be necessary in order for the Stock A-7 Options to qualify as Incentive Stock Options, or should any additional provisions be required, the Committee may amend this Plan accordingly, without the necessity of obtaining the approval of the stockholders of the Company. (f) Subject to the terms and conditions of this Plan, a Stock Option shall be evidenced by such form of agreement or grant as is approved by the Committee and the Committee may modify, extend or renew outstanding Stock Options granted under this Plan (provided that the rights of a Participant are not reduced without his consent), or accept the surrender of outstanding Stock Options (up to the extent not theretofore exercised) and authorize the granting of new Stock Options in substitution therefor (to the extent not theretofore exercised). (g) Stock Options may contain such other provisions, which shall not be inconsistent with any of the foregoing terms of this Plan, as the Committee shall deem appropriate including, without limitation, permitting "reloads" such that the same number of Stock Options are granted as the number of Stock Options exercised, shares used to pay for the exercise price of Stock Options or shares used to pay withholding taxes ("RELOADS"). With respect to Reloads, the exercise price of the new Stock Option shall be the Fair Market Value on the date of the "reload" and the term of the Stock Option shall be the same as the remaining term of the Stock Options that are exercised, if applicable, or such other exercise price and term as determined by the Committee. ARTICLE VI. NON-EMPLOYEE DIRECTOR STOCK OPTIONS 6.1. STOCK OPTIONS. The terms of this ARTICLE VI shall apply only to Stock Options granted to Non-Employee Directors. 6.2. GRANTS. On the date of the Annual Meeting of Stockholders of the Company held in 1998, and on the date of the Annual Meeting of Stockholders of the Company in each year thereafter while shares of Common Stock remain available for the grant of Stock Options hereunder, each Non-Employee Director shall be automatically granted Stock Options to purchase 1,000 shares of Common Stock. A Non-Employee Director who is first elected or appointed to the Board after the Annual Meeting of Stockholders in any year shall upon such election or appointment automatically be granted a PRO RATA portion of the Stock Options referred to in the preceding sentence, based upon the portion of the period between Annual Meetings of Stockholders that such Non-Employee Director is expected to serve in such capacity. 6.3. NON-QUALIFIED STOCK OPTIONS. Stock Options granted under this ARTICLE VI shall be Non-Qualified Stock Options. 6.4. TERMS OF OPTIONS. Stock Options granted under this ARTICLE VI shall be subject to the following terms and conditions and shall be in such form and contain such additional terms and conditions, not inconsistent with terms of this Plan, as the Committee shall deem desirable: (a) The exercise price per share of Common Stock subject to a Stock Option granted pursuant to SECTION 6.2 shall be equal to 100% of the Fair Market Value of Common Stock at the time of grant. (b) Stock Options granted under this ARTICLE VI shall be exercisable immediately upon grant. A-8 (c) A Non-Employee Director electing to exercise one or more Stock Options shall give written notice of exercise to the Company specifying the number of shares to be purchased. Common Stock purchased pursuant to the exercise of a Stock Option shall be paid for as provided in SECTION 5.3(d). No shares of Common Stock shall be issued until payment therefore, as provided herein, has been made or provided for. (d) Except as otherwise provided herein, if not previously exercised each Stock Option shall expire upon the tenth anniversary of the date of the grant thereof. (e) Stock Options granted to a Non-Employee Director under this ARTICLE VI shall be subject to SECTION 4.2. 6.5. TERMINATION OF DIRECTORSHIP. The following rules apply with regard to Stock Options granted under this ARTICLE VI upon a Termination of Directorship: (a) Except as otherwise provided herein, upon a Termination of Directorship on account of death or Disability, all then outstanding Stock Options shall remain exercisable by the Participant or, in the case of death, by the Participant's estate or by the person given authority to exercise such Stock Options by his or her will or by operation of law, at any time within a period of one year from the date of such Termination of Directorship, but in no event beyond the expiration of the stated term of such Stock Option. (b) Except as otherwise provided herein, upon a Termination of Directorship on account of retirement, resignation, failure to stand for reelection or failure to be reelected or otherwise other than as set forth in (c) below, all then outstanding Stock Options shall remain exercisable at any time within a period of one year from the date of such Termination of Directorship, but in no event beyond the expiration of the stated term of such Stock Option; PROVIDED, HOWEVER, that, if the Participant dies within such exercise period, any unexercised Stock Option held by such Participant shall thereafter be exercisable by the Participant's estate or by the person given authority to exercise such Stock Options by his or her will or by operation of law, to the extent to which it was exercisable at the time of death, for a period of one year (or such other period as the Committee may specify at grant or, if no rights of the Participant's estate are reduced, thereafter) from the date of such death, but in no event beyond the expiration of the stated term of such Stock Option. (c) Upon removal, failure to stand for reelection or failure to be renominated for any reason that would constitute grounds for removal of a director for cause under Delaware law, or if the Company obtains or discovers information after Termination of Directorship that such Participant had engaged in conduct that would have justified removal for cause during his or her directorship, all outstanding Stock Options of such Participant shall immediately terminate and shall be null and void. ARTICLE VII. GRANT OF SHARES OF COMMON STOCK TO NON-EMPLOYEE DIRECTORS 7.1. On the date of the Annual Meeting of Stockholders of the Company held in 1998, and on the date of the Annual Meeting of Stockholders of the Company held in each year thereafter in which shares of A-9 Common Stock remain available for grant hereunder, each Non-Employee Director shall be automatically granted shares of Common Stock having a Fair Market Value on such date of $12,000. Alternatively, at the election of an Eligible Director made in writing to the Chief Financial Officer of the Company within 30 days prior to the date of grant, the Eligible Director may choose to receive a combination of (i) a number of shares of Common Stock having a Fair Market Value equal to the excess of $12,000 over the amount of cash referred to in CLAUSE (ii) of this sentence, and (ii) an amount of cash sufficient for such Non-Employee Director to pay the federal, state and local income taxes he or she may reasonably be expected to owe as a result of the receipt of such shares of Common Stock (as determined by the Committee). Any Eligible Director who is first elected or appointed to the Board after the grant of shares of Common Stock hereunder in any year, shall upon such election or appointment be automatically granted a PRO RATA portion of the shares of Common Stock or cash referred to in the preceding sentence, based upon the portion of the period between Annual Meetings of Stockholders that such Non-Employee Director is expected to serve in such capacity. The Committee hereby approves each election to receive cash or stock hereunder. 7.2. Shares of Common Stock granted hereunder shall not be subject to any restrictions under this Plan except as provided in ARTICLE XI. ARTICLE VIII. NON-TRANSFERABILITY AND TERMINATION OF EMPLOYMENT/CONSULTANCY PROVISIONS 8.1. Except as otherwise provided in this SECTION 8.1, no Stock Option shall be Transferred by the Participant otherwise than by will or by the laws of descent and distribution. All Stock Options shall be exercisable, during the Participant's lifetime, only by the Participant. Any attempt to Transfer any Stock Option shall be void, and no such Stock Option shall in any manner be used for the payment of, subject to, or otherwise encumbered by or hypothecated for the debts, contracts, liabilities, engagements or torts of any person who shall be entitled to such Stock Option, nor shall it be subject to attachment or legal process for or against such person. Notwithstanding the foregoing, the Committee may determine at the time of grant that a Non-Qualified Stock Option granted pursuant to ARTICLE V or ARTICLE VI that is otherwise not transferable pursuant to this ARTICLE VIII is transferable in whole or part and in such circumstances, and under such conditions, as specified by the Committee. 8.2. TERMINATION OF EMPLOYMENT OR TERMINATION OF CONSULTANCY. The following rules apply with regard to Stock Options upon the Termination of Employment or Termination of Consultancy of a Participant, unless otherwise determined by the Committee at grant or, if no rights of the Participant (or his estate in the event of death) are reduced, thereafter: (a) If a Participant's Termination of Employment or Termination of Consultancy is by reason of his death, any Stock Option held by such Participant may be exercised, to the extent exercisable at the Participant's Termination of Employment or Termination of Consultancy, by the Participant's estate or by the person given authority to exercise such Stock Options by his or her will or by operation of law, at any time within a period of one year from the date of such death, but in no event beyond the expiration of the stated term of such Stock Option. (b) If a Participant's Termination of Employment or Termination of Consultancy is by reason of his Disability or retirement, any Stock Option held by such Participant may be exercised, to the extent exercisable at the Participant's Termination of Employment or Termination of Consultancy, by the A-10 Participant, at any time within a period of one year from the date of such Termination of Employment or Termination of Consultancy, but in no event beyond the expiration of the stated term of such Stock Option; PROVIDED, HOWEVER, that, if the Participant dies within such exercise period, any unexercised Stock Option held by such Participant shall thereafter be exercisable by the Participant's estate or by the person given authority to exercise such Stock Options by his or her will or by operation of law, to the extent to which it was exercisable at the time of death, for a period of one year (or such other period as the Committee may specify at grant or, if no rights of the Participant's estate are reduced, thereafter) from the date of such death, but in no event beyond the expiration of the stated term of such Stock Option. (c) If a Participant's Termination of Employment or Termination of Consultancy is by the Company without cause, any Stock Option held by such Participant may be exercised, to the extent exercisable at termination, by the Participant at any time within a period of 90 days from the date of such termination, but in no event beyond the expiration of the stated term of such Stock Option. (d) If a Participant's Termination of Employment or Termination of Consultancy is a voluntary termination by the Participant and occurs prior to, or more than 90 days after, the occurrence of an event which would be grounds for Termination of Employment or Termination of Consultancy for cause (without regard to any notice or cure period requirements), any Stock Option held by such Participant may be exercised, to the extent exercisable at termination, by the Participant at any time within a period of 30 days from the date of such termination, but in no event beyond the expiration of the stated term of such Stock Option. (e) If a Participant's Termination of Employment or Termination of Consultancy is (i) for cause, or (ii) a voluntary termination (as provided in SUBSECTION(d) above) within 90 days after an event which would be grounds for a Termination of Employment or Termination of Consultancy for cause, any Stock Option held by such Participant shall thereupon terminate and expire as of the date of termination. ARTICLE IX. TERMINATION OR AMENDMENT OF PLAN 9.1. TERMINATION OR AMENDMENT. Notwithstanding any other provision of this Plan, the Board or the Committee may at any time, and from time to time, amend, in whole or in part, any or all of the provisions of this Plan (including any amendment deemed necessary to ensure that the Company may comply with any regulatory requirement referred to in this ARTICLE IX), or suspend or terminate it entirely, retroactively or otherwise; PROVIDED, that, unless otherwise required by law or specifically provided herein, the rights of a Participant with respect to Stock Options granted prior to such amendment, suspension or termination, may not be impaired without the consent of such Participant; and PROVIDED FURTHER, that without the approval of the stockholders of the Company in accordance with the laws of the State of Delaware, to the extent required by the applicable provisions of Rule 16b-3, Section 162(m) of the Code or (with respect to Incentive Stock Options) Section 422 of the Code, no amendment may be made which would: (a) increase the aggregate number of shares of Common Stock that may be issued under this Plan; (b) increase the maximum individual Participant limitations for a fiscal year under SECTION 4.1(b); (c) change the classification of employees and Consultants eligible to receive Awards under this Plan; (d) decrease the minimum exercise price of any Stock Option; or (e) extend the maximum option term under SECTION 5.3(b). A-11 The Committee may amend the terms of any Award theretofore granted, prospectively or retroactively, but, subject to ARTICLE IV or as otherwise specifically provided herein, no such amendment or other action by the Committee shall impair the rights of any Participant without the Participant's consent. ARTICLE X. UNFUNDED PLAN 10.1. UNFUNDED STATUS OF PLAN. This Plan is intended to constitute an "unfunded" plan for incentive and deferred compensation. With respect to any payments as to which a Participant has a fixed and vested interest but which are not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company. ARTICLE XI. GENERAL PROVISIONS 11.1. LEGEND. All certificates for shares of Common Stock delivered under this Plan shall be subject to such stock transfer orders and other restrictions as the Committee or the Board, as applicable, may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Common Stock is then listed or any national securities association system upon whose system the Common Stock is then quoted, any applicable Federal or state securities law, and any applicable corporate law, and the Committee or the Board, as applicable, may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. 11.2. OTHER PLANS. Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases. 11.3. NO RIGHT TO EMPLOYMENT/CONSULTANCY/DIRECTORSHIP. Neither this Plan nor the grant of any Stock Options hereunder shall give any Participant or other employee or Consultant any right with respect to continuance of employment or consultancy by the Company or any Affiliate, nor shall they be a limitation in any way on the right of the Company or any Affiliate by which an employee is employed or consultant retained to terminate his employment or consultancy, as applicable, at any time. Neither this Plan nor the grant of any Stock Options or shares of Common Stock hereunder shall impose any obligations on the Company to retain any Participant as a director nor shall it impose on the part of any Participant any obligation to remain as a director of the Company. 11.4. WITHHOLDING OF TAXES. The Company shall deduct from any payment to be made to a Participant, or shall otherwise require, prior to the issuance or delivery of any shares of Common Stock or the payment of any cash hereunder, payment by the Participant of any Federal, state or local taxes required by law to be withheld; and such withholding is hereby approved by the Committee. 11.5. GOVERNING LAW. This Plan shall be governed and construed in accordance with the laws of the State of Delaware (regardless of the law that might otherwise govern under applicable Delaware principles of conflict of laws). A-12 11.6. CONSTRUCTION. Wherever any words are used in this Plan in the masculine gender they shall be construed as though they were also used in the feminine gender in all cases where they would so apply, and wherever any words are used herein in the singular form they shall be construed as though they were also used in the plural form in all cases where they would so apply. To the extent applicable, this Plan shall be limited, construed and interpreted in a manner so as to comply with Section 162(m) of the Code and the applicable requirements of Rule 16b-3; PROVIDED, HOWEVER, that noncompliance with Section 162(m) of the Code and Rule 16b-3 shall have no impact on the effectiveness of a Stock Option under this Plan. 11.7. OTHER BENEFITS. No Stock Option under this Plan shall be deemed compensation for purposes of computing benefits under any retirement plan of the Company or its subsidiaries or affiliates nor affect any benefits under any other benefit plan now or subsequently in effect under which the availability or amount of benefits is related to the level of compensation. 11.8. COSTS. The Company shall bear all expenses included in administering this Plan, including expenses of issuing shares of Common Stock pursuant to this Plan or any Stock Options granted hereunder. 11.9. NO RIGHT TO SAME BENEFITS. The provisions of Stock Options need not be the same with respect to each Participant, and such Stock Options to individual Participants need not be the same in subsequent years. 11.10. DEATH/DISABILITY. The Committee may in its discretion require the transferee of a Participant's Stock Option to supply the Company with written notice of the Participant's death or Disability and to supply the Company with a copy of the will (in the case of the Participant's death) or such other evidence as the Committee deems necessary to establish the validity of the Transfer of a Stock Option. The Committee may also require that the transferee agree in writing to be bound by all of the terms and conditions of this Plan. 11.11. SEVERABILITY OF PROVISIONS. If any provision of this Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and this Plan shall be construed and enforced as if such provisions had not been included. 11.12. HEADINGS AND CAPTIONS. The headings and captions herein are provided for reference and convenience only, shall not be considered part of this Plan, and shall not be employed in the construction of this Plan. ARTICLE XII. EFFECTIVE DATE OF PLAN This Plan has been adopted by the Board effective as of June 30, 1998 (the "EFFECTIVE DATE"), subject to and conditioned upon the approval of this Plan by the stockholders of the Company in accordance with the requirements of the laws of the State of Delaware and any applicable exchange requirements. A-13 ARTICLE XIII. TERM OF PLAN No Stock Option shall be granted pursuant to this Plan on or after the tenth anniversary of the Effective Date, but Stock Options granted prior to such tenth anniversary may extend beyond that date. ARTICLE XIV. NAME OF PLAN This Plan shall be known as the C&D TECHNOLOGIES, INC. 1998 Stock Option Plan. A-14 -----END PRIVACY-ENHANCED MESSAGE-----