-----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, PyTXDm6BUMNzZSniS6mLAyrkzjdVGZecd0OzxT1PLFS4IqUaR0pWbxZw2/VYALDM anbtJwmBUU4crYvKMM6GVQ== 0000950130-01-001324.txt : 20010316 0000950130-01-001324.hdr.sgml : 20010316 ACCESSION NUMBER: 0000950130-01-001324 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20010131 FILED AS OF DATE: 20010315 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CABLE DESIGN TECHNOLOGIES CORP CENTRAL INDEX KEY: 0000913142 STANDARD INDUSTRIAL CLASSIFICATION: DRAWING AND INSULATING NONFERROUS WIRE [3357] IRS NUMBER: 363601505 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12561 FILM NUMBER: 1569386 BUSINESS ADDRESS: STREET 1: 661 ANDERSON DR STREET 2: FOSTER PLZ 7 CITY: PITTSBURGH STATE: PA ZIP: 15220 BUSINESS PHONE: 4129372300 MAIL ADDRESS: STREET 1: FOSTER PLAZA 7 STREET 2: 661 ANDERSEN DRIVE CITY: PITTSBURGH STATE: PA ZIP: 15220 10-Q 1 0001.txt FORM 10-Q - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended January 31, 2001 Commission File No. 0-22724 CABLE DESIGN TECHNOLOGIES CORPORATION (Exact name of registrant as specified in its charter) Delaware 36-3601505 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) Foster Plaza 7 661 Andersen Drive Pittsburgh, PA 15220 (Address of principal executive offices) (412) 937-2300 Registrant's telephone number, including area code Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---------- ----------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at 3/5/01 ----- --------------------- Common Stock, $.01 Par Value 43,788,699 CABLE DESIGN TECHNOLOGIES CORPORATION ------------------------------------- TABLE OF CONTENTS ----------------- Page ---- PART I FINANCIAL INFORMATION Item 1 Financial Statements.................................................................... 3 Review Report of Independent Public Accountants for the Three Months and Six Months Ended January 31, 2001 and 2000......................... 4 Condensed Consolidated Statements of Income - Unaudited for the Three Months and Six Months Ended January 31, 2001 and 2000............................................................... 5 Condensed Consolidated Balance Sheets as of January 31, 2001 (Unaudited) and July 31, 2000.................................... 6 Condensed Consolidated Statements of Cash Flows - Unaudited for the Six Months Ended January 31, 2001 and 2000......................................................... 7 Notes to Condensed Consolidated Financial Statements -Unaudited......................................................... 8 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations..................................................... 11 PART II OTHE INFORMATION Item 1 Legal Proceedings....................................................................... 15 Item 2 Changes in Securities................................................................... 15 Item 3 Defaults upon Senior Securities......................................................... 15 Item 4 Submission of Matters to a Vote of Security Holders..................................... 15 Item 5 Other Information....................................................................... 16 Item 6 Exhibits and Reports on Form 8-K........................................................ 16 Signatures ........................................................................................ 17
PART I. FINANCIAL INFORMATION Item 1. Financial Statements In the opinion of Cable Design Technologies Corporation's (the "Company") management, the unaudited condensed consolidated financial statements included in this filing on Form 10-Q reflect all adjustments which are considered necessary for a fair presentation of financial information for the periods presented. REVIEW BY INDEPENDENT PUBLIC ACCOUNTANTS Arthur Andersen LLP has made a review, based upon procedures adopted by the American Institute of Certified Public Accountants, of the unaudited condensed consolidated financial statements as of and for the three month and six month periods ended January 31, 2001 and 2000, contained in this report. As stated on page 4, Arthur Andersen LLP did not audit and accordingly does not express an opinion on the unaudited consolidated financial statements; however as a result of such review, they are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with generally accepted accounting principles. 3 Report of Independent Public Accountants To the Board of Directors and Stockholders of Cable Design Technologies Corporation: We have reviewed the accompanying condensed consolidated balance sheet of Cable Design Technologies Corporation (a Delaware corporation) and Subsidiaries as of January 31, 2001, and the related condensed consolidated statements of income for the three month and six month periods ended January 31, 2001 and 2000, and the condensed consolidated statements of cash flows for the six month periods ended January 31, 2001 and 2000. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States. We have previously audited, in accordance with auditing standards generally accepted in the United States, the consolidated balance sheet of Cable Design Technologies Corporation and Subsidiaries as of July 31, 2000, and, in our report dated September 15, 2000, we expressed an unqualified opinion on that statement. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of July 31, 2000, is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived. Pittsburgh, Pennsylvania, /s/ Arthur Andersen LLP February 16, 2001 4 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES ------------------------------------------------------ CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED ------------------------------------------------------- (In thousands, except share and per share data) -----------------------------------------------
Three Months Ended Six Months Ended January 31, January 31, -------------------------- -------------------------- 2001 2000 2001 2000 ----------- ------------ ----------- ------------ Net sales $ 202,645 $ 178,179 $ 417,371 $ 365,801 Cost of sales 143,790 127,714 294,245 259,050 ----------- ---------- ---------- ---------- Gross profit 58,855 50,465 123,126 106,751 Selling, general and administrative expenses 35,654 27,965 68,904 57,286 Amortization of goodwill 606 612 1,208 1,252 Research and development expenses 1,316 1,167 2,566 2,342 ----------- ---------- ---------- ---------- Income from operations 21,279 20,721 50,448 45,871 Interest expense, net 2,440 2,985 4,834 5,970 Other (income) expense, net (23) 507 185 1,371 ----------- ---------- ---------- ---------- Income before income taxes 18,862 17,229 45,429 38,530 Income tax provision 7,338 6,806 17,696 15,123 ----------- ---------- ---------- ---------- Net income $ 11,524 $ 10,423 $ 27,733 $ 23,407 =========== ========== ========== ========== Basic earnings per common share $ 0.26 $ 0.25 $ 0.63 $ 0.55 =========== ========== ========== ========== Diluted earnings per common share $ 0.26 $ 0.24 $ 0.61 $ 0.54 =========== ========== ========== ========== Weighted average common shares 43,717,728 42,377,340 43,674,329 42,335,789 =========== ========== ========== ========== Weighted average common and common equivalent shares 44,891,233 43,493,687 45,109,063 43,411,046 =========== ========== ========== ==========
The accompanying notes are an integral part of these statements. 5 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES ------------------------------------------------------ CONDENSED CONSOLIDATED BALANCE SHEETS ------------------------------------- (In thousands, except share and per share data) -----------------------------------------------
As of As of January 31, July 31, 2001 2000 --------------- ------------- (unaudited) ASSETS - ------ Current Assets: Cash and cash equivalents $ 12,694 $ 16,454 Trade accounts receivable, net of allowance for uncollectible accounts of $3,908 and $6,180, respectively 139,454 145,717 Inventories 161,606 145,015 Other current assets 18,678 18,974 -------------- ------------- Total current assets 332,432 326,160 Property, plant and equipment, net 218,233 205,880 Goodwill, net 73,324 74,539 Other assets 8,530 8,774 -------------- ------------- Total assets $632,519 $615,353 ============== ============= LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current liabilities: Notes payable to banks $ 5,969 $ 5,776 Current maturities of long-term debt 4,470 3,692 Other current liabilities 86,918 99,982 -------------- ------------- Total current liabilities 97,357 109,450 Long-term debt, excluding current maturities 150,817 153,336 Other non-current liabilities 37,527 36,023 -------------- ------------- Total liabilities 285,701 298,809 -------------- ------------- Stockholders' Equity: Preferred stock, par value $.01 per share - authorized 1,000,000 shares, no shares issued --- --- Common stock, par value $.01 per share - authorized 100,000,000 shares, 47,534,341 and 47,362,880 shares issued, respectively 475 316 Paid in capital 196,277 192,956 Common stock issuable, 26,435 and 19,573 shares, respectively 464 367 Retained earnings 210,741 183,166 Treasury stock, at cost, 3,774,078 and 3,867,528 shares, respectively (47,286) (48,415) Deferred compensation (795) --- Accumulated other comprehensive deficit (13,058) (11,846) -------------- ------------- Total stockholders' equity 346,818 316,544 -------------- ------------- Total liabilities and stockholders' equity $632,519 $615,353 ============== =============
The accompanying notes are an integral part of these statements. 6 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES ------------------------------------------------------ CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED ----------------------------------------------------------- (In thousands) --------------
Six Months Ended January 31, ------------------------------ 2001 2000 ----------- ------------ Net cash provided by operating activities $ 16,771 $ 26,197 Cash flows from investing activities: Purchases of property, plant and equipment (22,088) (10,167) ----------- ------------ Net cash used by investing activities (22,088) (10,167) Cash flows from financing activities: Net change in revolving note borrowings (300) (9,146) Funds provided by long-term debt 1,511 133 Funds used to reduce long-term debt (2,501) (5,174) Common stock issued or issuable 838 779 Net proceeds from exercise of stock options 2,137 715 ----------- ------------ Net cash provided (used) by financing activities 1,685 (12,693) Effect of exchange rate changes on cash and cash equivalents (128) (279) ----------- ------------ Net (decrease) increase in cash (3,760) 3,058 Cash and cash equivalents, beginning of period 16,454 11,424 ----------- ------------ Cash and cash equivalents, end of period $ 12,694 $ 14,482 =========== ============ Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 5,133 $ 5,213 =========== ============ Income taxes $ 17,856 $ 16,316 =========== ============
The accompanying notes are an integral part of these statements. 7 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES ------------------------------------------------------ NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED ---------------------------------------------------------------- 1. BASIS OF PRESENTATION --------------------- The condensed consolidated financial statements presented herein are unaudited. Certain information and footnote disclosures normally prepared in accordance with generally accepted accounting principles have been either condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. Although the registrant believes that all adjustments necessary for a fair presentation have been made, interim period results are not necessarily indicative of the results of operations for a full year. As such, these financial statements should be read in conjunction with the financial statements and notes thereto included in the registrant's most recent Form 10-K which was filed for the fiscal year ended July 31, 2000. 2. SIGNIFICANT ACCOUNTING POLICIES ------------------------------- Amounts billed to customers for shipping and handling costs are included in net sales in the accompanying statements of income. Shipping and handling costs incurred by the Company for the delivery of goods to customers are classified as a component of either cost of sales or selling, general and administrative expenses ("SG&A"), depending on the specific operating unit. Shipping and handling costs included in SG&A were $2.4 million and $1.9 million for the three months ended January 31, 2001 and 2000, respectively, and $5.1 million and $3.8 million for the six months ended January 31, 2001 and 2000, respectively. 3. INVENTORIES ----------- Inventories of the Company consist of the following: January 31, July 31, 2001 2000 -------------- --------------- (In thousands) Raw materials $ 44,674 $ 40,779 Work-in-process 35,419 35,268 Finished goods 81,513 68,968 -------------- --------------- $ 161,606 $ 145,015 ============== =============== 8 4. EARNINGS PER SHARE ------------------ Basic earnings per common share are computed based on the weighted average common shares outstanding. Diluted earnings per common share are computed based on the weighted average common shares outstanding plus additional shares assumed to be outstanding to reflect the dilutive effect of common stock equivalents. The following table sets forth the computation of basic and diluted earnings per share:
Three Months Ended Six Months Ended January 31, January 31, ---------------------------- ----------------------------- 2001 2000 2001 2000 ----------- ----------- ----------- ----------- (Dollars in thousands, except per share data) Net income $ 11,524 $ 10,423 $ 27,733 $ 23,407 ----------- ----------- ----------- ----------- Basic earnings per common share: Weighted average common shares outstanding 43,717,728 42,377,340 43,674,329 42,335,789 Basic earnings per common share $ 0.26 $ 0.25 $ 0.63 $ 0.55 =========== =========== =========== =========== Diluted earnings per common share: Weighted average common shares outstanding 43,717,728 42,377,340 43,674,329 42,335,789 Shares issuable from assumed exercise of dilutive stock options and vesting of restricted stock grants 1,173,505 1,116,347 1,434,734 1,075,257 ----------- ----------- ----------- ----------- Weighted average common and common equivalent shares outstanding 44,891,233 43,493,687 45,109,063 43,411,046 Diluted earnings per common share $ 0.26 $ 0.24 $ 0.61 $ 0.54 =========== =========== =========== ===========
Options to purchase 536,500 and 159,000 shares of common stock were outstanding during the three month periods ended January 31, 2001 and 2000, respectively, and options to purchase 397,750 and 159,000 shares of common stock were outstanding during the six month periods ended January 31, 2001 and 2000, respectively, but were not included in the computation of diluted earnings per common share as the option's exercise price was greater than the average market price of the common stock for the respective periods. 5. INDUSTRY SEGMENT INFORMATION ---------------------------- The Company's operations are organized into two business segments: the Network Communication segment and the Specialty Electronic segment. Network Communication encompasses connectivity products used within computer networks and communication infrastructures for the electronic transmission of data, voice, and multimedia. Products included in this segment are high performance network cable, fiber optic cable and passive components, including connectors, wiring racks and panels, and interconnecting hardware for end-to-end network structured wiring systems, and communication cable products for local loop, central office, wireless and other applications. The Specialty Electronic segment encompasses electronic cable products for automation and process control applications as well as specialized wire and cable products for niche markets, including commercial aviation and automotive electronics. The Company evaluates segment performance based on operating profit excluding net nonrecurring items, after allocation of Corporate expenses. 9 The Company has no inter-segment revenues. Summarized financial information for the Company's business segments is as follows:
Network Specialty Communication Electronic Segment Segment Total ------------------ -------------------- ---------------- Three Months Ended January 31, (In thousands) Sales: 2001 $140,235 $ 62,410 $202,645 2000 $120,288 $ 57,891 $178,179 Segment Operating Profit: 2001 $ 12,741 $ 8,538 $ 21,279 2000 $ 12,085 $ 8,636 $ 20,721 Network Specialty Communication Electronic Segment Segment Total ------------------ -------------------- ---------------- Six Months Ended January 31, (In thousands) Sales: 2001 $285,129 $132,242 $417,371 2000 $246,302 $119,499 $365,801 Segment Operating Profit: 2001 $ 30,731 $ 19,717 $ 50,448 2000 $ 27,401 $ 18,470 $ 45,871
6. OTHER COMPREHENSIVE INCOME -------------------------- Comprehensive income is defined as all changes in stockholders' equity during a period except those resulting from investment by or distribution to stockholders. The Company's comprehensive income differs from net income due to foreign currency translation adjustments. Comprehensive income was $15.5 million and $8.3 million for the three months and $26.5 million and $22.6 million for the six months ended January 31, 2001 and 2000, respectively. 7. RECLASSIFICATIONS ----------------- Certain reclassifications have been made to the prior year statements to conform with the current year presentation. 10 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cable Design Technologies is a leading manufacturer of technologically advanced connectivity products for the Network Communication and Specialty Electronic marketplaces. Network Communication encompasses connectivity products used within computer networks and communication infrastructures for the electronic transmission of data, voice and multimedia. Products included in this segment are high bandwidth network and interconnect cables, fiber optic cable and passive components, including connectors, wiring racks and panels, and interconnecting hardware for end-to-end network structured wiring systems, and communication cable products for local loop, central office, wireless and other applications. The Specialty Electronic segment encompasses electronic cable products for automation and process control applications as well as specialized wire and cable products for niche markets, including commercial aviation and automotive electronics. This discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the Company's unaudited condensed consolidated financial statements and the notes thereto. Results of Operations Overview Sales for the three months ended January 31, 2001 ("second quarter 2001") were $202.6 million, an increase of 14% compared to the three months ended January 31, 2000 ("second quarter 2000"). Excluding the impact of unfavorable foreign currency translation on sales, the increase was 17% over the same period last year. Sales for the Network Communication segment increased 17% to $140.2 million, and represented 69% of total revenue. The increase in sales for this segment was led by 88% growth in sales of gigabit network cables (Category 5e and Category 6), 83% growth in sales of central office telecommunication and 90% growth in sales of fiber optic connectivity products. Sales for the Specialty Electronic segment were $62.4 million, an increase of 8% compared to the second quarter 2000. During the second quarter 2001, the Company incurred a bad debt charge of $3.1 million for Anicom, a distributor that filed for bankruptcy. Excluding the Anicom bad debt charge, the operating margin increased to 12.0% for the second quarter 2001 compared to 11.6% for the second quarter 2000. The operating margin as reported was 10.5% for the second quarter 2001. Excluding the Anicom bad debt charge, net income for the second quarter 2001 increased $3.1 million, or 29%, to $13.5 million ($0.30 per diluted share) compared to net income of $10.4 million ($0.24 per diluted share) for the second quarter 2000. Reported net income for the second quarter 2001 was $11.5 million ($0.26 per diluted share). Sales for the six months ended January 31, 2001 ("first half 2001") increased $51.6 million, or 14%, to $417.4 million compared to $365.8 million for the six months ended January 31, 2000 ("first half 2000"). Sales for the Network Communication segment increased $38.8 million, or 16%, to $285.1 million for the first half 2001, primarily as the result of growth in sales of gigabit network cables, central office telecommunication and fiber optic connectivity products, which grew 66%, 75% and 72%, respectively. Specialty Electronic segment sales increased 11%, to $132.2 million for the first half 2001, primarily due to a 17% increase in sales of industrial cables. The operating margin, excluding the Anicom bad debt charge, was 12.8% for the first half 2001 versus 12.5% for the same period last year. The operating margin as reported for the first half 2001 was 12.1%. Excluding the Anicom bad debt charge, net income increased $6.3 million, or 27%, to $29.7 million ($0.66 per diluted share) for the first half 2001 compared to $23.4 million ($0.54 per diluted share) for the first half 2000. Reported net income for the first half 2001 was $27.7 million ($0.61 per diluted share). Three Months Ended January 31, 2001 Compared to Three Months Ended January 31, 2000 Sales for the second quarter 2001 increased $24.4 million, or 14%, to $202.6 million compared to $178.2 million for the second quarter 2000. Sales for the Network Communication segment were $140.2 million for the second quarter 2001, an increase of 17% compared to sales of $120.3 million for the second quarter 2000. The increase in sales for the Network Communication segment was primarily due to an increase in sales of gigabit network cables, central office telecommunication and fiber optic connectivity products, which grew 88%, 83%, and 90%, respectively, over the same period last year. The increase in sales of gigabit network cables was driven by demand for higher bandwidth within premise network systems. The increase in sales of central office products and fiber optic connectivity products, particularly single-mode fiber optic cable, was primarily due to demand from communication services companies for the build-out of the broadband telecommunication infrastructure. Demand from companies for single-mode fiber for use in their premise communication network systems also contributed to the growth in sales of fiber optic connectivity products. The increase in sales for these product lines was partially offset by a 48% decline in sales of the lower performance rated Category 5 network cable due to a shift in demand to the higher performance gigabit network cables, and a 50% reduction in sales of wireless assembly services due to 11 the previously reported loss of the principal customer for these services. Second quarter 2001 sales for the Specialty Electronic segment increased 8% to $62.4 million compared to $57.9 million for the second quarter 2000. The increase in sales for this segment was primarily due to an increase in sales of automation and process control cables, including sales attributable to the recently acquired Industria Tecnica Cavi ("ITC/CDT"). Sales outside of North America were $47.9 million for the second quarter 2001, an increase of 15% compared to sales of $41.7 million for the second quarter 2000. The increase in international sales was primarily due to higher sales in Western Europe of computer interconnect and central office cable products, as well as sales of Specialty Electronic cable products attributable to the ITC/CDT acquisition. Gross profit for the second quarter 2001 increased $8.4 million, or 17%, to $58.9 million compared to $50.5 million for the second quarter 2000, primarily due to an increase in gross profit for the Network Communication segment as a result of the increase in sales for this segment. The gross margin for the second quarter 2001 was 29.0% compared to 28.3% for the second quarter 2000. The increase in the gross margin was the result of a slightly higher gross margin for the Network Communication segment, partially offset by a small decline in the gross margin for the Specialty Electronic segment. The higher Network Communication gross margin was primarily due to an increase in the gross margin for communication products resulting from an improved product mix due to higher sales of central office products. The lower Specialty Electronic segment gross margin was primarily due to a lower margin for automation and process control products due to a higher average cost of copper and competitive market conditions. Selling, general and administrative expenses ("SG&A") for the second quarter 2001 were $35.7 million compared to $28.0 million for the same period last year. The increase in SG&A was primarily due to a bad debt charge of $3.1 million for Anicom, a distributor that filed for bankruptcy, as well as costs associated with the recently established European and Fiber Optic management groups. Excluding the Anicom bad debt charge, SG&A as a percentage of sales was 16.1% compared to 15.7% for the second quarter 2000. Income from operations for the second quarter 2001 increased $0.6 million, or 3%, to $21.3 million compared to $20.7 million for the second quarter 2000. Excluding the Anicom bad debt charge, the operating margin increased to 12.0% compared to 11.6% for the second quarter 2000. The operating margin as reported for the second quarter 2001 was 10.5%. Interest expense decreased $0.6 million to $2.4 million for the second quarter 2001 compared to $3.0 million for the second quarter 2000, primarily due to the lower average balance of debt outstanding. The effective tax rate was 38.9% for the second quarter 2001 compared to 39.5% for the second quarter 2000. Net income for the second quarter 2001 increased $1.1 million, or 11%, to $11.5 million ($0.26 per diluted share) compared to net income of $10.4 million ($0.24 per diluted share) for the second quarter 2000. Six Months Ended January 31, 2001 Compared to Six Months Ended January 31, 2000 Sales for the first half 2001 increased $51.6 million, or 14%, to $417.4 million compared to $365.8 million for the first half 2000. Network Communication segment sales increased 16% to $285.1 million for the first half 2001. The growth in sales for the Network Communication segment was primarily due to increased sales of gigabit network cables, central office telecommunication and fiber optic connectivity products, which grew 66%, 75%, and 72%, respectively, over the first half 2000. The increase in sales of gigabit network cables was driven by demand for higher bandwidth within premise network systems. The increase in sales of central office products was driven by the growth of competitive local exchange carriers, Internet service providers and application service providers within the telecommunication industry. Factors contributing to the increase in sales of fiber optic connectivity products include demand from companies for single-mode fiber for use in their premise communication network systems as well as demand from communication services companies for the build-out of the broadband telecommunication infrastructure. The increase in sales from these product lines was partially offset by a 38% decline in sales of the lower performance rated Category 5 network cable due to a shift in demand to the higher performance gigabit network cables, and a 46% reduction in sales of wireless assembly services due to the previously reported loss of the principal customer for these services. First half 2001 sales for the Specialty Electronic segment increased 11% to $132.2 million compared to $119.5 million for the first half 2000. The increase in sales for this segment was primarily due to an increase in sales of automation and process control cables, including sales attributable to the recently acquired ITC/CDT. Sales outside of North America were $94.1 million for the first half 2001, an increase of 14% compared to sales of $82.7 million for the first half 2000. The increase in international sales was primarily due to higher sales of computer interconnect and central office cable products in Western Europe, network and wireless products in the Pacific Rim, as well as sales of Specialty Electronic cable products attributable to the ITC/CDT acquisition. 12 Gross profit for the first half 2001 increased $16.3 million, or 15%, to $123.1 million compared to $106.8 million for the first half 2000, primarily due to an increase in gross profit for the Network Communication segment as a result of the increase in sales for this segment. The gross margin for the first half 2001 was 29.5% compared to 29.2% for the first half 2000. The increase in the gross margin was the result of a slightly higher gross margin for the Network Communication segment, partially offset by a small decline in the gross margin for the Specialty Electronic segment. The higher Network Communication gross margin was primarily due to an increase in the gross margin for communication products resulting from an improved product mix due to higher sales of central office products, as well as a higher margin for network products due primarily to better product mix. The lower Specialty Electronic segment gross margin was primarily due to a lower gross margin for automation and process control products due to a higher average cost of copper and competitive market conditions. SG&A for the first half 2001 increased $11.6 million to $68.9 million compared to $57.3 million for the first half 2000. The increase in SG&A was primarily due to the $3.1 million Anicom bad debt charge incurred in the second quarter 2001, additional SG&A of businesses acquired, higher sales volume, and the costs associated with the recently established European and Fiber Optic management groups. Excluding the Anicom bad debt charge, SG&A as a percentage of sales for the first half 2001 was 15.8% compared to 15.7% for the first half 2000. Income from operations for the first half 2001 increased $4.5 million, or 10%, to $50.4 million compared to $45.9 million for the first half 2000. Excluding the Anicom bad debt charge, the operating margin increased to 12.8% compared to 12.5% for the first half 2000. The operating margin as reported for the first half 2001 was 12.1%. Interest expense decreased $1.2 million to $4.8 million for the first half 2001 compared to $6.0 million for the first half 2000, primarily due to the lower average balance of debt outstanding. The effective tax rate was 39.0% for the first half 2001 compared to 39.2% for the first half 2000. Net income for the first half 2001 increased $4.3 million, or 18%, to $27.7 million ($0.61 per diluted share) compared to net income of $23.4 million ($0.54 per diluted share) for the first half 2000. Financial Condition Liquidity and Capital Resources - ------------------------------- The Company generated $16.8 million of net cash from operating activities during the first half 2001, after providing for a $23.6 million increase in operating working capital. The change in operating working capital was primarily the result of an increase in inventories of $17.2 million and decreases in accrued employee benefits, income taxes and other accrued liabilities of $9.8 million, which were partially offset by a decrease in accounts receivable of $5.9 million. The change in operating working capital excludes changes in cash and cash equivalents and current maturities of long-term debt. The Company invested $22.1 million during the first half 2001 in facilities and machinery and equipment, including the purchase of a building which was previously leased. Net cash provided by financing activities of $1.7 million included $3.0 million received from the exercise of stock options and issuance of common stock, partially offset by $1.3 million used to reduce outstanding debt. The Company's primary credit agreement (the "Credit Agreement") consists of a $121.3 million U.S. revolving facility and a CDN $115.0 million Canadian revolving facility equivalent to approximately $76.7 million. The U.S. revolving facility includes a $50.0 million Deutschmark sub-facility. The Credit Agreement expires April 10, 2002. The Company also maintains a bank credit facility in the United Kingdom equivalent to approximately $11.0 million (the "Foreign Facility"). As of January 31, 2001, the Company had availability of $48.0 million and $4.8 million under the Credit Agreement and Foreign Facility, respectively. The Company also had a 364-day, unsecured bank revolving credit agreement which expired December 10, 2000. This facility had a maximum principal amount of $15.0 million, and there were no amounts outstanding under such facility at the time of expiration. On March 8, 2001, the Company entered into a new 364-day unsecured bank revolving credit facility with a maximum principal amount of $15.0 million. Based on an analysis of current expectations for its business, management believes that the Company's cash flow from operations and funds available under its credit agreements will provide it with sufficient liquidity to meet its current liquidity needs. 13 Fluctuation in Copper Price The cost of copper in inventories, including finished goods, reflects purchases over various periods of time ranging from one to several months for each of the Company's operations. For certain communication cable products, profitability is generally not significantly affected by volatility of copper prices as selling prices are generally adjusted for changes in the market price of copper, however, differences in the timing of selling price adjustments do occur and may impact near term results. For other products, although selling prices are not generally adjusted to directly reflect changes in copper prices, the relief of copper costs from inventory for those operations having longer inventory cycles may affect profitability from one period to the next following periods of significant movement in the cost of copper. The Company does not engage in activities to hedge the underlying value of its copper inventory. Forward-Looking Statements -- Under the Private Securities Litigation Act of 1995 Certain statements in this quarterly report are forward-looking statements, including, without limitation, statements regarding future financial results and performance, and the Company's or management's beliefs, expectations or opinions. These statements are subject to various risks and uncertainties, many of which are outside the control of the Company, including the level of market demand for the Company's products, competitive pressures, the ability to achieve reductions in operating costs and to continue to integrate acquisitions, price fluctuations of raw materials and the potential unavailability thereof, foreign currency fluctuations, technological obsolescence, environmental matters and other specific factors discussed in the Company's Annual Report on Form 10-K for the year ended July 31, 2000, and other Securities and Exchange Commission filings. The information contained herein represents management's best judgment as of the date hereof based on information currently available; however, the Company does not intend to update this information to reflect developments or information obtained after the date hereof and disclaims any legal obligation to the contrary. 14 PART II. OTHER INFORMATION Item 1. Legal Proceedings Two managers of one of the Company's subsidiaries have filed a lawsuit claiming that they are owed bonuses of approximately $2.25 million. The Company believes the bonuses were properly allocated and paid, and that the lawsuit will not have a material adverse affect on the Company. Item 2. Changes in Securities None. Item 3. Defaults upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders (a) Cable Design Technologies Corporation annual meeting of stockholders was held on December 6, 2000. (b) Proxies were solicited by Cable Design Technologies Corporation and there was no solicitation in opposition to the nominees as listed in the proxy statement. All such nominees were elected pursuant to the vote of the stockholders as follows: VOTES ----- For Withheld --- -------- Bryan C. Cressey 38,089,002 77,176 Paul M. Olson 38,088,544 77,634 George C. Graeber 38,091,064 75,114 Lance Balk 38,090,164 76,014 Michael F. O. Harris 38,086,414 79,764 Glenn Kalnasy 38,038,571 127,607 Ferdinand Kuznik 38,091,064 75,114 Richard C. Tuttle 38,085,477 80,701 The adoption of the 2001 Long-Term Performance Incentive Plan was approved, by a vote of: For: 20,207,842 Against: 17,871,956 Abstain: 86,380 The firm of Arthur Andersen LLP was re-elected to serve as auditors for the fiscal year ending July 31, 2001, by a vote of: For: 37,518,419 Against: 40,932 Abstain: 606,827 15 Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 15.1 Letter of Arthur Andersen LLP regarding unaudited interim financial statement information. 99.1 Cable Design Technologies Corporation 2001 Long-Term Performance Incentive Plan adopted December 6, 2000. 99.2 Form of Stock Option Grant under CDT Non-Employee Director Stock Plan. (b) Reports on Form 8-K: None. 16 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CABLE DESIGN TECHNOLOGIES CORPORATION /s/ Paul M. Olson ------------------------------------- March 15, 2001 Paul M. Olson President and Chief Executive Officer /s/ Kenneth O. Hale ------------------------------------- March 15, 2001 Kenneth O. Hale Vice President and Chief Financial Officer 17 EX-15.1 2 0002.txt LETTER OF ARTHUR ANDERSEN LLP EXHIBIT 15.1 February 16, 2001 To the Stockholders and Board of Directors of Cable Design Technologies Corporation: We are aware that Cable Design Technologies Corporation has incorporated by reference in its Registration Statements on Form S-3 (Registration No. 333- 00554); Form S-8 (Registration No. 333-80229); Form S-8 (Registration No. 333- 76351); Form S-8 (Registration No. 33-73272); Form S-8 (Registration No. 33- 78418); Form S-8 (Registration No. 333-2450); Form S-8 (Registration No. 333- 6743); and Form S-8 (Registration No. 333-17443) its Form 10-Q for the quarter ended January 31, 2001, which includes our report dated February 16, 2001, covering the unaudited interim financial statement information contained therein. Pursuant to Regulation C of the Securities Act of 1933 (the Act), that report is not considered a part of the registration statements prepared or certified by our firm or a report prepared or certified by our firm within the meaning of Sections 7 and 11 of the Act. /s/Arthur Andersen LLP EX-99.1 3 0003.txt LONG-TERM PERFORMANCE INCENTIVE PLAN EXHIBIT 99.1 CABLE DESIGN TECHNOLOGIES CORPORATION 2001 Long-Term Performance Incentive Plan 1. Purpose. The purpose of the 2001 Long-Term Performance Incentive Plan (the "Plan") is to advance the interests of Cable Design Technologies Corporation, a Delaware corporation (the "Company") and its stockholders by (i) providing incentives to certain employees of the Company, directors and to certain other individuals who perform services for, or to whom an offer of employment has been extended by, the Company, including those who contribute significantly to the strategic and long-term performance objectives and growth of the Company and (ii) to enable the Company to attract, retain and reward the best available persons for positions of responsibility. 2. Administration. The Plan shall be administered solely by the Board of Directors (the "Board") of the Company or, if the Board shall so designate, by a committee of the Board that shall be comprised of not fewer than two directors (the "Committee"); provided that the Committee may delegate the administration of the Plan in whole or in part, on such terms and conditions, and to such person or persons as it may determine in its discretion. References to the Committee hereunder shall include the Board where appropriate. The Committee has all the powers vested in it by the terms of the Plan set forth herein, such powers to include exclusive authority (except as may be delegated as permitted herein) to select the employees and other individuals to be granted Awards under the Plan, to determine the type, size and terms of the Award to be made to each individual selected, to modify the terms of any Award that has been granted, to determine the time when Awards will be granted, to establish performance objectives, to make any adjustments necessary or desirable as a result of the granting of Awards to eligible individuals located outside the United States and to prescribe the form of the instruments embodying Awards made under the Plan. The Committee is authorized to interpret the Plan and the Awards granted under the Plan, to establish, amend and rescind any rules and regulations relating to the Plan, and to make any other determinations which it deems necessary or desirable for the administration of the Plan. The Committee (or its delegate as permitted herein) may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any Award in the manner and to the extent the Committee deems necessary or desirable to carry it into effect. Any decision of the Committee (or its delegate as permitted herein) in the interpretation and administration of the Plan, as described herein, shall lie within its sole and absolute discretion and shall be final, conclusive and binding on all parties concerned. The Committee may act only by a majority of its members in office, except that the members thereof may authorize any one or more of their members or any officer of the Company to execute and deliver documents or to take any other ministerial action on behalf of the Committee with respect to Awards made or to be made to Plan participants. No member of the Committee and no officer of the Company shall be liable for anything done or omitted to be done by him, by any other member of the Committee or by any officer of the Company in connection with the performance of duties under the Plan, except for his own willful misconduct or as expressly provided by statute. Determinations to be made by the Committee under the Plan may be made by its delegates. 3. Participation. Consistent with the purposes of the Plan, the Committee shall have exclusive power (except as may be delegated as permitted herein) to select the employees, directors and other individuals performing services for the Company who may participate in the Plan and be granted Awards under the Plan. Eligible individuals may be selected individually or by groups or categories, as determined by the Committee in its discretion. 4. Awards under the Plan. (a) Types of Awards. Awards under the Plan may include, but need not be limited to, one or more of the following types, either alone or in any combination thereof: (i) "Stock Options," (ii) "Stock Appreciation Rights," (iii) "Restricted Stock," (iv) "Performance Grants" and (v) any other type of Award deemed by the Committee in its discretion to be consistent with the purposes of the Plan (including, but not limited to, Awards of or options or similar rights granted with respect to unbundled stock units or components thereof, and Awards to be made to participants who are foreign nationals or are employed or performing services outside the United States). Stock Options, which include "Nonqualified Stock Options" (which may be awarded to participants or sold at a price determined by the Committee ("Purchased Options")) and "Incentive Stock Options" or combinations thereof, are rights to purchase common shares of the Company having a par value of $.01 per share and stock of any other class into which such shares may thereafter be changed (the "Common Shares"). Nonqualified Stock Options and Incentive Stock Options are subject to the terms, conditions and restrictions specified in Paragraph 5. Stock Appreciation Rights are rights to receive (without payment to the Company) cash, Common Shares, other Company securities (which may include, but need not be limited to, unbundled stock units or components thereof, debentures, preferred stock, warrants, securities convertible into Common Shares or other property ("Other Company Securities")) or property, or other forms of payment, or any combination thereof, as determined by the Committee, based on the increase in the value of the number of Common Shares specified in the Stock Appreciation Right. Stock Appreciation Rights are subject to the terms, conditions and restrictions specified in Paragraph 6. Shares of Restricted Stock are Common Shares which are issued subject to certain restrictions pursuant to Paragraph 7. Performance Grants are contingent awards subject to the terms, conditions and restrictions described in Paragraph 8, pursuant to which the participant may become entitled to receive cash, Common Shares, Other Company Securities or property, or other forms of payment, or any combination thereof, as determined by the Committee. (b) Maximum Number of Shares that May be Issued. There may be issued under the Plan (as Restricted Stock, in payment of Performance Grants, pursuant to the exercise of Stock Options or Stock Appreciation Rights, or in payment of or pursuant to the exercise of such other Awards as the Committee, in its discretion, may determine) an aggregate of not more than 1,800,000 Common Shares, subject to adjustment as provided in Paragraph 14. In any one calendar year, the Committee shall not grant to any one participant options or SARs to purchase a number of shares of Common Stock, and shall not grant to any one participant Restricted Stock or Performance Grants, in excess of 100,000 shares. Common Shares issued pursuant to the Plan may be either authorized but unissued shares, treasury shares, reacquired shares, or any combination thereof; provided, however, that, unless and until this plan is approved by the Company's shareholders, only treasury shares shall be issued hereunder. If any Common Shares issued as Restricted Stock or otherwise subject to repurchase or forfeiture rights are reacquired by the Company pursuant to such rights, or if any Award is canceled, terminates or expires unexercised, any Common Shares that would otherwise have been issuable pursuant thereto will be available for issuance under new Awards. (c) Rights with respect to Common Shares and Other Securities. (i) Unless otherwise determined by the Committee in its discretion, a participant to whom an Award of Restricted Stock has been made (and any person succeeding to such a participant's rights pursuant to the Plan) shall have, after issuance of a certificate for the number of Common Shares awarded and prior to the expiration of the Restricted Period (as hereinafter defined) or the earlier repurchase of such Common Shares as herein provided, ownership of such Common Shares, including the right to vote the same and to receive dividends or other distributions made or paid with respect to such Common Shares (provided that such Common Shares, and any new, additional or different shares, or Other Company Securities or property, or other forms of consideration which the participant may be entitled to receive with respect to such Common Shares as a result of a stock split, stock dividend or any other change in the corporate or capital structure of the Company, shall be subject to the restrictions hereinafter described as determined by the Committee in its discretion), subject, however, to the options, restrictions and limitations imposed thereon pursuant to the Plan. Notwithstanding the foregoing, a participant with whom an Award agreement is made to issue Common Shares in the future, shall have no rights as a stockholder with respect to Common Shares related to such agreement until issuance of a certificate to him. (ii) Unless otherwise determined by the Committee in its discretion, a participant to whom a grant of Stock Options, Stock Appreciation Rights, Performance Grants or any other Award is made (and any person succeeding to such a participant's rights pursuant to the Plan) shall have no rights as a stockholder with respect to any Common Shares or as a holder with respect to other securities, if any, issuable pursuant to any such Award until the date of the issuance of a stock certificate to him for such Common Shares or other instrument of ownership, if any. Except as provided in Paragraph 14, no adjustment shall be made for dividends, distributions or other rights (whether ordinary or extraordinary, and whether in cash, securities, other property or other forms of consideration, or any combination thereof) for which the record date is prior to the date such stock certificate or other instrument of ownership, if any, is issued. 5. Stock Options. The Committee may grant or sell Stock Options either alone, or in conjunction with Stock Appreciation Rights, Performance Grants or other Awards, either at the time of grant or by amendment thereafter; provided that an Incentive Stock Option may be granted only to an eligible employee of the Company or any parent or subsidiary corporation. Each Stock Option (referred to herein as an "Option") granted or sold under the Plan shall be evidenced by an instrument in such form as the Committee shall prescribe from time to time in accordance with the Plan and shall comply with the following terms and conditions, and with such other terms and conditions, including, but not limited to, restrictions upon the Option or the Common Shares issuable upon exercise thereof, as the Committee, in its discretion, shall establish: (a) The option price may be less than, equal to, or greater than, the fair market value of the Common Shares subject to such Option at the time the Option is granted, as determined by the Committee, but in no event will such option price be less than 50% of the fair market value of the underlying Common Shares at the time the Option is granted; provided, however, that in the case of an Incentive Stock Option granted to such an employee, the option price shall not be less than the fair market value of the Common Shares subject to such Option at the time the Option is granted, or if granted to such an employee who owns stock representing more than ten percent of the voting power of all classes of stock of the Company or any parent or subsidiary (a "Ten Percent Employee"), such option price shall not be less than 110% of such fair market value at the time the Option is granted; but in no event will such option price be less than the par value of such Common Shares. (b) The Committee shall determine the number of Common Shares to be subject to each Option. The number of Common Shares subject to an outstanding Option may be reduced on a share-for-share or other appropriate basis, as determined by the Committee, to the extent that Common Shares under such Option are used to calculate the cash, Common Shares, Other Company Securities or property, or other forms of payment, or any combination thereof, received pursuant to exercise of a Stock Appreciation Right attached to such Option, or to the extent that any other Award granted in conjunction with such Option is paid. (c) The Option may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of, except by will or the laws of descent and distribution or to a participant's family member (as defined in General Instruction A.1(a)(5) to Form S-8 under the Securities Act of 1933, as amended, and any successor thereto) by gift or a qualified domestic relations order (as defined in the Internal Revenue Code of 1986, as amended), and shall be exercisable during the grantee's lifetime only by him. Unless the Committee determines otherwise, the Option shall not be exercisable for at least six months after the date of grant, unless the grantee ceases employment or performance of services before the expiration of such six-month period by reason of his disability as defined in Paragraph 12 or his death. (d) The Option shall not be exercisable: (i) in the case of any Incentive Stock Option granted to a Ten Percent Employee, after the expiration of five years from the date it is granted, and, in the case of any other Option, after the expiration of ten years from the date it is granted. Any Option may be exercised during such period only at such time or times and in such installments as the Committee may establish; (ii) unless payment in full is made for the shares being acquired thereunder at the time of exercise as set forth in paragraph (e) below; such payment shall be made in such form (including, but not limited to, cash, Common Shares, or the surrender of another outstanding Award under the Plan, or any combination thereof) as the Committee may determine in its discretion; and (iii) unless the person exercising the Option has been, at all times during the period beginning with the date of the grant of the Option and ending on the date of such exercise, employed by or otherwise performing services for the Company, or a corporation, or a parent or subsidiary of a corporation, substituting or assuming the Option in a transaction to which Section 424(a) of the Internal Revenue Code of 1986, as amended, or any successor statutory provision thereto (the "Code"), is applicable, except that (A) if such person shall cease such employment or performance of services by reason of his disability as defined in Paragraph 12 or early, normal or deferred retirement under an approved retirement program of the Company (or such other plan or arrangement as may be approved by the Committee, in its discretion, for this purpose) while holding an Option which has not expired and has not been fully exercised, such person, at any time within three years (or such period determined by the Committee) after the date he ceased such employment or performance of services (but in no event after the Option has expired), may exercise the Option with respect to any shares as to which he could have exercised the Option on the date he ceased such employment or performance of services, or with respect to such greater number of shares as determined by the Committee; (B) if any person to whom an Option has been granted shall die holding an Option which has not expired and has not been fully exercised, his executors, administrators, heirs or distributees, as the case may be, may, at any time within one year (or such other period determined by the Committee) after the date of death (but in no event after the Option has expired), exercise the Option with respect to any shares as to which the decedent could have exercised the Option at the time of his death, or with respect to such greater number of shares as determined by the Committee; or (C) if such person shall cease employment or performance of services while holding an Option which has not expired and has not been fully exercised, the Committee may determine to allow such person at any time within the one year (or three months in the case of an Incentive Stock Option) or such other period determined by the Committee after the date he ceased such employment or performance of services (but in no event after the Option has expired), to exercise the Option with respect to any shares as to which he could have exercised the Option on the date he ceased such employment or performance of services, or with respect to such greater number of shares as determined by the Committee. (e) Unless otherwise determined by the Committee, payment for shares being acquired under any Option shall be made (i) in cash (including check, bank draft, money order or wire transfer of immediately available funds), (ii) by delivery of outstanding Common Shares with a fair market value on the date of exercise equal to the aggregate exercise price payable with respect to the Options' exercise, (iii) by simultaneous sale through a broker reasonably acceptable to the Committee of shares acquired on exercise, as permitted under Regulation T of the Federal Reserve Board, (iv) by authorizing the Company to withhold from issuance a number of shares issuable upon exercise of the Options which, when multiplied by the fair market value of a Common Shares on the date of exercise, is equal to the aggregate exercise price payable with respect to the Options so exercised or (v) by any combination of the foregoing. Options may also be exercised upon payment of the exercise price of the shares to be acquired by delivery of the optionee's promissory note, but only to the extent specifically approved by and in accordance with the policies of the Committee. In the event a grantee elects to pay the exercise price payable with respect to an Option pursuant to clause (ii) above, (A) only a whole number of Common Shares (and not fractional Common Shares) may be tendered in payment, (B) such grantee must present evidence acceptable to the Company that he or she has owned any such Common Shares tendered in payment of the exercise price (and that such tendered Common Shares have not been subject to any substantial risk of forfeiture) for at least six months prior to the date of exercise, and (C) Common Shares must be delivered to the Company. Delivery for this purpose may, at the election of the grantee, be made either by (A) physical delivery of the certificate(s) for all such Common Shares tendered in payment of the price, accompanied by duly executed instruments of transfer in a form acceptable to the Company, or (B) direction to the grantee's broker to transfer, by book entry, of such Common Shares from a brokerage account of the grantee to a brokerage account specified by the Company. When payment of the exercise price is made by delivery of Common Shares, the difference, if any, between the aggregate exercise price payable with respect to the Option being exercised and the fair market value of the Common Shares tendered in payment (plus any applicable taxes) shall be paid in cash. No grantee may tender Common Shares having a fair market value exceeding the aggregate exercise price payable with respect to the Option being exercised (plus any applicable taxes). In the event a grantee elects to pay the exercise price payable with respect to an Option pursuant to clause (iv) above, (A) only a whole number of share(s) (and not fractional shares) may be withheld in payment and (B) such grantee must present evidence acceptable to the Company that he or she has owned a number of Common Shares at least equal to the number of shares to be withheld in payment of the exercise price (and that such owned Common Shares have not been subject to any substantial risk of forfeiture) for at least six months prior to the date of exercise. When payment of the exercise price is made by withholding of shares, the difference, if any, between the aggregate exercise price payable with respect to the Option being exercised and the fair market value of the shares withheld in payment (plus any applicable taxes) shall be paid in cash. No grantee may authorize the withholding of shares having a fair market value exceeding the aggregate exercise price payable with respect to the Option being exercised (plus any applicable taxes). Any withheld shares shall no longer be issuable under such Option (except pursuant to any Reload Option (as defined below) with respect to any such withheld shares). (f) In the case of an Incentive Stock Option, the amount of the aggregate fair market value of Common Shares (determined at the time of grant of the Option pursuant to subparagraph 5(a) of the Plan) with respect to which incentive stock options are exercisable for the first time by an employee during any calendar year (under all such plans of his employer corporation and its parent and subsidiary corporations) shall not exceed $100,000. (g) It is the intent of the Company that Nonqualified Stock Options granted under the Plan not be classified as Incentive Stock Options, that the Incentive Stock Options granted under the Plan be consistent with and contain or be deemed to contain all provisions required under Section 422 and the other appropriate provisions of the Code and any implementing regulations (and any successor provisions thereof), and that any ambiguities in construction shall be interpreted in order to effectuate such intent. (h) The Committee may provide (either at the time of grant or exercise of an Option), in its discretion, for the grant to a grantee who exercises all or any portion of an Option ("Exercised Options") and who pays all or part of such exercise price with Common Shares, of an additional Option (a "Reload Option") for a number of Common Shares equal to the sum (the "Reload Number") of the number of Common Shares tendered or withheld in payment of such exercise price for the Exercised Options plus, if so provided by the Committee, the number of Common Shares, if any, tendered or withheld by the grantee or withheld by the Company in connection with the exercise of the Exercised Options to satisfy any federal, state or local tax withholding requirements. The terms of each Reload Option, including the date of its expiration and the terms and conditions of its exercisability and transferability, shall be the same as the terms of the Exercised Option to which it relates, except that (i) the grant date for each Reload Option shall be the date of exercise of the Exercised Option to which it relates and (ii) the exercise price for each Reload Option shall be the fair market value of the Common Shares on the grant date of the Reload Option. 6. Stock Appreciation Rights. The Committee may grant Stock Appreciation Rights either alone, or in conjunction with Stock Options, Performance Grants or other Awards, either at the time of grant or by amendment thereafter. Each Award of Stock Appreciation Rights granted under the Plan shall be evidenced by an instrument in such form as the Committee shall prescribe from time to time in accordance with the Plan and shall comply with the following terms and conditions, and with such other terms and conditions, including, but not limited to, restrictions upon the Award of Stock Appreciation Rights or the Common Shares issuable upon exercise thereof, as the Committee, in its discretion, shall establish: (a) The Committee shall determine the number of Common Shares to be subject to each Award of Stock Appreciation Rights. The number of Common Shares subject to an outstanding Award of Stock Appreciation Rights may be reduced on a share- for-share or other appropriate basis, as determined by the Committee, to the extent that Common Shares under such Award of Stock Appreciation Rights are used to calculate the cash, Common Shares, Other Company Securities or property, or other forms of payment, or any combination thereof, received pursuant to exercise of an Option attached to such Award of Stock Appreciation Rights, or to the extent that any other Award granted in conjunction with such Award of Stock Appreciation Rights is paid. (b) The Award of Stock Appreciation Rights may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of, except by will or the laws of descent and distribution or to a participant's family member (as defined in General Instruction A.1(a)(5) to Form S-8 under the Securities Act of 1933, as amended, and any successor thereto) by gift or a qualified domestic relations order (as defined in the Internal Revenue Code of 1986, as amended), and shall be exercisable during the grantee's lifetime only by him. Unless the Committee determines otherwise, the Award of Stock Appreciation Rights shall not be exercisable for at least six months after the date of grant, unless the grantee ceases employment or performance of services before the expiration of such six-month period by reason of his disability as defined in Paragraph 12 or his death. (c) The Award of Stock Appreciation Rights shall not be exercisable: (i) in the case of any Award of Stock Appreciation Rights which is attached to an Incentive Stock Option granted to a Ten Percent Employee, after the expiration of five years from the date it is granted, and, in the case of any other Award of Stock Appreciation Rights, after the expiration of ten years from the date it is granted. Any Award of Stock Appreciation Rights may be exercised during such period only at such time or times and in such installments as the Committee may establish; (ii) unless the Option or other Award to which the Award of Stock Appreciation Rights is attached is at the time exercisable; and (iii) unless the person exercising the Award of Stock Appreciation Rights has been, at all times during the period beginning with the date of the grant thereof and ending on the date of such exercise, employed by or otherwise performing services for the Company, except that (A) if such person shall cease such employment or performance of services by reason of his disability as defined in Paragraph 12 or early, normal or deferred retirement under an approved retirement program of the Company (or such other plan or arrangement as may be approved by the Committee, in its discretion, for this purpose) while holding an Award of Stock Appreciation Rights which has not expired and has not been fully exercised, such person may, at any time within three years (or such other period determined by the Committee) after the date he ceased such employment or performance of services (but in no event after the Award of Stock Appreciation Rights has expired), exercise the Award of Stock Appreciation Rights with respect to any shares as to which he could have exercised the Award of Stock Appreciation Rights on the date he ceased such employment or performance of services, or with respect to such greater number of shares as determined by the Committee; or (B) if any person to whom an Award of Stock Appreciation Rights has been granted shall die holding an Award of Stock Appreciation Rights which has not expired and has not been fully exercised, his executors, administrators, heirs or distributees, as the case may be, may at any time within one year (or such other period determined by the Committee) after the date of death (but in no event after the Award of Stock Appreciation Rights has expired), exercise the Award of Stock Appreciation Rights with respect to any shares as to which the decedent could have exercised the Award of Stock Appreciation Rights at the time of his death, or with respect to such greater number of shares as determined by the Committee. (d) An Award of Stock Appreciation Rights shall entitle the holder (or any person entitled to act under the provisions of subparagraph 6(c)(iii)(B) hereof) to exercise such Award and surrender unexercised the Option (or other Award), if any, to which the Stock Appreciation Right is attached (or any portion of such Option or other Award) to the Company and to receive from the Company in exchange thereof, without payment to the Company, that number of Common Shares having an aggregate value equal to (or, in the discretion of the Committee, less than) the excess of the fair market value of one share, at the time of such exercise, over the exercise price (or Option Price, as the case may be), times the number of shares subject to the Award or the Option (or other Award), or portion thereof, which is so exercised or surrendered, as the case may be. The Committee shall be entitled in its discretion to elect to settle the obligation arising out of the exercise of a Stock Appreciation Right by the payment of cash or Other Company Securities or property, or other forms of payment, or any combination thereof, as determined by the Committee, equal to the aggregate value of the Common Shares it would otherwise be obligated to deliver. Any such election by the Committee shall be made as soon as practicable after the receipt by the Committee of written notice of the exercise of the Stock Appreciation Right. The value of a Common Share, Other Company Securities or property, or other forms of payment determined by the Committee for this purpose shall be the fair market value thereof on the last business day next preceding the date of the election to exercise the Stock Appreciation Right, unless the Committee, in its discretion, determines otherwise. (e) A Stock Appreciation Right may provide that it shall be deemed to have been exercised at the close of business on the business day preceding the expiration date of the Stock Appreciation Right or of the related Option (or other Award), or such other date as specified by the Committee, if at such time such Stock Appreciation Right has a positive value. Such deemed exercise shall be settled or paid in the same manner as a regular exercise thereof as provided in subparagraph 6(d) hereof. (f) No fractional shares may be delivered under this Paragraph 6, but in lieu thereof a cash or other adjustment shall be made as determined by the Committee in its discretion. 7. Restricted Stock. Each Award of Restricted Stock under the Plan shall be evidenced by an instrument in such form as the Committee shall prescribe from time to time in accordance with the Plan and shall comply with the following terms and conditions, and with such other terms and conditions as the Committee, in its discretion, shall establish: (a) The Committee shall determine the number of Common Shares to be issued to a participant pursuant to the Award, and the extent, if any, to which they shall be issued in exchange for cash, other consideration, or both. (b) Restricted Stock awarded to a participant in accordance with the Award shall be subject to the following restrictions until the expiration of such period as the Committee shall determine, from the date on which the Award is granted (the "Restricted Period"): (i) a participant to whom an award of Restricted Stock is made shall be issued, but shall not be entitled to the delivery of a stock certificate, (ii) unless otherwise determined by the Committee, certificates representing Restricted Stock will be held in escrow by the Company on the participant's behalf during the Restricted Period and will bear an appropriate legend specifying the applicable restrictions thereon, and the participant will be required to execute a blank stock power, (iii) the Restricted Stock shall not be transferable prior to the end of the Restricted Period, (iv) the Restricted Stock shall be forfeited and the stock certificate shall be returned to the Company and all rights of the holder of such Restricted Stock to such shares and as a shareholder shall terminate without further obligation on the part of the Company if the participant's continuous employment or performance of services for the Company shall terminate for any reason prior to the end of the Restricted Period, except as otherwise provided in subparagraph 7(c), and (v) such other restrictions as determined by the Committee in its discretion. (c) If a participant who has been in continuous employment or performance of services for the Company since the date on which a Restricted Stock Award was granted to him shall, while in such employment or performance of services, die, or terminate such employment or performance of services by reason of disability as defined in Paragraph 12 or by reason of early, normal or deferred retirement under an approved retirement program of the Company (or such other plan or arrangement as may be approved by the Committee in its discretion, for this purpose) and any of such events shall occur after the date on which the Award was granted to him and prior to the end of the Restricted Period of such Award, the Committee may determine to cancel any and all restrictions on any or all of the Common Shares subject to such Award. 8. Performance Grant. The Award of the Performance Grant ("Performance Grant") to a participant will entitle him to receive a specified amount determined by the Committee (the "Actual Value"), if the terms and conditions specified herein and in the Award are satisfied. Each Award of a Performance Grant shall be subject to the following terms and conditions, and to such other terms and conditions, including but not limited to, restrictions upon any cash, Common Shares, Other Company Securities or property, or other forms of payment, or any combination thereof, issued in respect of the Performance Grant, as the Committee, in its discretion, shall establish, and shall be embodied in an instrument in such form and substance as is determined by the Committee: (a) The Committee shall determine the value or range of values of a Performance Grant to be awarded to each participant selected for an Award and whether or not such a Performance Grant is granted in conjunction with an Award of Options, Stock Appreciation Rights, Restricted Stock or other Award, or any combination thereof, under the Plan (which may include, but need not be limited to, deferred Awards) concurrently or subsequently granted to the participant (the "Associated Award"). As determined by the Committee, the maximum value of each Performance Grant (the "Maximum Value") shall be: (i) an amount fixed by the Committee at the time the Award is made or amended thereafter, (ii) an amount which varies from time to time based in whole or in part on the then current value of the Common Shares, Other Company Securities or property, or other securities or property, or any combination thereof or (iii) an amount that is determinable from criteria specified by the Committee. Performance Grants may be issued in difference classes or series having different names, terms and conditions. In the case of a Performance Grant awarded in conjunction with an Associated Award, the Performance Grant may be reduced on an appropriate basis to the extent that the Associated Award has been exercised, paid to or otherwise received by the participant, as determined by the Committee. (b) The award period ("Award Period") related to any Performance Grant shall be a period determined by the Committee. At the time each Award is made, the Committee shall establish performance objectives to be attained within the Award Period as the means of determining the Actual Value of such a Performance Grant. The performance objectives shall be based on such measure or measures of performance, which may include, but need not be limited to, the performance of the participant, the Company, one or more of its subsidiaries or one or more of their divisions or units, or any combination of the foregoing, as the Committee shall determine, and may be applied on an absolute basis or be relative to industry or other indices, or any combination thereof. The Actual Value of a Performance Grant shall be equal to its Maximum Value only if the performance objectives are attained in full, but the Committee shall specify the manner in which the Actual Value of Performance Grants shall be determined if the performance objectives are met in part. Such performance measures, the Actual Value or the Maximum Value, or any combination thereof, may be adjusted in any manner by the Committee in its discretion at any time and from time to time during or as soon as practicable after the Award Period, if it determines that such performance measures, the Actual Value or the Maximum Value, or any combination thereof, are not appropriate under the circumstances. (c) The rights of a participant in Performance Grants awarded to him shall be provisional and may be canceled or paid in whole or in part, all as determined by the Committee, if the participant's continuous employment or performance of services for the Company shall terminate for any reason prior to the end of the Award Period. (d) The Committee shall determine whether the conditions of subparagraph 8(b) or 8(c) hereof have been met and, if so, shall ascertain the Actual Value of the Performance Grants. If the Performance Grants have no Actual Value, the Award and such Performance Grants shall be deemed to have been canceled and the Associated Award, if any, may be canceled or permitted to continue in effect in accordance with its terms. If the Performance Grants have any Actual Value and: (i) were not awarded in conjunction with an Associated Award, the Committee shall cause an amount equal to the Actual Value of the Performance Grants earned by the participant to be paid to him or his beneficiary as provided below; or (ii) were awarded in conjunction with an Associated Award, the Committee shall determine, in accordance with criteria specified by the Committee (A) to cancel the Performance Grants, in which event no amount in respect thereof shall be paid to the participant or his beneficiary, and the Associated Award may be permitted to continue in effect in accordance with its terms, (B) to pay the Actual Value of the Performance Grants to the participant or his beneficiary as provided below, in which event the Associated Award may be canceled or (C) to pay to the participant or his beneficiary as provided below, the Actual Value of only a portion of the Performance Grants, in which event all or a portion of the Associated Award may be permitted to continue in effect in accordance with its terms or be canceled, as determined by the Committee. Such determination by the Committee shall be made as promptly as practicable following the end of the Award Period or upon the earlier termination of employment or performance of services, or at such other time or times as the Committee shall determine, and shall be made pursuant to criteria specified by the Committee. Payment of any amount in respect of the Performance Grants which the Committee determines to pay as provided above shall be made by the Company as promptly as practicable after the end of the Award Period or at such other time or times as the Committee shall determine, and may be made in cash, Common Shares, Other Company Securities or property, or other forms of payment, or any combination thereof or in such other manner, as determined by the Committee in its discretion. Notwithstanding anything in this Paragraph 8 to the contrary, the Committee may, in its discretion, determine and pay out the Actual Value of the Performance Grants at any time during the Award Period. 9. Deferral of Compensation. The Committee shall determine whether or not an Award shall be made in conjunction with deferral of the participant's salary, bonus or other compensation, or any combination thereof, and whether or not such deferred amounts may be (i) forfeited to the Company or to other participants or any combination thereof, under certain circumstances (which may include, but need not be limited to, certain types of termination of employment or performance of services for the Company), (ii) subject to increase or decrease in value based upon the attainment of or failure to attain, respectively, certain performance measures and/or (iii) credited with income equivalents (which may include, but need not be limited to, interest, dividends or other rates of return) until the date or dates of payment of the Award, if any. 10. Deferred Payment of Awards. The Committee may specify that the payment of all or any portion of cash, Common Shares, Other Company Securities or property, or any other form of payment, or any combination thereof, under an Award shall be deferred until a later date. Deferrals shall be for such periods or until the occurrence of such events, and upon such terms, as the Committee shall determine in its discretion. Deferred payments of Awards may be made by undertaking to make payment in the future based upon the performance of certain investment equivalents (which may include, but need not be limited to, government securities, Common Shares, other securities, property or consideration, or any combination thereof), together with such additional amounts of income equivalents (which may be compounded and may include, but need not be limited to, interest, dividends or other rates of return or any combination thereof) as may accrue thereon until the date or dates of payment, such investment equivalents and such additional amounts of income equivalents to be determined by the Committee in its discretion. 11. Amendment or Substitution of Awards under the Plan. The terms of any outstanding Award under the Plan may be amended from time to time by the Committee in its discretion in any manner that it deems appropriate (including, but not limited to, acceleration of the date of exercise of any Award and/or payments thereunder); provided that no such amendment shall adversely affect in a material manner any right of a participant under the Award without his written consent, unless the Committee determines in its discretion that there have occurred or are about to occur significant changes in the participant's position, duties or responsibilities, or significant changes in economic, legislative, regulatory, tax, accounting or cost/benefit conditions which are determined by the Committee in its discretion to have or to be expected to have a substantial effect on the performance of the Company, or any subsidiary, affiliate, division or department thereof, on the Plan or on any Award under the Plan. The Committee may, in its discretion, permit holders of Awards under the Plan to surrender outstanding Awards in order to exercise or realize the rights under other Awards, or in exchange for the grant of new Awards, or require holders of Awards to surrender outstanding Awards as a condition precedent to the grant of new Awards under the Plan. 12. Disability. For the purposes of this Plan, a participant shall be deemed to have terminated his employment or performance of services for the Company and its Affiliates by reason of disability, if the Committee shall determine that the physical or mental condition of the participant by reason of which such employment or performance of services terminated was such at that time as would entitle him to payment of monthly disability benefits under any Company disability plan. If the participant is not eligible for benefits under any disability plan of the Company, he shall be deemed to have terminated such employment or performance of services by reason of disability if the Committee shall determine that his physical or mental condition would entitle him to benefits under any Company disability plan if he were eligible therefor. 13. Termination of a Participant. For all purposes under the Plan, the Committee shall determine whether a participant has terminated employment with, or the performance of services for, the Company. 14. Dilution and Other Adjustments. In the event of any change in the outstanding Common Shares of the Company by reason of any stock split, dividend, split-up, split-off, spin-off, recapitalization, merger, consolidation, rights offering, reorganization, combination or exchange of shares, a sale by the Company of all of its assets, any distribution to stockholders other than a normal cash dividend, or other extraordinary or unusual event, if the Committee shall determine, in its discretion, that such change equitably requires an adjustment in the terms of any Award (including, without limitation, the number and type of consideration subject to any Award), maximum number of awards to any one participant, or the number of Common Shares available for Awards, such adjustment may be made by the Committee and shall be final, conclusive and binding for all purposes of the Plan. In the event of the proposed dissolution or liquidation of the Company, all outstanding Awards shall terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Committee. In the event of a proposed sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation, all restrictions on any outstanding Awards shall lapse and participants shall be entitled to the full benefit of all such Awards immediately prior to the closing date of such sale or merger, unless otherwise provided by the Committee. 15. Designation of Beneficiary by Participant. A participant may name a beneficiary to receive any payment to which he may be entitled in respect of any Award under the Plan in the event of his death, on a written form to be provided by and filed with the Committee, and in a manner determined by the Committee in its discretion. The Committee reserves the right to review and approve beneficiary designations. A participant may change his beneficiary from time to time in the same manner, unless such participant has made an irrevocable designation. Any designation of beneficiary under the Plan (to the extent it is valid and enforceable under applicable law) shall be controlling over any other disposition, testamentary or otherwise, as determined by the Committee in its discretion. If no designated beneficiary survives the participant and is living on the date on which any amount becomes payable to such a participant's beneficiary, such payment will be made to the legal representatives of the participant's estate, and the term "beneficiary" as used in the Plan shall be deemed to include such person or persons. If there are any questions as to the legal right of any beneficiary to receive a distribution under the Plan, the Committee in its discretion may determine that the amount in question be paid to the legal representatives of the estate of the participant, in which event the Company, the Board and the Committee and the members thereof, will have no further liability to anyone with respect to such amount. 16. Financial Assistance. If the Committee determines that such action is advisable, the Company may assist any person to whom an Award has been granted in obtaining financing from the Company (or under any program of the Company approved pursuant to applicable law), or from a bank or other third party, on such terms as are determined by the Committee, and in such amount as is required to accomplish the purposes of the Plan, including, but not limited to, to permit the exercise of an Award, the participation therein, and/or the payment of any taxes in respect thereof. Such assistance may take any form that the Committee deems appropriate, including, but not limited to, a direct loan from the Company, a guarantee of the obligation by the Company, or the maintenance by the Company of deposits with such bank or third party. 17. Miscellaneous Provisions. (a) No employee or other person shall have any claim or right to be granted an Award under the Plan. Determinations made by the Committee under the Plan need not be uniform and may be made selectively among eligible individuals under the plan, whether or not such eligible individuals are similarly situated. Neither the Plan nor any action taken hereunder shall be construed as giving any employee or other person any right to continue to be employed by or perform services for the Company, and the right to terminate the employment of or performance of services by any participants at any time and for any reason is specifically reserved. (b) No participant or other person shall have any right with respect to the Plan, the Common Shares reserved for issuance under the Plan or in any Award, contingent or otherwise, until written evidence of the Award shall have been delivered to the recipient and all the terms, conditions and provisions of the Plan and the Award applicable to such recipient (and each person claiming under or through him) have been met. (c) Except as may be approved by the Committee, a participant's rights and interest under the Plan may not be assigned or transferred, hypothecated or encumbered in whole or in part either directly or by operation of law or otherwise (except in the event of a participant's death) including, but not by way of limitation, execution, levy, garnishment, attachment, pledge, bankruptcy or in any other manner; provided, however, that any Option or similar right (including, but not limited to, a Stock Appreciation Right) offered pursuant to the Plan shall not be transferable other than by will or the laws of descent and distribution and shall be exercisable during the participant's lifetime only by him. (d) No Common Shares, Other Company Securities or property, other securities or property, or other forms of payment shall be issued hereunder with respect to any Award unless counsel for the Company shall be satisfied that such issuance will be in compliance with applicable federal, state, local and foreign legal, securities exchange and other applicable requirements. (f) The Company shall have the right to deduct from any payment made under the Plan any federal, state, local or foreign income or other taxes required by law to be withheld with respect to such payment. It shall be a condition to the obligation of the Company to issue Common Shares, Other Company Securities or property, other securities or property, or other forms of payment, or any combination thereof, upon exercise, settlement or payment of any Award under the Plan, that the participant (or any beneficiary or person entitled to act) pay to the Company, upon its demand, such amount as may be required by the Company for the purpose of satisfying any liability to withhold federal, state, local or foreign income or other taxes. If the amount requested is not paid, the Company may refuse to issue Common Shares, Other Company Securities or property, other securities or property, or other forms of payment, or any combination thereof. Notwithstanding anything in the Plan to the contrary, the Committee may, in its discretion, permit an eligible participant (or any beneficiary or person entitled to act) to elect to pay a portion or all of the amount requested by the Company for such taxes with respect to such Award, at such time and in such manner as the Committee shall deem to be appropriate (including, but not limited to, by authorizing the Company to withhold, or agreeing to surrender to the Company on or about the date such tax liability is determinable, Common Shares, Other Company Securities or property, other securities or property, or other forms of payment, or any combination thereof, owned by such person or a portion of such forms of payment that would otherwise be distributed, or have been distributed, as the case may be, pursuant to such Award to such person, having a fair market value on the date that the amount of tax to be withheld is determined equal to the amount of such taxes). Any election that a participant makes shall be irrevocable. (g) The expenses of the Plan shall be borne by the Company. (h) The Plan shall be unfunded. The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the payment of any Award under the Plan, and rights to the payment of Awards shall be no greater than the rights of the Company's general creditors. (i) By accepting any Award or other benefit under the Plan, each participant and each person claiming under or through him shall be conclusively deemed to have indicated his acceptance and ratification of, and consent to, any action taken under the Plan by the Company, the Board or the Committee or its delegates. (j) Fair market value in relation to Common Shares, Other Company Securities or property, other securities or property or other forms of payment of Awards under the Plan, or any combination thereof, as of any specific time shall mean such value as determined by the Committee in accordance with applicable law. (k) The masculine pronoun includes the feminine and the singular includes the plural wherever appropriate. (l) The appropriate officers of the Company shall cause to be filed any reports, returns or other information regarding Awards hereunder of any Common Shares issued pursuant hereto as may be required by Section 13 or 15(d) of the Exchange Act (or any successor provision) or any other applicable statute, rule or regulation. (m) The validity, construction, interpretation, administration and effect of the Plan, and of its rules and regulations, and rights relating to the Plan and to Awards granted under the Plan, shall be governed by the substantive laws, but not the choice of law rules, of the State of Delaware. 18. Amendment and Termination of the Plan. The Board of Directors or the Committee, without the approval of the stockholders, may amend or terminate the Plan, except that no amendment shall become effective without prior approval of the stockholders of the Company if stockholder approval would be required by applicable law or regulations, including if required for continued compliance with the performance-based compensation exception of Section 162(m) of the Code, under the provisions of Section 422 of the Code or any successor thereto or by any listing requirements of the principal stock exchange on which the Common Stock is then listed. 19. Plan Termination. This Plan shall terminate upon the earlier of the following dates or events to occur: (a) upon the adoption of a resolution of the Board terminating the Plan; or (b) ten years from the date the Plan is initially approved and adopted by the stockholders of the Company; provided, however, that the Board may, prior to the expiration of such ten-year period, extend the term of the Plan for an additional period of up to five years for the grant of Awards other than Incentive Stock Options. No termination of the Plan shall materially alter or impair any of the rights or obligations of any person, without his consent, under any Award theretofore granted under the Plan, except that subsequent to termination of the Plan, the Committee may make amendments permitted under Paragraph 11. * * * * * * * * * * EX-99.2 4 0004.txt FORM OF STOCK OPTION GRANT EXHIBIT 99.2 CABLE DESIGN TECHNOLOGIES CORPORATION DIRECTOR NON-QUALIFIED STOCK OPTION GRANT Grantee: Grant Date: Option Shares: Exercise Price: Pursuant to a resolution duly adopted by the Board of Directors of Cable Design Technologies Corporation (the "Company"), Grantee has been awarded a nonqualified stock option to purchase [ ] shares of common stock, par value $.01 per share (the "Common Stock"), of the Company at the option price per share of $[_]. This grant is effective on the date written above (the "grant date") and is made pursuant to the 2001 Long-Term Performance Incentive Plan (the "Plan"). 1. Grantee Bound by Plan. A copy of the Plan has been provided to --------------------- Grantee, which Plan is incorporated herein by reference and made a part hereof. The Plan and any prospectus then in effect should be carefully examined before any decision is made to exercise the option.This Grant shall be administered by the Compensation Committee of the Board or Directors of the Company or, if deemed appropriate by the Compensation Committee or the Board of Directors, the Board of Directors (collectively, the "Board"). 2. Exercise of Option. Subject to the earlier termination of the option ------------------ as provided herein and in the Plan, the option may be exercised at any time and from time to time after the date of grant, but, except as otherwise provided below, such option shall not be exercisable for more than a percentage of the aggregate number of shares offered by such option determined by the number of full years from the date of grant thereof to the date of such exercise, in accordance with the following schedule: Completed Years Cumulative Percentage of Shares That From Date of Grant May Be Exercisable ------------------ ------------------ Less than 1 year 0% 1 but less than 2 years up to 33 1/3% 2 but less than 3 years up to 66 2/3% 3 or more years up to 100% provided that, subject to the other conditions of this Grant, all of the shares shall vest and be exercisable upon a Change of Control (defined in Exhibit A). --------- An option shall not be exercisable in any event after the expiration of ten years from the date of grant. An option may not be exercised for a fraction of a share of Common Stock. Options may be exercised by delivery of written notice to the Company or in such other manner as designated by the Company from time to time. 3. Conditions to Exercise. The option may not be exercised by Grantee ---------------------- unless all of the following conditions are met: (a) Legal counsel for the Company must be satisfied at the time of exercise that the issuance of shares of Common Stock upon exercise will be in compliance with the Securities Act of 1933, as amended (the "Act") and other applicable United States federal, state, local and foreign laws; (b) Grantee must pay at the time of exercise the full purchase price for the shares of Common Stock being acquired hereunder, by paying in United States dollars by cash or delivering such other consideration as is acceptable to the Board in its sole discretion; (c) Grantee must, at all times during the period beginning with the grant date of the option and ending on the date of such exercise, have been a director of the Company; provided that if: (i) Grantee ceases to be a director by reason of Grantee's disability or retirement (as such terms are defined in the Plan and interpreted and administered by the Board) while holding the option which has not expired and has not been fully exercised Grantee may, at any time within three years of the date of the onset of such disability or retirement (but in no event after the expiration of ten years from the grant date), exercise the option with respect to the number of shares, determined under Paragraph 2 above, as to which Grantee could have exercised the option on the date of the onset of such disability or retirement (or with respect to such greater number of shares as determined by the Board in its sole discretion) and any remaining portion of the option shall be canceled and no longer exercisable; (ii) Grantee dies while holding the option which has not expired and has not been fully exercised, his executors, administrators, heirs or distributees, as the case may be, may, at any time within one year (or such other period determined by the Board) after the date of death (but in no event after the Option has expired), exercise the option with respect to any shares, determined under Paragraph 2, as to which the decedent could have exercised the option at the time of his death (or with respect to such greater number of shares as determined by the Board) and any remaining portion of the option shall be canceled and no longer exercisable; and (iii) Grantee ceases to be a director and on the date he ceases to be a director Grantee holds the option which has not expired and has not been fully exercised, Grantee may, at any time within 30 days after ceasing to be a director (but in no event after the expiration of ten years from the grant date), exercise the option with respect to the number of shares, determined under Paragraph 2 above, as to which Grantee could have exercised the option on such date he ceased to be a director (or with respect to such greater number of shares as determined by the Board in its sole discretion), and any remaining portion of the option shall be canceled and no longer exercisable. Any option that is not exercised within the periods contemplated in clauses (i), (ii) and (iii) above shall be canceled and no longer exercisable. 4. Transferability. The option may not be sold, assigned, transferred, --------------- pledged, hypothecated or otherwise disposed of by Grantee, except by will or the laws of descent and distribution and is exercisable during Grantee's lifetime only by Grantee. If Grantee or anyone claiming under or through Grantee attempts to violate this Paragraph 4, such attempted violation shall be null and void and without effect, and the Company's obligation to make any further payments (stock or cash) hereunder shall terminate. 5. Adjustments; Change of Control. In the event of any change in the ------------------------------ number of shares of Common Stock outstanding by reason of any stock split, stock dividend, split-up, split-off, spin-off, recapitalization, merger or consolidation in which the Company is the surviving corporation, rights offering, reorganization, combination or exchange of shares, distribution to shareholders other than a normal cash dividend, or other extraordinary or unusual event occurring after the grant date specified above and prior to its exercise in full, the number of shares of Common Stock for which the option may then be exercised, the type of consideration for which the option may be exercised and the option price per share may or may not be adjusted so as to reflect such change, all as determined by the Board in its sole discretion. 6. Withholding of Tax. It shall be a condition to the obligation of the ------------------ Company to furnish shares of Common Stock upon exercise of an option (i) that Grantee (or any person acting under Paragraph 3(c)(ii) above) pay to the Company or its designee, upon its demand and in cash or in the form of such other consideration acceptable to the Board in its sole discretion and, in all cases in accordance with the Plan, any amount that may be demanded for the purpose of satisfying the Company's obligation to withhold federal, state, local or foreign income, employment or other taxes incurred by reason of the exercise of the option or the transfer of shares thereupon and (ii) that Grantee (or any person acting under Paragraph 3(c)(ii) above) provide the Company with any forms, documents or other information reasonably required by the Company in connection with the grant. If the amount requested for the purpose of satisfying the withholding obligation is not paid, the Company may refuse to furnish shares of Common Stock upon exercise of the option. 7. Amendment or Substitution of Awards. The terms of this Grant may be ----------------------------------- amended from time to time by the Board in its sole discretion in any manner that it deems appropriate (including, but not limited to, acceleration of the vesting provisions of the option in Paragraph 2); provided, however, that no such amendment shall adversely affect in a material manner any right of Grantee under this Grant without Grantee's written consent, unless the Board determines in its sole discretion that there have occurred or are about to occur significant changes in Grantee's position, duties or responsibilities, or significant changes in economic, legislative, regulatory, tax, accounting or cost/benefit conditions which are determined by the Board in its sole discretion to have or to be expected to have a substantial effect on the performance of the Company, or any Subsidiary, affiliates, division, or department thereof, on the Plan or on this grant under the Plan. The Board may, in its sole discretion, permit Grantee to surrender this grant in order to exercise or realize the rights under other awards under the Plan, or in exchange for the grant of new awards under the Plan, or require Grantee to surrender this grant as a condition precedent to the grant of new awards under the Plan. 8. Administration. Any action taken or decision made by the Company, the -------------- Board of Directors, or the Compensation Committee or its delegates arising out of or in connection with the construction, administration, interpretation or effect of the Plan or this Grant shall lie within its sole and absolute discretion, as the case may be, and shall be final, conclusive and binding on Grantee and all persons claiming under or through Grantee. By accepting this grant or other benefit under the Plan, Grantee and each person claiming under or through Grantee shall be conclusively deemed to have indicated acceptance and ratification of, and consent to, any action taken under the Plan by the Company, the Board of Directors or the Compensation Committee or its delegates. 9. No Rights as Stockholder. Unless and until a certificate or ------------------------ certificates representing such shares of Common Stock shall have been issued to Grantee (or any person acting under Paragraph 3(c)(ii) above), Grantee shall not be or have any of the rights or privileges of a stockholder of the Company with respect to shares of Common Stock acquirable upon exercise of the option. No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights for which the record date is prior to the date such stock certificate is issued to Grantee. 10. Securities Laws. Shares of Common Stock which Grantee may acquire by --------------- exercising the option may not be sold or otherwise disposed of in any manner which would constitute a violation of any applicable securities laws, whether federal or state. 11. Rights of Participants. Grantee shall have no rights under the Plan ---------------------- other than as an unsecured general creditor of the Company. 12. Notices. Any notice hereunder to the Company shall be addressed to: ------- Cable Design Technologies Corporation, Foster Plaza 7, 661 Andersen Drive, Pittsburgh, Pennsylvania 15220, Attention: President, and any notice hereunder to Grantee shall be addressed to Grantee at Grantee's last address on the records of the Company, subject to the right of either party to designate at any time hereafter in writing some other address. Any notice shall be deemed to have been duly given when delivered personally or enclosed in a properly sealed envelope, addressed as set forth above, and deposited (with first class postage prepaid) in the United States mail. 13. Binding Effect. This Grant shall be binding upon and inure to the -------------- benefit of any successors to the Company and all persons lawfully claiming under Grantee. 14. Severability. Whenever possible, each provision of this Grant shall be ------------ interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Grant is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Grant shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. 15. Governing Law. The validity, construction, interpretation, ------------- administration and effect of the Plan, and of its rules and regulations, and rights relating to the Plan and to this Grant, shall be governed by the substantive laws, but not the choice of law rules, of the State of Delaware. * * * * * * * * * CABLE DESIGN TECHNOLOGIES CORPORATION, pursuant to the direction of the Board of Directors By: ___________________________ Paul M. Olson CEO & President EXHIBIT A Definitions ----------- "Change in Control" shall be deemed to have occurred if: ----------------- (a) any "person" or "group" (as such terms are used in Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's then outstanding securities; or (b) there shall be consummated any consolidation, merger, reorganization or acquisition involving the Company unless following such event (i) all or substantially all of the individuals and entities who were the beneficial owners of the outstanding voting securities of the Company immediately prior to such event beneficially own, directly or indirectly, more than 55% of the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors of the corporation resulting from such event in substantially the same proportions as their ownership immediately prior to such event and (ii) the provisions of clause (a) above are not met and (iii) at least 55% of the members of the board of directors of the corporation resulting from such event were members of the board of directors at the time of the initial consideration of, or any action of the board relating to, such event; or (c) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company (on a consolidated basis); or (d) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company; or (e) as the result of, or in connection with, any cash tender offer, exchange offer, merger or other business combination, sale of assets, proxy or consent solicitation, contested election or substantial stock accumulation (a "Control Transaction"), the members of the Board ------------------- immediately prior to the date the Company initiates, or is notified of, such Control Transaction (the "Incumbent Board") shall thereafter cease to --------------- constitute at least a majority of the Board; provided, however, that for purposes of this clause (e) any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board. -----END PRIVACY-ENHANCED MESSAGE-----