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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998 Commission file number 1-7283
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REGAL-BELOIT CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Wisconsin 39-0875718
(State of Incorporation) (I.R.S. Employer Identification No.)
200 State Street
Beloit, Wisconsin 53511-6254
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (608) 364-8800
=============================================================================
Securities registered pursuant to Section 12 (b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
- ----------------------------- -----------------------------------
Common Stock ($.01 Par Value) American Stock Exchange
Securities registered pursuant to Section 12 (g) of the Act . . . . None
(Title of Class)
=============================================================================
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
-----
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 5, 1999 was approximately $407,154,000.
On March 5, 1999 the registrant had outstanding 20,946,805 shares of common
stock, $.01 par value, which is registrant's only class of common stock.
============================================================================
Documents Incorporated by Reference
-----------------------------------
Documents Form 10-K Reference
- --------- -------------------
Annual Report to Shareholders
for Year Ended December 31, 1998 . . . . . . . . . . . . . I, II, IV
Proxy Statement for Annual
Shareholders Meeting to be Held on April 21, 1999 . . . . . III
1
REGAL-BELOIT CORPORATION
Index to
Annual Report on Form 10-K
For the Year Ended December 31, 1998
Page
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . 6
Item 4. Submission of Matters To A Vote of Security Holders . . . . 6
PART II
Item 5. Market for the Registrant's Common Equity
and Related Shareholder Matters . . . . . . . . . . . . . 6
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . 7
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . . . 7
Item 8. Financial Statements and Supplementary Data. . . . . . . . . 7
Item 9. Changes In and Disagreements with Accountants
on Accounting and Financial Disclosure . . . . . . . . . . 7
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . . 7
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . 8
Item 12. Security Ownership of Certain
Beneficial Owners and Management . . . . . . . . . . . . . 8
Item 13. Certain Relationships and Related Transactions . . . . . . . 8
PART IV
Item 14. Financial Statements, Financial Statement Schedule,
Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 9
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
PART I
ITEM 1. Business
General Development of Business
- -------------------------------
Regal-Beloit Corporation is a Wisconsin corporation founded in 1955. The
Company's initial business was the production of special metalworking taps.
Through 34 acquisitions and internal growth, the Company has become a
prominent manufacturer of a diversified line of mechanical products to
control motion and torque and electrical products such as motors and
generators.
The Company's mechanical products are manufactured by its Mechanical Group
and include standard and custom worm gear, bevel gear, helical gear and
concentric shaft gearboxes; marine and high-performance after-market
automotive transmissions; custom gearing; gear motors; manual valve actuators;
and perishable, high speed steel, rotary cutting tools. Mechanical Group
products are sold to distributors, original equipment manufacturers and end
users across many industry segments.
Typical applications for the Company's mechanical products include material
handling systems such as conveyors, palletizers and packaging equipment;
off-highway vehicular equipment such as street pavers, graders,
airport/fire/crash/rescue equipment; farm implements; gas and liquid pipeline
transmission systems; civic water and waste treatment facilities; open-pit
mining; paper making machinery; high-performance, after-market automotive
transmissions and ring/pinion sets; and marine transmissions for luxury
inboard powered craft.
Effective March 26, 1997, the Company acquired 100% of the stock of Marathon
Electric Manufacturing Corporation. Marathon Electric now comprises the
Company's Electrical Group. The Electrical Group produces and markets AC
electric motors ranging in size from 1/12 horsepower to over 500 horsepower
and electric generators ranging in size from 5 kilowatts through 2300
kilowatts. The Group is currently developing larger motors to 800 horsepower
and larger generators to 4,000 kilowatts, and plans to commence shipments in
the second and third quarters of 1999, respectively. The Group's products
are also sold to distributors, original equipment manufacturers and end users
across many industry segments.
Typical applications for the Company s electrical products include: 1) for
electric motors: air movement such as heating, ventilating, air conditioning
and compressors; fluid movement such as pumping; woodworking; commercial
laundry; process industries; variable frequency drives; and floor care; and
2) for electric generators: prime and standby power applications including
buildings such as telecommunication, commercial, industrial, hospital and
school; marine; agriculture; windpower; military; and transport refrigeration.
Regal-Beloit believes its consistent ability to provide products on a shorter
delivery schedule than other manufacturers gives it a competitive selling
advantage and that its extensive use of modern, up-to-date equipment which
is best suited for the job, along with its continued product redesign and
effective plant layout, often gives it a competitive cost advantage in its
product offering.
Marketing and Sales
- -------------------
The Company's products are sold to distributors, original equipment
manufacturers and end users. Both the Mechanical Group and the Electrical
Group have their own organization of field sales employees and manufacturers
representatives.
Export sales accounted for approximately 6% of the Company's sales in 1998,
7% in 1997 and 3% in 1996. Additionally, 3%, 4%, and 7% of Company sales
were manufactured and sold outside the United States in 1998, 1997, and 1996,
respectively. No material part of the Company's business is dependent upon
a single customer. In fiscal 1998, 1997, and 1996, no single customer
accounted for as much as 3% of Company sales. Although the Company's sales
are predominantly not seasonal, they tend to vary with general economic
conditions and with the rate of industrial production, and are affected by
business climates in the many markets in which the Company sells. However,
because the Company's products are sold to many different markets, the
effects of weaker markets are frequently offset by strengths in other markets.
Working capital requirements to properly serve the Company's customers are
generally typical of capital goods manufacturers. Accounts receivable and
inventory are generally not seasonal or at unusual levels by industry
standards.
Competition
- -----------
Major domestic competitors in the mechanical motion control equipment industry
include Emerson Electric, Reliance Electric, Winsmith, Falk, and Boston Gear.
Major foreign competitors would include SEW Eurodrive, Flender, Sumitomo and
Zahnrad Fabrik. Major domestic competitors for the Electrical Group include
Baldor Electric, Emerson, Reliance, Leeson, General Electric, Cummins,
and Magnetek. Major foreign competitors include Siemens, Toshiba, Weg,
Leroy Somer, and ABB.
Over the past several years, niche product market opportunities have become
more prevalent due to changing market conditions. The Mechanical Group's
markets have also been impacted by decisions by larger manufacturers not to
compete in lower volume or specialized markets. Many captive producers have
chosen, for economic reasons, to outsource their requirements to specialized
manufacturers like Regal-Beloit's Mechanical Group, who can produce more cost
effectively.
The Company has capitalized on this competitive climate by making acquisitions
and increasing its manufacturing efficiencies. Some of these acquisitions
have created new opportunities for the Company because the Company is now in
new markets in which it was not previously involved. The Company has also
continued to upgrade its manufacturing equipment and processes, including
increasing its use of computer aided manufacturing systems and redesigning
products to take full advantage of the more productive equipment along with
redoing plant layout to improve product flow. In practice, the Company's
operating units have sought out specific niche markets concentrating on a
wide diversity of customers and applications. Because of this approach, the
Company is often not the largest supplier in any specific market. The Company
believes it competes primarily on the basis of the promptness of delivery,
price and quality.
For further segment information required by Item 101 of Regulation S-K,
reference is made to Note 11 of Notes to Consolidated Financial Statements
on page 14 of the Annual Report to Shareholders for the year ended
December 31, 1998, and such information is incorporated herein by reference.
Manufacturing
- -------------
Each of the Company's operating units conducts its manufacturing operations
independently in one or more facilities. The Company regularly invests in
high quality machinery and equipment and other improvements to and
maintenance of its facilities. These capital expenditures typically meet
4
or exceed the Company's depreciation levels, as the Company believes that
such investments are essential to its long-term success, although in 1998
expenditures were held below depreciation as the capital goods economy
slowed.
The manufacturing operations of both the Mechanical Group and Electrical
Group are highly integrated. Although raw materials and selected parts
such as bearings and seals are purchased, this vertical integration permits
the Company to produce most of its products component parts when needed.
The Company believes this results in lower production costs, greater
manufacturing flexibility and higher product quality, as well as reducing
the Company's reliance on outside suppliers.
Base materials for the Company's products consist primarily of: 1) steel in
various types and sizes, bearings and weldments, 2) copper magnet wire and
3) castings made of grey iron or aluminum. The Company purchases its raw
materials from many suppliers and is not dependent on any single supplier
for any of its base materials.
Backlog
- -------
As of December 31, 1998, the amount of the Company's Mechanical Group
backlog was approximately $40,300,000 compared to approximately $51,310,000
on December 31, 1997. The Electrical Group backlog as of December 31, 1998
was $25,300,000 versus $31,700,000 on December 31, 1997. Average delivery
time for orders of the Company's mechanical products (except for large,
specially designed products) varies from three days to two months. The
Company believes that virtually all of its backlog is shippable in 1999.
The Company's business units have historically shipped the majority of its
products in the month the order is received. Accordingly, since total
backlog is less than 15% of the Company's annual sales, the Company believes
that backlog is not a reliable indicator of the Company's future sales.
Patents, Trademarks and Licenses
- --------------------------------
The Company owns a number of United States patents and foreign patents
relating to its businesses. While the Company believes that its patents
provide certain competitive advantages, the Company does not consider any one
patent or group thereof essential to the business of either of its Groups or
the Company as a whole. Regal-Beloit utilizes various registered and
unregistered trademarks and the Company believes these trademarks are
significant in the marketing of most of its products. However, the Company
believes the successful manufacture and sale of its products generally
depends more upon its technological, manufacturing and marketing skills.
In addition, the Company believes its engineering, test and development
capabilities are significant factors in the success of its business.
Employees
- ---------
As of December 31, 1998, the Company employed approximately 4,780 persons,
of which approximately 27% are covered by collective bargaining agreements.
The Company considers its employee relations to be very good.
Environmental Matters
- ---------------------
The Company is subject to Federal, State and local environmental regulations.
The Company is currently involved with environmental proceedings related to
certain of its facilities. Based on available information, it is believed
that the outcome of these proceedings and future known environmental
compliance costs will not have a material adverse effect on the Company's
financial position or results of operations.
5
ITEM 2. Properties
- -------------------
The Company's Mechanical Group currently operates 21 manufacturing and
service/distribution facilities. Four are located in Illinois; two each are
located in Indiana, South Carolina, South Dakota and Wisconsin; and one each
are located in California, Massachusetts, New York, North Carolina,
Pennsylvania, Texas, Newbury (England), Neu Anspach (Germany) and Legnano
(Italy). The Mechanical Group s present operating facilities contain a total
of approximately 1,590,000 square feet of space of which approximately 46,700
square feet are leased.
The Electrical Group currently operates 12 manufacturing and warehousing
facilities. Three are located in Missouri, two each in Ohio and Texas and
one each in Indiana, Pennsylvania, Wisconsin, Singapore, and Market Overton
(England). The Electrical Group's present operating facilities contain a
total of approximately 1,010,000 square feet of space of which approximately
130,000 square feet are leased.
The Company has its principal offices in Beloit, Wisconsin in an owned 24,000
square foot office building. The Company believes its equipment and
facilities are well maintained and adequate for its present needs.
ITEM 3. Legal Proceedings
- --------------------------
The Company is not involved in any material legal proceedings.
ITEM 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
There were no matters submitted to a vote of security holders during the
quarter ended December 31, 1998.
PART II
ITEM 5. Market for the Registrant's Common Equity and
- ------------------------------------------------------
Related Shareholder Matters
- ---------------------------
Certain information required by Item 201 of Regulation S-K is set forth on
page 4 and the inside back cover of the Annual Report to Shareholders for the
year ended December 31, 1998, and such information is incorporated herein by
reference.
ITEM 6. Selected Financial Data
- --------------------------------
Information required by Item 301 of Regulation S-K is set forth on page 4 of
the Annual Report to Shareholders for the year ended December 31, 1998, and
such information is incorporated herein by reference.
6
ITEM 7. Management's Discussion and Analysis of Financial Condition
- --------------------------------------------------------------------
and Results of Operations
- -------------------------
Information required by Item 303 of Regulation S-K is set forth on pages 5
and 6 of the Annual Report to Shareholders for the year ended December 31,
1998, and such information is incorporated herein by reference.
ITEM 8. Financial Statements and Supplementary Data
- ----------------------------------------------------
In the Annual Report to Shareholders for the year ended December 31, 1998,
there are set forth on pages 7 through 15, financial statements meeting the
requirements of Regulation S-X and information specified by Item 302 of
Regulation S-K and such financial statements are incorporated herein by
reference.
ITEM 9. Changes in and Disagreements with Accountants on Accounting
- --------------------------------------------------------------------
and Financial Disclosure
- ------------------------
The Company has had no disagreements with its accountants subject to
disclosure by Item 304 of Regulation S-K nor has it had a change of
accountants within the last two fiscal years.
PART III
ITEM 10. Directors and Executive Officers of the Registrant
- ------------------------------------------------------------
Information required by Item 401 of Regulation S-K is set forth on pages 3
through 5 and 7 of the definitive proxy statement for the Annual Meeting of
Shareholders to be held on April 21, 1999, a copy of which has been filed
within 120 days following the close of the fiscal year, and such information
is incorporated herein by reference.
The names, ages, and positions of the executive officers of the Company as
of March 5, 1999, are listed below along with their business experience
during the past five years. Officers are elected annually by the Board
of Directors at the Meeting of Directors immediately following the Annual
Meeting of Shareholders in April. There are no family relationships among
these officers, nor any arrangements of understanding between any officer
and any other persons pursuant to which the officer was selected.
7
Name, Age and Position Business Experience During the Past 5 Years
- ---------------------- -------------------------------------------
James L. Packard, 56 - Elected Chairman in 1986; Chief Executive
Chairman, President and Officer since 1984; President since 1980.
Chief Executive Officer
Henry W. Knueppel, 50 - Elected Executive Vice President in 1987,
Executive Vice President prior to which he was Vice President-
Operations since 1985. Appointed to the
additional position of President, Marathon
Electric Manufacturing Corporation in
September, 1997.
Kenneth F. Kaplan, 53 - Joined Company in September, 1996. Elected
Vice President, Chief Vice President, Chief Financial Officer in
Financial Officer and October, 1996 and Secretary in April, 1997.
Secretary Previously, he was employed by Gehl
Company, West Bend, Wisconsin, as Vice
President -Finance and Treasurer from 1987.
ITEM 11. Executive Compensation
- --------------------------------
Information required by Item 402 of Regulation S-K is set forth on pages 8
through 14 of the definitive proxy statement for the Annual Meeting of
Shareholders to be held on April 21, 1999, a copy of which has been filed
within 120 days following the close of the fiscal year, and such information
is incorporated herein by reference.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------
Information required pursuant to Item 403 of Regulation S-K is set forth on
pages 3 through 5 and 7 of the definitive proxy statement for the Annual
Meeting of Shareholders to be held on April 21, 1999, a copy of which has
been filed within 120 days following the close of the fiscal year, and such
information is incorporated herein by reference.
ITEM 13. Certain Relationships and Related Transactions
- --------------------------------------------------------
Information required pursuant to Item 404 of Regulation S-K is set forth on
pages 6 and 9 of the definitive proxy statement for the Annual Meeting of
Shareholders to be held on April 21, 1999, a copy of which has been filed
within 120 days following the close of the fiscal year, and such information
is incorporated herein by reference.
8
PART IV
ITEM 14. Financial Statements, Financial Statement Schedule, Exhibits
- ----------------------------------------------------------------------
and Reports on Form 8-K
- -----------------------
(a) 1. and 2. Financial Statements and Financial Statement Schedule
----------------------------------------------------------------
Reference is made to the separate index to the Company s Consolidated
Financial Statements and Schedule contained on Page 11 hereof.
3. Exhibits
------------
Reference is made to the separate exhibit index contained on Pages 14-15
hereof.
(b) Reports on Form 8-K
-------------------
There were no reports filed on Form 8-K by the Company during the quarter
ended December 31, 1998.
9
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
REGAL-BELOIT CORPORATION
By: /s/ Kenneth F. Kaplan
---------------------
Kenneth F. Kaplan
Vice President, Chief Financial Officer
and Secretary
March 5, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
/s/ James L. Packard Chairman, President, Chief March 5, 1999
- -------------------- Executive Officer and Director
James L. Packard
/s/ Kenneth F. Kaplan Vice President, Chief Financial March 5, 1999
- --------------------- Officer and Secretary
Kenneth F. Kaplan (Principal Accounting
& Financial Officer)
/s/ Henry W. Knueppel Executive Vice President March 5, 1999
- --------------------- and Director
Henry W. Knueppel
/s/ John A. McKay Director March 5, 1999
- ---------------------
John A. McKay
/s/ John M. Eldred Director March 5, 1999
- ---------------------
John M. Eldred
/s/ J. Reed Coleman Director March 5, 1999
- ---------------------
J. Reed Coleman
/s/ Frank Bauchiero Director March 5, 1999
- ---------------------
Frank Bauchiero
10
REGAL-BELOIT CORPORATION
Index to Financial Statements
and Financial Statement Schedule
Page(s) In
Annual Report *
---------------
The following documents are incorporated by reference
as part of this report:
(1) Financial Statements:
Consolidated Balance Sheets at December 31, 1998 and 1997 7
Consolidated Statements of Income for the three years ended
December 31, 1998 8
Consolidated Statements of Shareholders Investment for
the three years ended December 31, 1998 8
Consolidated Statements of Cash Flows for the three years
ended December 31, 1998 9
Notes to Consolidated Financial Statements 10 - 14
Report of Independent Public Accountants 15
* Incorporated by reference from the indicated pages of the
Regal-Beloit Corporation 1998 Annual Report to Shareholders
Page In
Form 10-K
---------
(2) Financial Statement Schedule:
Report of Independent Public Accountants on Financial
Statement Schedule 12
Consent of Independent Public Accountants 12
For the three years ended December 31, 1998,
Schedule II - Valuation and Qualifying Accounts 13
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
11
Report of Independent Public Accountants
To Regal-Beloit Corporation:
We have audited, in accordance with generally accepted auditing standards,
the financial statements included in Regal-Beloit Corporation's Annual
Report to Shareholders, incorporated by reference in this Form 10-K, and
have issued our report thereon dated January 27, 1999. Our audit was made
for the purpose of forming an opinion on those statements taken as a whole.
The schedule listed in the index to financial statements is the responsibility
of the Company's management and is presented for purposes of complying with
the Securities and Exchange Commission s rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in
our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
/s/ ARTHUR ANDERSEN LLP
-----------------------
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
January 27, 1999
Exhibit 23
Consent of Independent Public Accountants
To Regal-Beloit Corporation:
As independent public accountants, we hereby consent to the incorporation of
our reports, included and incorporated by reference in this Form 10-K, into
Regal-Beloit Corporation's previously filed Registration Statements, File
Nos. 33-25480, 33-25233, 33-82076 and 33-8934.
/s/ ARTHUR ANDERSEN LLP
------------------------
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
March 5, 1999
13
SCHEDULE II
REGAL-BELOIT CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
Allowance for Doubtful Accounts:
(In Thousands Of Dollars)
--------------------------------------------------------------
Balance Provision Write-offs, Additions, Balance
Beginning (Credits) Net of Related to End
of Year for Losses Recoveries Acquisition of Year
--------- ---------- ---------- ----------- ---------
Year Ended December 31, 1998 $ 2,620 $ (213) $ (556) $ -0- $ 1,851
Year Ended December 31, 1997 $ 1,190 $ 592 $ (622) $ 1,460 $ 2,620
Year Ended December 31, 1996 $ 1,140 $ 125 $ (75) $ -0- $ 1,190
13
Exhibits Index
The following exhibits are required to be filed by Item 601 of Regulation S-K.
Exhibit
Number Description Incorporated by Reference Herein
- ------- ----------- --------------------------------
2 Agreement and Plan of Merger by Filed as Exhibit A to Annual Meeting
and between the Registrant and Proxy Statement of
Regal-Beloit Corporation, dated as Regal-Beloit Corporation
of April 18, 1994 dated March 11, 1994
2.1 Agreement and Plan of Merger Filed as Exhibit 2.1 on Regal-Beloit
among the Registrant, Regal- Corporation's Form 8-K dated
Beloit Acquisition Corp., and April 10, 1997
Marathon Electric Manufacturing
Corporation dated as of February
26, 1997, as amended and
restated March 17, 1997 and
March 26, 1997
2.2 Credit Agreement among Regis- Filed as Exhibit 2.2 on Regal-Beloit
trant, Bank of America Illinois, M&I Corporation's Form 8-K dated
Marshall & Illsley Bank and the April 10, 1997
Other Financial Institutions Party
hereto dated as of March 26, 1997;
Schedule 2.01; Guaranty Agree-
ments dated March 26, 1997; and
Promissory Notes dated March 26,
1997.
2.3 Amended and Restated Credit Filed as Exhibit 2.3 to Regal-Beloit
Agreement Dated as of May 30, Corporation's Quarterly Report
1997 among Registrant, Bank of on Form 10-Q dated August 8,
America Illinois, as Documentation 1997
Agent, M&I Marshall & Illsley Bank,
as Administrative Agent and Letter
of Credit Issuing Bank, Firstar Bank
Milwaukee, N.A., Harris Trust and
Savings Bank and The Northern
Trust Company, as Co-Agents, and
The Other Financial Institutions
Party Hereto Arranged by
Bancamerica Securities, Inc. as
Syndication Agent; Disclosure
Schedules and Attached Exhibits;
and Promissory Note
3.1 Articles of Incorporation of the Filed as Exhibit B to the 1994 Proxy
Registrant Statement
3.2 Bylaws of the Registrant Filed as Exhibit C to the 1994 Proxy
Statement
14
Exhibit
Number Description Incorporated by Reference Herein
- ------- ----------- --------------------------------
4 Articles of Incorporation and Bylaws Filed as Exhibits 3.1 and 3.2 hereto
of the Registrant
10.1 Short-Term Incentive Compensation Filed as Exhibit 10.1 to Regal-Beloit
Plan, as amended Corporation's Annual Report
on Form 10-K dated
March 29, 1993
10.2 1982 Incentive Stock Option Plan Filed as Exhibit 10.4 to 1986 S-1
10.3 1987 Stock Option Plan Filed as Exhibit 10.3 to 1988 S-1
10.4 1991 Flexible Stock Incentive Plan Filed as Exhibit 10.4 to Regal-Beloit
Corporation's Annual Report
on Form 10-K dated
March 29, 1993 (1994 S-8
Registration No. 33-82076)
10.5 Change of Control Agreement Filed as Exhibit 10.5 to Regal-Beloit
Corporation's Annual Report
on Form 10-K dated
March 6, 1998
10.5 (a) Addendum to Change of Control Regal-Beloit Corporation's Annual Report
Agreement effective as of on Form 10-K dated March 5, 1999.
April 21, 1998 (Filed herewith)
10.6 Disability Insurance Agreement Filed as Exhibit 10.6 to Regal-Beloit
between Regal-Beloit Corporation Corporation's Annual Report
and Continental Casualty Company on Form 10-K dated
March 29, 1993
10.7 1998 Stock Option Plan Regal-Beloit Corporation's Annual Report
on Form 10-K dated March 5, 1999.
(Filed herewith)
13 Annual Report to Shareholders Regal-Beloit Corporation's Annual Report
for the year ended December 31, on Form 10-K dated March 5, 1999.
1998 (Filed herewith)
21 Subsidiaries of Regal-Beloit Regal-Beloit Corporation's Annual Report
Corporation on Form 10-K dated March 5, 1999.
(Filed herewith)
23 Consent of Independent Public Regal-Beloit Corporation's Annual Report
Accountants on Form 10-K dated March 5, 1999.
(Filed herewith)
99 Annual Meeting Proxy Statement of Regal-Beloit Corporation's Proxy
Regal-Beloit Corporation dated Statement on Schedule 14A dated
March 12, 1999 March 12, 1999, (Filed herewith)
15
Exhibit 10.5(a)
ADDENDUM TO
CHANGE OF CONTROL AGREEMENT
The following revisions shall be deemed to be a part of the change of Control
Agreement effective as of April 21, 1998:
1. Section 2(a) Severance Benefits. This will be replaced by the following:
-------------------------------
Within fifteen (15) business days after the Termination Date,
Regal-Beloit shall pay Executive a lump sum amount, in
cash, equal to three (3) times the sum of:
(i) Executive's Base Salary, as defined in Section 1(a);
(ii) Executive's Annual Bonus, as defined in Section 1(b); and
(iii) Executive's Fringe Benefits, as defined in Section 1(i).
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be
executed and delivered as of April 21, 1998.
REGAL-BELOIT CORPORATION
By: /s/ John McKay
----------------------------
John McKay, Director and
Chairman of Compensation Committee
By:____________________________________
Named Executive Officer
Exhibit 10.7
REGAL-BELOIT CORPORATION
1998 STOCK OPTION PLAN
1. PURPOSES. The purpose of the 1998 Stock Option Plan (the "1998 Plan") is
to provide, on a basis competitive with industry practices, long-term
incentives through stock grants (the "Grants") to Directors, Officers,
key executives and other management employees of Regal-Beloit
Corporation and its subsidiaries (the "Company"), in order to assist the
Company in attracting and retaining experienced and capable Directors,
Officers, key executives and other management employees and to associate
the interest of such persons with those of the Company's Shareholders.
2. EFFECTIVE DATE. The 1998 Plan is effective as of April 21, 1998, subject
to the approval by the holders of at least a majority of the outstanding
shares of the Company's Common Stock, present, or represented, and
entitled to vote at the 1998 Annual Meeting of Shareholders. Grants may
be made under the 1998 Plan on and after its effective date.
3. SHARES OF STOCK SUBJECT TO THE 1998 PLAN. The shares that may be
delivered or purchased or used for reference purposes under the 1998
Plan shall not exceed an aggregate of 1,000,000 shares of the Company's
Common Stock, $0.01 par value, subject to adjustment as provided in
Section 19. The Committee may make any other type of Grant which it
shall determine is consistent with the objectives and limitations of the
1998 Plan.
4. ADMINISTRATION OF THE 1998 PLAN. The 1998 Plan shall be administered by
the Board of Directors of the Company or a Committee comprised of two or
more Non-Employee Directors, (hereinafter collectively called the
"Committee"). The Committee shall have all the powers vested in it by
the terms of the 1998 Plan, such powers to include exclusive authority
(within the limits described herein) to select the eligible Participants
(as hereinafter defined) to receive Grants under the 1998 Plan, to
determine the type, size and terms of Grants to be made to each
Participant selected, to determine the time when Grants will be granted
and to establish objectives and conditions, if any, relating to such
Grants. The Committee shall have full power and authority to administer
and interpret the 1998 Plan and to adopt such rules, regulations,
agreements, guidelines and instruments for the administration of the
1998 Plan and to make all other determinations which the Committee deems
necessary or advisable. The Committee's interpretation of the 1998 Plan
and all actions taken and determinations made by the Committee pursuant
to the powers vested in it hereunder, shall be conclusive and binding on
all parties concerned, including the Company, its Shareholders and
Participants in the 1998 Plan.
In administering the 1998 Plan, the term "Committee" shall mean
exclusively the Board of Directors where appropriate when interpreting
the 1998 Plan as it pertains to Non-Employee Directors. "Non Employee
Directors" means those Outside Directors who are not officers or employees
of the Company.
5. ELIGIBLE PARTICIPANTS. The persons eligible to participate in the 1998
Plan shall be all Directors, Officers, key executives and other management
employees of the Company who are responsible for or contribute to the
management, growth and/or profitability of the business of the Company
(the "Participants").
6. NON-EMPLOYEE DIRECTOR GRANTS.
a. (i) The 1998 Plan shall supersede the 1991 Flexible Stock Incentive
Plan, as amended, as to Non-Employee Director grants only, effective
April 21 1998.
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(ii) Under the 1998 Plan, each individual Non-Employee Director will
be annually granted stock options, Stock Appreciation Rights or any
combination thereof of shares of Common Stock at 100 percent (100%)
of the fair market value as of the date corresponding to the Annual
Shareholders' Meeting. For the years 1998 and 1999, each individual
Non-Employee Director shall be granted 800 shares of Common Stock.
For the years 2000 and 2001, each individual Grant will be increased
to 900 shares. For the years 2002 through 2008, each individual Grant
will be increased to 1,000 shares. However, the first Grant to each
Non-Employee Director who is initially elected as a Non-Employee
Director or is initially appointed subsequent to the date of the
Annual Shareholders' Meeting of the Company and prior to the date of
the next succeeding Annual Shareholders' Meeting, shall be three (3)
times the number of shares granted to each individual Non-Employee
Director during such applicable year at 100 percent (100%) of the fair
market value at the closing sale price on the date that he or she
becomes a director of the Company.
b. The right to exercise any Grant given to Non-Employee Directors shall
vest immediately upon Grant. Unexercised Grants to Non-Employee
Directors shall terminate the earlier of ten (10) years after the date
of Grant or ninety (90) days after the Non-Employee Director ceases to
be a member of the Company's Board of Directors, unless terminated for
Cause as provided in Section 18.
c. In all other respects, Grants to a Non-Employee Director under the
Plan shall be controlled by the terms and conditions of the 1998 Plan
and the rules, regulations, agreements, guidelines, instruments and
interpretations issued by the Committee, except where inconsistent
with the limitations set forth in this Section 6 of the 1998 Plan.
7. GRANTS.
a. Types. Grants under the 1998 Plan shall be made with reference to
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shares of the Company's Common Stock and may include, but need not be
limited to Incentive Stock Options ("ISO"), Nonqualified Stock Options
("NSO"), Restricted Stock, Deferred Stock, Stock Appreciation Rights
or any combination thereof.
b. Vesting
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(i) The Committee, in its sole discretion, shall determine any vesting
(i.e., exercisability) requirements applicable to each Grant.
(ii) The Committee may also determine that all or a portion of a
payment of Grants other than ISOs and NSOs to a Participant under the
1998 Plan, whether it is to be made in cash, shares of the Company's
Common Stock or a combination thereof, shall be vested at such times
and upon such terms as may be selected by it in its sole discretion.
c. Price. The option price per share of each option granted shall be
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established by the Committee except that the option price shall not be
less than 100 percent (100%) of the fair market value of the stock at
the closing sale price on the date the option is granted. If there is
no sale on the date of Grant, the fair market value of the stock shall
be the closing sale price of the stock on the preceding business day
on which the Company's Common Stock was traded.
d. Performance Goals. The Committee may, but need not, establish
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performance goals to be achieved within such performance periods as
may be selected by it in its sole discretion, using such measures of
the performance of the Company as it may select.
e. Guidelines. The Committee may adopt from time to time written policies
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implementing the 1998 Plan. Such policies may include, but need not be
limited to the type, size and term of Grants to be made to Participants
and the conditions for payment of such Grants.
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f. Maximum Grants. Participants may be granted multiple Grants under the
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1998 Plan. However, no one Participant shall be granted a Grant if
immediately after such Grant he or she is the owner or would be deemed
to be the owner of more than 10 percent (10%) of the total combined
voting power of all classes of stock of the Company, unless the option
price per share is at least 110 percent (110%) of the fair market value
and such Grant by its terms is not exercisable after the expiration of
five (5) years from the date such Grant is granted.
8. PAYMENT OF GRANTS.
The Committee shall determine the extent to which Grants other than ISOs
and NSOs shall be payable in cash, shares of the Company's Common Stock
or any combination thereof to a Participant. The Committee may
determine that all or a portion of a payment to a Participant under the
1998 Plan, whether it is to be made in cash, shares of the Company's
Common Stock or a combination thereof shall be deferred. Deferrals
shall be for such periods and upon such terms as the Committee may
determine in its sole discretion.
9. EXERCISE OF ISOs AND NSOS. The price for shares may be paid in any
combination of cash, cashier's or certified check, personal check
acceptable to the Company, or shares of the Company's Common Stock,
including previously owned Common Stock.
10. RIGHTS OF SHAREHOLDERS. A Participant under the 1998 Plan shall have no
rights as a holder of the Company's Common Stock with respect to Grants
hereunder, unless and until certificates for shares of such stock are
issued to the Participant.
11. ASSIGNMENT OR TRANSFER. Except as otherwise provided by the Committee,
Grants under the 1998 Plan or any rights or interests therein shall not
be assignable or transferable except by will or the laws of descent and
distribution, or exercisable by anyone other than the Participant during
his or her lifetime.
12. AGREEMENTS. All Grants granted under the 1998 Plan shall be evidenced by
agreements in such form and containing such terms and conditions (not
inconsistent with the 1998 Plan) as the Committee shall adopt.
13. COMPLIANCE WITH LEGAL REGULATIONS.
a. The Committee may require each person purchasing shares pursuant to a
stock option or other Grant under the 1998 Plan to represent to and
agree with the Company in writing that the optionee or Participant is
acquiring the shares without a view to distribution thereof. The
certificates for such shares may include any legend which the Committee
deems appropriate to reflect any restrictions on transfer.
b. All certificates for shares of stock or other securities delivered
under the 1998 Plan shall be subject to such stock transfer orders and
other restrictions as the Committee may deem advisable under the rules,
regulations and other requirements of the Securities and Exchange
Commission, any stock exchange upon which the stock is then listed,
and any applicable federal or state securities law, and the Committee
may cause a legend or legends to be put on any such certificate to make
appropriate reference to such restrictions.
14. WITHHOLDING TAXES.
a. The Company shall have the right to deduct from all Grants hereunder
paid in cash any federal, state, local or foreign taxes required by
law to be withheld with respect to such Grants.
b. With respect to Grants paid by shares of the Company's Common Stock,
the Company shall also have the right to require the payment (through
withholding from the Participant's salary or otherwise) of any of the
taxes referenced above in Section 14a. An appropriate number of
shares of Common Stock may be withheld for such payment. If shares
are used to satisfy tax withholding requirements, the value of such
shares shall be based on the fair market value of the Common Stock on
the date when the tax withholding is required to be made.
c. The obligation of the Company to make delivery of Grants in cash or the
Company's Common Stock shall be subject to currency or other
restrictions imposed by any government.
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15. NO RIGHTS TO GRANTS. No Participant or other person shall have any right
to receive a Grant under the 1998 Plan. Neither the 1998 Plan nor any
action taken hereunder shall be construed as giving any Participant any
right to be retained in the employ of the Company or any of its
subsidiaries or shall interfere with or restrict in any way the rights of
the Company, which are hereby reserved, to discharge the Participant at
any time for any reason whatsoever, with or without good cause.
16. COST AND EXPENSES. The cost and expense of administering the 1998 Plan
shall be bome by the Company and not charged to any Grant nor to any
Participant receiving a Grant.
17. TERMINATION OR EXPIRATION OF GRANTS. If any Grant under the 1998 Plan
terminates or expires, the shares allocable to the unexercised portion
of the Grant will be available for purposes of the 1998 Plan. In certain
circumstances where a Participant uses stock to exercise a Grant, only
the net shares issued to the Participant are counted against the number
of shares issued under the 1998 Plan. Certain stock issuances which are
later forfeited by the Participant do not count as grants under the 1998
Plan.
18. TERMINATION OF EMPLOYMENT.
a. (i) In the event a Participant's employment with the Company is
terminated, whether voluntarily or otherwise, but not by reason of
death, disability or retirement, each prior unexpired or uncancelled
Grant, to the extent exercisable as of the date of such termination of
employment or service, shall terminate thirty (30) days after the
Participant's date of termination or as determined by the Committee.
(ii) Notwithstanding the foregoing, if a Participant's employment or
service as a Non-Employee Director of the Company is terminated for
Cause (as defined below), each unexpired or uncancelled Grant, to the
extent not previously exercised by him or her, shall terminate
immediately.
b. The term "Cause" is defined as: (i) the commission by a Participant of
any act or omission that would constitute a felony under federal,
state or equivalent foreign law, (ii) fraud, dishonesty, theft,
embezzlement, disclosure of trade secrets or confidential information
or other acts or omissions that result in a breach of any fiduciary
duty to the Company.
c. In the event a Participant terminates his or her employment with the
Company as a result of death, disability, or retirement, the Committee
shall have the discretion to extend the period of exercisability of
each previously granted and unexpired or uncancelled Grant in
accordance with applicable statutes, rules and regulations and to
preserve ISO treatment, where necessary, unless the termination date
specified in the Grant occurs earlier. The Committee shall also have
discretion to determine whether such Grant(s) shall become immediately
exercisable in full.
19. DILUTION AND OTHER ADJUSTMENTS. In the event of any change in the
outstanding shares of the Company's Common Stock by reason of any split,
stock dividend, recapitalization, merger, consolidation, combination or
exchange of shares or other similar corporate change, such equitable
adjustments shall be made in the 1998 Plan and the Grants thereunder as
the Committee determines are necessary or appropriate. If necessary, the
Committee may make any adjustments in the maximum number of shares
referred to in Section 3, in the number and option price of shares
subject to outstanding options, in the number and purchase price of
shares subject to outstanding stock purchase rights, and in the number of
shares subject to other Grants granted under the 1998 Plan. Such
adjustment shall be conclusive and binding for all purposes of the
1998 Plan.
20. AMENDMENTS AND TERMINATIONS.
a. Amendments. The Committee may terminate or amend the 1998 Plan in
whole or in part at any time, but no such action shall adversely
affect any rights or obligations with respect to any Grants theretofore
made under the 1998 Plan nor change the limitations as to Non-Employee
Directors as set forth in Section 6 hereof.
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Unless the holders of at least a majority of the outstanding shares of
the Common Stock, present or represented, and entitled to vote at a
meeting of Shareholders shall have first approved thereof, no amendment
of the 1998 Plan shall be effective which would (i) increase the
maximum number of shares referred to in Section 3 of the 1998 Plan;
(ii) extend the maximum period during which ISO Grants may be granted
under the 1998 Plan, or (iii) reduce the price per share at which ISO
Options may be offered under the 1998 Plan below 100 percent (100%) of
the fair market value on the date of Grant. For purposes of this
Section 20a, subject to adjustment as provided in Section 19, any (1)
cancellation and reissuance or (2) repricing of any Grants made under
the 1998 Plan at a new option price as provided in the 1998 Plan's
rules relating to stock options and Stock Appreciation Rights shall
not constitute an amendment of this 1998 Plan.
With the consent of the Participant affected, the Committee or the
Board of Directors, where applicable, may amend outstanding agreements
evidencing Grants under the 1998 Plan in a manner not inconsistent
with the terms of the 1998 Plan.
b. Termination. Unless the 1998 Plan shall heretofore have been
terminated as above provided, the 1998 Plan shall terminate on and no
Grants shall be granted after April 20, 2008. Any Grants outstanding
under the 1998 Plan at the time of the termination of the 1998 Plan
shall remain in effect until such Grant shall have been exercised or
shall have expired according to its terms.
21. GOVERNING LAWS. The validity and construction of the 1998 Plan and any
agreements entered into thereunder shall be governed by the laws of the
State of Wisconsin.
22. COMPLIANCE WITH APPLICABLE LAWS. The Committee will comply with all
applicable laws, rules and regulations including the Internal Revenue
Code of 1986, as amended (the "Code") and the Securities Exchange Act of
1934, as amended (the "Exchange Act") or any successor provisions or other
regulatory requirements. To the extent required, the 1998 Plan is
designed to comply with Section 162(m) of the Code to qualify future
performance based compensation and to qualify under Section 16 of the
Exchange Act. To the extent any provision of the 1998 Plan or action by
the Committee fails to so comply, it shall be deemed null and void to
the extent permitted by law and deemed advisable by the Committee.
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