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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended June 30, 1996
COMMISSION FILE NO. 1-4474
--------------------------
OAK INDUSTRIES INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 36-1569000
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
1000 WINTER STREET
WALTHAM, MASSACHUSETTS 02154
(Address of principal executive offices)
(617) 890-0400
(Registrant's telephone number)
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 number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
As of June 30, 1996, the Company had outstanding 18,103,044 shares of
Common Stock, $0.01 par value per share.
PART I. FINANCIAL INFORMATION
ITEM I. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
(Unaudited)
--------------------- ---------------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents....................... $ 15,031 $ 16,942
Receivables, less reserve...................... 49,721 40,631
Inventories:
Raw materials............................... $ 13,151 $ 12,308
Work in process............................. 31,053 30,451
Finished goods.............................. 11,910 56,114 9,569 52,328
--------- ----------
Deferred income taxes.......................... 17,532 19,900
Other current assets........................... 4,273 3,815
--------- ---------
Total current assets..................... 142,671 133,616
Plant and Equipment, at cost...................... 135,807 124,810
Less - Accumulated depreciation................... (75,128) 60,679 (71,242) 53,568
--------- ----------
Deferred Income Taxes............................. 8,348 17,242
Goodwill and Other Intangible Assets, less
accumulated amortization of
$10,952 and $10,945............................ 77,403 79,829
Investments in Affiliates......................... 8,998 20,940
Other Assets...................................... 7,133 7,533
--------- ---------
Total Assets............................. $ 305,232 $ 312,728
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt.............. $ 6,729 $ 14,691
Accounts payable............................... 18,426 15,822
Accrued liabilities............................ 28,924 23,161
--------- ---------
Total current liabilities 54,079 53,674
Other Liabilities................................. 8,520 11,628
Long-term Debt.................................... 50,018 91,570
Minority Interest................................. 41,468 36,643
Stockholders' Equity:
Common stock................................... 181 177
Additional paid-in capital..................... 288,234 282,179
Accumulated deficit............................ (135,485) (161,528)
Other.......................................... (1,783) 151,147 (1,615) 119,213
--------- --------- ---------- ---------
Total Liabilities and Stockholders'
Equity................................ $ 305,232 $ 312,728
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
---------------------- ----------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales.......................................... $ 86,721 $ 66,932 $ 171,348 $ 138,532
Cost of sales...................................... (51,726) (39,961) (102,892) (83,046)
-------- -------- --------- ---------
Gross profit....................................... 34,995 26,971 68,456 55,486
Selling, general and administrative expenses....... (17,195) (12,432) (35,365) (25,282)
-------- -------- --------- ---------
Operating income................................... 17,800 14,539 33,091 30,204
Interest expense................................... (1,281) (1,089) (3,110) (2,599)
Interest income.................................... 124 514 266 975
-------- -------- --------- ---------
Gain on sale of equity investment.................. # # 20,550 #
Equity in net income (loss) of
affiliated companies............................ 69 437 (906) 935
Income from operations before
income taxes and minority interest.............. 16,712 14,401 49,891 29,515
Income taxes....................................... (6,415) (1,166) (19,023) (2,639)
Minority interest in net income of subsidiaries.... (2,675) (2,512) (4,825) (5,338)
-------- -------- ---------- ----------
Net income......................................... $ 7,622 $ 10,723 $ 26,043 $ 21,538
======== ======== ========== ==========
Income per common share............................ $ 0.41 $ 0.58 $ 1.41 $ 1.16
======== ======== ========== ==========
Weighted average shares............................ 18,622 18,558 18,480 18,533
======== ======== ========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
----------------------
1996 1995
-------- --------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS FROM:
Operating Activities:
Net income........................................... $ 26,043 $ 21,538
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation and amortization.................. 6,520 5,672
Change in minority interest.................... 4,825 5,338
Gain on sale of equity investment.............. (20,550) #
Change in assets and liabilities............... 6,835 (10,196)
Other.......................................... 460 (901)
-------- --------
Net cash provided by operations......................... 24,133 21,451
-------- --------
Investing Activities:
Capital expenditures................................ (12,188) (6,607)
Proceeds from the sale of equity investment......... 29,400 #
Other............................................... 367 61
-------- --------
Net cash provided by (used in) investing activities.... 17,579 (6,546)
-------- --------
Financing Activities:
Repayment of borrowings............................. (49,514) (14,162)
Other............................................... 6,414 163
-------- --------
Net cash used in financing activities.................. (43,100) (13,999)
-------- --------
Effect of exchange rates............................... (523) 864
-------- --------
Cash and Cash Equivalents:
Net change during the period........................ (1,911) 1,770
Balance, beginning of period........................ 16,942 37,648
-------- --------
Balance, end of period.............................. $ 15,031 $ 39,418
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
OAK INDUSTRIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The condensed consolidated financial statements have been prepared by
Oak Industries Inc. (the "Company") without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. The Company believes that the disclosures made in this report
are adequate to make the information presented not misleading. It is
suggested that these condensed financial statements be read in conjunction
with the financial statements and the notes thereto included in the
Company's latest annual report on Form 10-K. In the opinion of the
Company, all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the financial position of Oak Industries Inc.
and subsidiaries as of June 30, 1996 and December 31, 1995, and the results
of their operations for the three and six month periods ending June 30,
1996 and 1995 and cash flows for the six month periods ending June 30, 1996
and 1995 have been included. The results of operations for such interim
periods are not necessarily indicative of the results for the full year.
2. Interest paid on debt for the three months ending June 30, 1996 and
1995 was $1,229,000 and $931,000, respectively, and for the six months
ending June 30, 1996 and 1995 was $3,255,000 and $2,274,000 respectively.
Income taxes, consisting primarily of foreign and state, paid during the
three months ended June 30, 1996 and 1995 were $4,021,000 and $1,507,000,
respectively, and during the six months ended June 30, 1996 and 1995 were
$4,616,000 and $1,837,000, respectively.
3. During the first quarter of 1996, the Company sold its 49% interest in
Video 44 (WSNS-TV Channel 44), a Hispanic television station located in
Chicago, and received net proceeds of $29,400,000. The Company recorded a
pre-tax gain of $20,550,000 from the sale. Proceeds of $29,000,000 were
used to reduce debt.
4. During the first quarter of 1996, the Company recorded a pre-tax
charge of $1,900,000 associated with the write down of certain assets and a
reserve for potential legal and environmental costs.
5. The Company previously reported that it had entered into a definitive
agreement to sell its 45% interest in O/E/N India Ltd. During the first
quarter of 1996, the potential buyer notified the Company that it was
unable to obtain financing for this transaction. As a result, the Company
wrote down the book value of its investment in O/E/N India Ltd. from
$1,218,000 to $468,000. This pre-tax $750,000 charge is included in the
$1,900,000 discussed in Note 4 above. In June 1996, the potential buyer
received partial financing and remitted $858,000 to the Company.
Accordingly, because the Company has not received full payment for its
shares of O/E/N India Ltd., and retains its interest in such shares, the
Company has not recorded this transaction as a sale. The potential buyer
is attempting to arrange financing for the remainder of the purchase price.
The Company is uncertain as to whether the sale of O/E/N India Ltd. will be
completed in 1996.
6. In May 1996, the Company received formal notification from certain
affiliates of Bain Capital, Inc. (collectively, "Bain") of its exercise of
certain rights pursuant to the terms of a Stockholders Agreement dated as
of December 22, 1992 (the "Stockholders Agreement"), to sell Bain's 20%
interest in Connector Holding Company ("Connector"), the parent company of
Gilbert Engineering Co., Inc. ("Gilbert'), to the Company. Bain holds a
17% indirect interest in Gilbert by virtue of its Connector holdings. It
is anticipated that this transaction will be consummated by year end.
7. The Company has engaged an investment banking firm to explore
alternatives with respect to its wholly owned subsidiary Nordco Inc.
("Nordco"). The Company is uncertain as to whether any transaction related
to Nordco will be consummated in 1996.
8. Certain items in the 1995 Consolidated Statement of Operations have
been reclassified to conform with 1996 presentation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Second Quarter Results
Sales for the second quarter of 1996 reached $86.7 million, an increase
of 29.6% over the $66.9 million in the same period of 1995. The 1996
Components Segment sales increased 32.3% over the prior year to $80.6
million primarily due to incremental sales of Lasertron Inc. ("Lasertron"),
purchased in September of 1995, and attributable to continued growth in the
Communications Components business. The Other Segment sales approximated
those of the prior year.
<TABLE>
<CAPTION>
Q2 Q2
1996 1995 % Change
---- ---- --------
<S> <C> <C> <C>
Net Sales ($ millions):
Components....................... $ 80.6 $ 60.9 32.3%
Other............................ 6.1 6.0 1.7%
------ ------
Total......................... $ 86.7 $ 66.9 29.6%
====== ======
</TABLE>
The Company reported net income of $7.6 million in 1996 compared to
$10.7 million in 1995. The second quarter of 1996 provision for income
taxes increased $5.2 million over the second quarter of 1995 principally
due to an increase in the effective tax rate for financial reporting
purposes. The annual effective income tax rate for financial reporting
purposes increased to 38.4% in the second quarter of 1996 from 8.1% in the
corresponding period of the prior year reflecting the provision of a full
U.S. statutory rate beginning in the third quarter of 1995. The Company
had approximately $29.0 million of unused net operating loss carryforwards
for tax return purposes at June 30, 1996 and will, therefore, pay minimal
federal income taxes until these carryforwards are utilized.
Minority interest increased $0.2 million due to higher earnings at
Gilbert Engineering which were partially offset by a higher income tax
provision as Gilbert fully utilized its net operating loss carryforward for
financial reporting purposes.
Pre-tax income before minority interest increased 16.0% to $16.7 million
in the second quarter of 1996 from $14.4 million recorded in the second
quarter of 1995. Operating income increased $3.3 million from second
quarter 1995 results due primarily to incremental profits from higher sales
volume and it was partially offset by increased interest expense ($0.2
million), decreased interest income ($0.4 million) and decreased equity
income ($0.4 million).
Communications Components
Communications Components revenues increased 41.9% in the second quarter
of 1996 over the same period in 1995. Excluding the impact of the
Lasertron, which was purchased in September 1995 and therefore not included
in second quarter 1995 results, Communication Components increased 20.5%
over the second quarter of 1995. Communications Components sales increased
over the prior year's quarter reflecting increased construction of cable
television networks in international markets, upgrades of domestic cable
systems, and expanding applications for products in cellular, paging and
personal communications systems.
Controls Components
The sales of Controls Components increased 14.4% in the second quarter
of 1996 over the same period in 1995, principally as the result of
increased demand for sensing devices combined with modest sales growth of
gas appliance control products.
Gross Profit
The gross profit margin was 40.4% for the second quarter of 1996 as
compared to 40.3% in the second quarter of 1995.
Selling General and Administrative Expenses
Selling, general and administrative expenses increased as a percentage
of sales to 19.8% in the second quarter of 1996 from 18.6% in the second
quarter of 1995 due to an increase in research and development expenditures
related to the acceleration of product prototyping activity for wireless
communications and wired telephony applications. Most of this increase was
attributable to Lasertron, which was acquired in September 1995.
Interest
Interest expense increased to $1.3 million in the second quarter of 1996
from $1.1 million in 1995 due primarily to increased borrowings in
connection with the acquisition of Lasertron in September of 1995.
Interest income decreased to $0.1 million in 1996 from $0.5 in the
second quarter of 1995 as average cash balances decreased. The Company
used approximately $20.0 million of cash in conjunction with its
acquisition of Lasertron in September of 1995.
Equity Income
Equity income decreased from $0.4 million in the second quarter of 1995
to $0.1 million in the second quarter of 1996. The Company sold its 49%
interest in Video 44 (WSNS-TV Channel 44), a Hispanic television station
located in Chicago, in the first quarter of 1996 and as a result, the
Company's proportionate share of Video 44's earnings was not included in
the second quarter of 1996. In addition, as a result of its acquisition of
Lasertron, the Company has included in equity income its proportionate
share of the earnings (losses) of its 50% owned Wuhan Telecommunications
Devices Company ("WTD"), located in the People's Republic of China in 1996
results.
Six Month Results
Sales for the first six months of 1996 were $171.3 million, and
increased 23.7% from $138.5 million in the first six months of 1995. The
1996 Components Segment sales increased 25.9% over the prior year period to
$159.3 million primarily due to incremental sales of Lasertron, purchased
in September of 1995, and also due to continued growth in the
Communications Components business. The Other Segment sales approximated
those of the prior year.
<TABLE>
<CAPTION>
Six Months Six Months
1996 1995 % Change
---- ---- --------
<S> <C> <C> <C>
Net Sales ($ millions):
Components....................... $159.3 $126.5 25.9%
Other............................ 12.0 12.0 0.0%
------ ------
Total......................... $171.3 $138.5 23.7%
====== ======
</TABLE>
The Company reported net income of $26.0 million for the first six
months of 1996 compared to $21.5 million in 1995. Net income for the first
six months of 1996 includes a net gain of $12.7 million ($20.5 million less
$7.8 million income tax expense) from the sale of the Company's 49%
interest in Video 44, a joint venture owning WSNS-TV Channel 44. The first
six months of 1996 also included the write down of certain assets and a
reserve to cover certain legal and environmental contingencies of $1.2
million ($1.9 million less $0.7 million tax benefit). Of this $1.9 million
pre-tax charge, $0.2 million is included in cost of sales, $0.8 million is
included in selling, general and administrative expenses and $0.9 million
is included in equity in net income (loss) of affiliated companies.
The Company's results of operations for the first six months of 1996 and
1995 can be summarized as follows (in millions):
<TABLE>
<CAPTION>
Six Months Six Months
1996 1995
---------- ----------
<S> <C> <C>
Pre-tax income excluding unusual items................ $ 31.2 $ 29.5
Income taxes.......................................... (11.9) (2.7)
Minority interest..................................... (4.8) (5.3)
------ ------
Net income excluding unusual items.................... 14.5 21.5
Unusual items:
Gain on the sale of equity investment.............. 20.5 #
Asset write down and other reserves................ (1.9) #
Tax impact of unusual items........................ (7.1) #
------ ------
Net income as reported................................ $ 26.0 $ 21.5
====== ======
</TABLE>
The first six months of 1996 income tax provision, excluding the impact
of unusual items, increased $9.2 million over the same period in 1995
principally due to an increase in the effective tax rate for financial
reporting purposes. The annual effective income tax rate for financial
reporting purposes increased to 38.2% in the first six months of 1996 from
8.9% in the corresponding period of the prior year reflecting the provision
of a full U.S. statutory rate beginning in the third quarter of 1995.
Minority interest decreased $0.5 million in the first six months of 1996
as compared to the same period in 1995, due to lower net income at Gilbert
resulting from a higher income tax provision as Gilbert fully utilized its
net operating loss carryforward for financial reporting purposed.
Pre-tax income before minority interest and unusual items increased by
$1.7 million to $31.2 million in the first six months of 1996 from $29.5
million recorded in 1995. Operating income increased $3.9 million from
1995 results due primarily to incremental profits from higher sales volume
and it was partially offset by increased interest expense ($0.5 million),
decreased interest income ($0.7 million), and decreased equity income ($1.0
million).
Communications Components
Communications Components revenues increased 37.0% in the first six
months of 1996 over the same period in 1995. Excluding the impact of the
Lasertron, which was purchased in September 1995 and therefore not included
in 1995 results, Communication Components revenues increased 16.5% over the
first six months of 1995. Communications Components sales increased over
prior year's quarter due primarily to increased construction of cable
television networks in international markets, upgrades of domestic cable
systems, and expanding applications for products in cellular, paging and
personal communications systems.
Controls Components
Sales of Controls Components increased 6.1% in the first six months of
1996 over the same period in 1995 principally as the result of increased
demand for sensing devices combined with modest sales growth of gas
appliance control products.
Gross Profit
Gross profit margin, excluding unusual items, was 40.1% for both the
first six months of 1996 and 1995.
Selling, General and Administrative Expenses
Selling, general and administrative expenses, excluding unusual items,
increased as a percentage of sales to 20.2% in the first six months of 1996
from 18.2% in the same period of 1995 due to an increase in research and
development expenditures related to the acceleration of product prototyping
activity for wireless communications and wired telephony applications.
Most of this increase was attributable to Lasertron which was acquired in
September 1995.
Interest Expense
Interest expense increased to $3.1 million in the first six months of
1996 from $2.6 million in 1995 due primarily to increased borrowings in
connection with the acquisition of Lasertron in September of 1995.
Interest income decreased to $0.3 million in the first six months of
1996 from $1.0 million in 1995 as average cash balances decreased. The
Company used approximately $20.0 million of cash in conjunction with the
Lasertron acquisition in September of 1995.
Equity Income
During the first six months of 1996, the Company sold its 49% interest
in Video 44 (WSNS-TV Channel 44), a Hispanic television station located in
Chicago, and received net proceeds of $29.4 million. The Company recorded
a pre-tax gain of $20.5 million from the sale. Due to this transaction,
the Company's proportionate share of Video 44's earnings was included in
1995 results but not in the six months of 1996 results subsequent to the
sale. In addition, as a result of its acquisition of Lasertron, the
Company has included in equity income its proportionate share of the
earnings (losses) of its 50% owned Wuhan Telecommunications Devices Company
("WTD"), located in the People's Republic of China in 1996 results.
Liquidity and Capital Resources
Cash flow from operations increased to $24.1 million in the first six
months of 1996 from $21.5 million generated in the same period in 1995,
reflecting an increase in income from operations combined with a reduction
in working capital. The Company accelerated its rate of capital spending
to $12.2 in the first six months of 1996 million from $6.6 million in the
same period for 1995 due, in part, to new capacity brought on line to
support higher production volumes and new products and, in part, to
additional expenditures for automation of production processes to reduce
both cost and manufacturing cycle time, expanded use of CAD/CAM capability
and new prototyping equipment to reduce development cycle times.
Debt net of cash decreased to $41.7 million at June 30, 1996 from $89.3
million at December 31, 1995. The cash proceeds from the sale of the
Company's 49% interest in Video 44 (WSNS-TV Channel 44), a Hispanic
television station located in Chicago, was used to reduce $29.0 million of
debt. In addition, the Company paid $20.5 of debt in the first six months
of 1996.
The Company's credit agreement provides for a $40.0 million revolving
credit facility, a $60.0 million term loan used in conjunction with the
Lasertron acquisition and a $60.0 million term loan restricted to the
funding of the Company's purchase of a minority partner's interest in
Connector. In conjunction with the Company's credit agreement, the Company
completed a financing on behalf of Gilbert for an $18.0 million revolving
credit facility and a $22.0 million term loan.
In addition to the $60.0 million term loan, which is only available for
purchase of the Connector minority interest, cash, cash equivalents and
unused lines of credit at June 30, 1996 totaled $51.0 million of which
$24.0 million was available only to Gilbert and $27.0 million was available
to the Company for general corporate purposes, including acquisitions.
In May 1996, the Company received formal notification from Bain of its
exercise of certain rights pursuant to the terms of the Stockholders
Agreement to sell Bain's 20% interest in Connector to the Company. Bain
holds a 17% indirect interest in Gilbert by virtue of its Connector
holdings. The Company is in the process of negotiating a new unsecured
$300 million credit facility, which will replace the current credit
facility. Proceeds from the new credit facility will be used to purchase
Bain's interest in Connector and consolidate the Company's ownership
interest in Gilbert, as well as for general corporate purposes, including
acquisitions. It is anticipated that this transaction will be consummated
by year end.
The Company has engaged an investment banking firm to explore
alternatives with respect to Nordco. The Company is uncertain as to whether
any transaction related to Nordco will be consummated in 1996.
The Company believes that funds generated by operations, existing cash
balances and its available credit facility will be sufficient to fund the
Company's ongoing operations over the next year.
Risks and Uncertainties
Revenues from telecommunications components will account for a majority
of the Company's future revenues. Although demand for these products has
grown in recent years with the build out of telecommunications networks in
domestic and international markets, a decrease in the rate of
infrastructure construction or upgrade programs could have an adverse
impact on the Company's results of operations.
The telecommunications industry is very competitive and is characterized
by rapid technological change, new product development, product
obsolescence and evolving product specifications. Additionally, price
competition in this market is intense with significant price erosion over
the life cycle of a product. The ability of the Company to compete
successfully depends on the continued introduction of new products and
ongoing manufacturing cost reduction.
Sales of the Company's Controls Components are in large part dependent
on the production level of a few North American appliance manufacturers,
which in turn is sensitive to the strength of the economy, including
housing starts, consumer disposable income and interest rates. Adverse
changes in the economy could have a negative impact on the Company's
financial results.
The Company currently buys a number of raw materials from single
sources. In most cases there are readily available and qualified
alternative sources of supply. Although the Company does not at this time
have a qualified second source for one critical component used in the
production of fiber optic modules, management believes there are other
suppliers that could provide a like quality product on comparable terms. A
change in suppliers for this product could cause a delay in manufacturing
and adversely impact operating results.
The Company must comply with governmental regulations relating to the
environment. The cost of compliance with environmental regulations in 1995
was immaterial and is not expected to have a material effect on capital
expenditures or operating results in 1996.
Various pending or threatened legal proceedings by or against the
Company or one or more of its subsidiaries involve alleged breaches of
contract, torts and miscellaneous other causes of action arising in the
course of business. The Company's management, based upon advice of legal
counsel representing the Company with respect to each of these proceedings,
does not believe any of these proceedings will have a significant impact on
the Company's consolidated financial position.
The Company's international operations and its results could be affected
by changes in policies of foreign governments and in social and economic
conditions outside the U.S. including civil unrest, changing inflation and
foreign exchange rates, and trade restrictions or prohibitions.
Any of the foregoing could have an adverse effect on future results.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to the Company's Annual Report on Form 10-K for the
year ended December 31, 1995.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
On May 1, 1996, the Company held its Annual Meeting of Stockholders (the
"Annual Meeting") at which each of William S. Antle III, Daniel W. Derbes,
Roderick M. Hills, George W. Leisz, Gilbert E. Matthews, Christopher H. B.
Mills and Elliot L. Richardson were re-elected as directors for an
additional term to expire at the Company's next Annual Meeting. Each of
the directors was re-elected with the following votes: Mr. Antle,
13,528,588 votes cast for and 1,455,505 votes withholding authority; Mr.
Derbes, 13,527,757 votes cast for and 1,456,336 votes withholding
authority; Mr. Hills, 13,526,605 votes cast for and 1,457,488 votes
withholding authority; Mr. Leisz, 13,522,420 votes cast for and 1,461,673
votes withholding authority; Mr. Matthews, 13,528,665 votes cast for and
1,455,428 votes withholding authority; Mr. Mills, 13,528,150 votes cast for
and 1,455,943 votes withholding authority; and Mr. Richardson, 13,105,688
votes cast for and 1,878,405 votes withholding authority.
The Company's stockholders also ratified the appointment of Price
Waterhouse LLP as the Company's independent public accountants for the
Company's fiscal year 1996, with 14,895,440 votes cast for such
ratification, 62,507 votes cast against such ratification, and 26,146 votes
abstaining from such ratification.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit Index
(10.1) Form of Severance Agreement dated as of May 1, 1996 by
and between the Company and each of William S. Antle III,
Francis J. Lunger, Coleman S. Hicks, and Pamela F.
Lenehan, filed herewith.
(10.2) Oak Industries Inc. Severance Plan dated as of May 1,
1996, filed herewith.
(27) Financial Data Schedule (Submitted only to the Securities
and Exchange Commission in electronic format for its
information only).
(b) Reports on Form 8-K:
On March 6, 1996, the Company filed a report on Form 8-K regarding
the sale of its 49% interest in Video 44.
OAK INDUSTRIES INC.
SIGNATURES
Pursuant to the requirement 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.
OAK INDUSTRIES INC.
Date: July 19, 1996 /s/ Francis J. Lunger
Francis J. Lunger
Senior Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-END> Jun-30-1996
<CASH> 15,031
<SECURITIES> 0
<RECEIVABLES> 49,721
<ALLOWANCES> 0
<INVENTORY> 56,114
<CURRENT-ASSETS> 142,671
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</TABLE>
OAK INDUSTRIES INC.
SEVERANCE AGREEMENT
This is an AGREEMENT entered into between Oak Industries Inc. (the
"Company") and ____________________ ("Executive") effective as of the first
day of May, 1996.
Executive is a key executive of the Company and a vital part of its
management. In consideration of Executive's continued employment with the
Company, the parties agree as follows:
1. Term; Window Period. The term during which this Agreement (the
"Agreement") will be in effect (the "Term of the Agreement") will begin on
May 1, 1996 (the "Effective Date") and, except as provided below, will
terminate on the second anniversary of the Effective Date. The Term of the
Agreement may be extended by mutual agreement of the parties for successive
two-year periods. If a Change of Control (as defined in Exhibit A) occurs
during the Term of the Agreement, the Agreement will remain in effect until
all obligations hereunder have been discharged. The period starting on the
date of such a Change of Control and ending on the third anniversary of the
Change of Control will be a "Window Period" during which special provisions
of this Agreement will apply.
2. Positions and Duties. Subject to the provisions of the Agreement:
2.1 Executive will serve as ______________________of the Company with
responsibilities consistent with these positions. [Executive will also be
a member of the Board of Directors of the Company.]
2.2 Executive will be a full-time employee of the Company and, except for
reasonable work-related travel, will perform his duties at the Company's
headquarters location.
2.3 Executive will devote his entire business time and attention and his
best efforts to the duties and services of his positions. However,
Executive may serve on boards of directors of other businesses and attend
to personal investments and community and charitable service, provided that
such activities are not competitive with the business of the Company and do
not interfere with the performance of Executive's duties to the Company.
3. Compensation and Benefits. During the Term of the Agreement, the
Company will provide compensation and benefits to Executive as follows:
3.1 Base Salary. Executive's base salary as of the Effective Date will
be $_________ per year, payable in accordance with the applicable payroll
practices of the Company. The Company will review Executive's base salary
annually, and Executive will receive such increases in base salary, if any,
for each succeeding year as the Board of Directors of the Company (the
"Board") determines in its sole discretion. (Executive's base salary as so
increased will be referred to as "Base Salary"). Executive's Base Salary
will not be decreased during the Term of the Agreement except as part of a
general reduction in which the base salaries of all executives at or above
the senior vice president level have been decreased and will not be
decreased during a Window Period without Executive's prior written
agreement.
3.2 Performance Bonus. Executive will be eligible for an annual
performance bonus based on achievement of objective performance goals
established by the Compensation Committee of the Board. Executive's bonus
for any year ending during a Window Period will not be less than 100
percent of his bonus for the completed year immediately preceding the
Change of Control.
3.3 Other Benefits. Executive will be entitled to participate in the
following plans, policies and arrangements (or in any successor or
supplemental plans, policies or arrangements) in each case at a level
appropriate to Executive's position and in each case in accordance with the
terms of the pertinent plan, policy or arrangement:
(i) the Oak Industries Salaried Pension Plan, the Oak Industries Vantage
Savings Plan and the Oak Industries Supplemental Retirement Income Plan
(the "SRIP");
(ii) the Company's group medical plan, Supplemental Executive Medical
Plan, long-term disability plan and Executive Supplemental Long-Term
Disability Plan;
(iii) life insurance arrangements provided to executive-level employees of
the Company;
(iv) all Company stock option and restricted stock plans in which
executives participate;
(v) the Company's normal expense reimbursement policies;
(vi) the automobile allowance arrangement for Company executives; and
(vii) vacation and sick leave in accordance with the Company's policies.
4. Termination of Employment; Severance Benefits.
4.1 Terminability of Employment. Either the Company or Executive may at
any time terminate Executive's employment with the Company after giving 30
days' written notice to the other party. However, if Executive's
employment terminates during the Term of the Agreement, the parties will
be required to discharge the applicable obligations described in this
Section 4 and elsewhere in this Agreement. If Executive's employment
terminates at any time other than during the Term of the Agreement,
Executive will have no rights under the Agreement.
4.2 Termination upon Death or Disability. If Executive ceases to be an
employee of the Company as a result of death or disability, the Company
will have no further obligation or liability to Executive hereunder other
than for Base Salary earned and unpaid at the date of termination and
compensation for accrued vacation, and the Term of the Agreement will end
when those amounts are paid. However, nothing in this Agreement is
intended to interfere with the rights of Executive and his family or
beneficiaries under other applicable plans, policies or arrangements of the
Company. For purposes of this Section 4.2, the Company may terminate
Executive's employment for "disability" if, because of physical or mental
incapacity, Executive is unable for a period of 30 consecutive days to
perform the material duties of his position and it is determined by a
qualified physician chosen by the Company (and, if during a Window Period,
approved by the Executive or his conservator) to be probable that such
incapacity will continue for an additional 60 consecutive days.
4.3 Termination by the Company for Cause or by Executive Without Good
Reason. If the Company terminates Executive's employment for Cause (as
defined in this Section 4.3) or if Executive terminates his employment
other than for Good Reason (as defined in Section 4.4), the Company will
have no further obligation or liability to Executive hereunder other than
for Base Salary earned and unpaid at the date of termination and
compensation for accrued vacation, and the Term of the Agreement will end
when those amounts are paid.
"Cause" means (a) willful malfeasance or gross negligence in the
performance by Executive of his duties, resulting in harm to the Company,
(b) fraud or dishonesty by Executive with respect to the Company, or (c)
Executive's conviction of a felony.
4.4 By the Company Without Cause or By Executive for Good Reason.
(a) Entitlement to Severance Benefits. If, during the Term of the
Agreement, the Company terminates Executive's employment without Cause, or
if Executive terminates his employment for Good Reason, the Company will,
subject to Section 5 below, provide severance benefits to Executive as set
forth below in this Section 4.4.
"Good Reason" means (i) failure by the Company to maintain Executive
in the positions described in Section 2 or assignment to Executive of
duties materially inconsistent with such positions, (ii) failure by the
Company to provide Executive with the compensation and benefits described
in Section 3, or (iii) during a Window Period, relocation of Executive's
principal place of work to a location more than 50 miles from its location
immediately prior to the Change of Control.
(b) Normal Severance Benefits. Except as provided in paragraph (c), the
Company will provide severance benefits as follows:
(i) The Company will pay to Executive within 30 days of the
termination a lump-sum cash amount equal to ______% of his annual Base
Salary in effect at the time of his termination (or, if his Base Salary has
been reduced within 60 days of the termination, his Base Salary in effect
prior to the reduction).
(ii) The Company will continue for a period of _____ years from the
date of termination to provide Executive with the benefits set forth in
paragraphs (ii) and (iii) of Section 3.3 above. To the extent that the
Company is unable to provide such benefits to Executive under its existing
plans and arrangements, it will pay Executive cash amounts equal to the
cost the Company would have incurred to provide those benefits.
(iii) For the ______ year period following termination of employment,
stock options held by Executive will become exercisable and restricted
stock held by Executive will become vested according to their original
schedules as though Executive had remained employed by the Company.
(c) Severance Benefits Following a Change of Control. If the
termination occurs during a Window Period, the Company will, instead of
the benefits prescribed in paragraph (b), provide severance benefits to
Executive as follows:
(i) The Company will pay to Executive within 30 days of the
termination a lump-sum cash amount equal to 300% of the sum of (A)
Executive's annual Base Salary in effect immediately prior to the
termination (or, if his Base Salary has been reduced within 60 days of the
termination or at any time after the Change of Control, his Base Salary in
effect prior to the reduction), plus (B) the average of the bonuses earned
by Executive for the period of three years (or such fewer number of years
as Executive has been employed by the Company) completed immediately prior
to the termination or immediately prior to the Change of Control, whichever
is higher (for this purpose, annualizing bonuses paid for less than a full
year's employment).
(ii) The Company will also pay to Executive within 30 days of the
termination a pro-rata portion of his target bonus (provided for in Section
3.2 above) for the year of termination.
(iii) The Company will continue for a period of three years from
the date of termination to provide Executive with the benefits set forth in
paragraphs (ii), (iii) and (vi) of Section 3.3 above. To the extent the
Company is unable to provide such benefits to Executive under its existing
plans and arrangements, it will either arrange to provide Executive with
substantially similar benefits upon comparable terms or pay Executive cash
amounts equal to Executive's cost of obtaining such benefits.
(iv) Notwithstanding any contrary provision of the plans or
arrangements under which they are granted, (A) all options to purchase
Company stock held by Executive will immediately become exercisable and
remain exercisable for a period of three years, and (B) all restricted
stock held by Executive under restricted stock plans and arrangements of
the Company will immediately become fully vested.
(v) Executive's benefits under the SRIP will immediately become
fully vested.
5. Limitations on Severance Benefits.
5.1 Except as provided in Section 5.2 below, the payments and benefits to
which Executive will be entitled under Section 4 of this Agreement will be
reduced to the extent necessary to prevent Executive from becoming liable
for the excise tax levied on certain "excess parachute payments" under
section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"). If a reduction is made under this Section 5.1, Executive will
have the right to determine which payments and benefits will be reduced.
5.2 The limitations of Section 5.1 will not apply if --
(i) the present value, net of all federal, state, and other income and
excise taxes, of all payments and benefits to which Executive is entitled
hereunder without such limitations, exceeds
(ii) the present value, net of all federal, state, and other income and
excise taxes, of all payments and benefits to which Executive would be
entitled hereunder if such limitations applied.
5.3 Determinations under this Section 5 will be made by the firm of
certified public accountants then serving as the Company's auditor unless
Executive has reasonable objections to the use of that firm, in which case
the determinations will be made by a comparable firm chosen by Executive
after consultation with the Company. The determinations of such firm will
be binding upon the Company and Executive.
6. Withholding. All payments required to be made by the Company to
Executive under this Agreement will be subject to the withholding of such
amounts, if any, relating to tax and other payroll deductions as may be
required by law.
7. Fees and Expenses. In the event of Executive's termination of
employment during a Window Period, the Company will pay any and all fees
and expenses (including legal fees and other costs of arbitration or
litigation) that may be incurred by Executive in enforcing his rights under
this Agreement. If the termination of employment does not occur during a
Window Period, the Company will pay that amount of such fees and expenses
that bears the same ratio to the total fees and expenses as the dollar
amount of payments and benefits determined to be payable to Executive bears
to the total dollar amount of payments and benefits in dispute.
8. No Duty to Mitigate. Benefits payable under this Agreement as a result
of termination of Executive's employment will be considered severance pay
in consideration of his past service and his continued service from the
Effective Date, and his entitlement thereto will neither be governed by any
duty to mitigate his damages by seeking further employment nor offset by
any compensation that he may receive from other employment.
9. Confidentiality and Exclusivity. Executive agrees to maintain the
confidentiality of the Company's (and its related entities and projects)
books, records, financial information, technical information, business
plans and/or strategies, and other confidential matters unless required to
make disclosure in the performance of his duties for the Company or as a
result of a legal proceeding or other legally mandated cause. In the event
of termination without Good Reason by Executive, other than such a
termination occurring during a Window Period, Executive will not for two
years following termination act as an executive-level employee with any
company that directly competes against the Company. The parties recognize
and agree that should the Company be required to pursue a claim against
Executive under this Section 9, the Company will likely be required to seek
injunctive relief as well as damages at law. Accordingly, Section 11,
Arbitration, will not apply to any action by the Company against Executive
for violation of this Section 9. Executive agrees for purposes of any
disputes arising under this Section 9 to submit to the exclusive
jurisdiction of the federal and state courts in the Commonwealth of
Massachusetts.
10. Indemnification. To the extent permitted by law, the Company will
defend, indemnify and hold Executive harmless from and against any and all
losses, liabilities, damages, expenses (including attorneys' fees and
costs), actions, causes of action or proceedings arising directly or
indirectly from Executive's performance of this Agreement or services as an
employee of the Company. Executive may retain his own counsel to defend
himself in such actions, and the Company will pay for the reasonable costs
and expense of such counsel. This indemnification is in addition to any
right of indemnification to which Executive may be entitled under the
Company's Articles of Incorporation and By-laws and any insurance policies
that may be maintained by the Company.
11. Arbitration. Except as otherwise provided in Section 9, any dispute
or controversy between the parties involving the construction or
application of any terms, covenants or conditions of this Agreement, or any
claim arising out of or relating to this Agreement, or any claim arising
out of or relating to Executive's employment by the Company that is not
resolved within ten days by the parties will be settled by arbitration in
Boston, Massachusetts, in accordance with the rules of the American
Arbitration Association then in effect, and judgment upon the award
rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof. The Company and Executive agree that the
arbitrator(s) will have no authority to award punitive or exemplary damages
or so-called consequential or remote damages such as damages for emotional
distress. Any decision of the arbitrator(s) will be final and binding upon
the parties. Upon request the arbitrator(s) shall submit written findings
of fact and conclusions of law. The parties agree and understand that they
hereby waive their rights to a jury trial of any dispute or controversy
relating to the matters specified above in this Section 11.
12. Rights of Survivors If Executive dies after becoming entitled to
benefits under Section 4 following termination of employment but before all
such benefits have been provided, (a) all unpaid cash amounts will be paid
to the beneficiary that has been designated by Executive in writing (the
"beneficiary"), or if none, to Executive's estate, (b) all applicable
insurance coverage will be provided to Executive's family as though
Executive had continued to live, and (c) any stock options that become
exercisable under Section 4.4(b)(iii) or Section 4.4(c)(iv) will be
exercisable by the beneficiary, or if none, the estate.
13. Successors. This Agreement will inure to and be binding upon the
Company's successors. The Company will require any successor to all or
substantially all of the business and/or assets of the Company by sale,
merger or consolidation (where the Company is not the surviving
corporation), lease or otherwise, by agreement in form and substance
satisfactory to Executive, to assume this Agreement expressly. This
Agreement is not otherwise assignable by the Company.
14. Subsidiaries. For purposes of this Agreement, employment by a
corporation or other entity that is controlled directly or indirectly by
the Company will be deemed to be employment by the Company. Thus,
references in the Agreement to "Company" include such corporations or other
entities where appropriate in the context.
15. Amendment or Modification; Waiver. Except as provided in clause (1)
of Exhibit A, this Agreement may not be amended unless agreed to in writing
by Executive and the Company. No waiver by either party of any breach of
this Agreement will be deemed a waiver of a subsequent breach.
16. Severability. In the event that any provision of this Agreement is
determined to be invalid or unenforceable, the remaining provisions shall
remain in full force and effect to the fullest extent permitted by law.
17. Controlling Law. This Agreement will be controlled and interpreted
pursuant to Massachusetts law.
18. Superseded Agreement. This Agreement supersedes in its entirety the
Employment Agreement between Executive and the Company dated
______________.
19. Notices. Any notices required or permitted to be sent under this
Agreement are to be delivered by hand or mailed by registered or certified
mail, return receipt requested, and addressed as follows:
If to the Company:
Oak Industries Inc.
1000 Winter Street, South Entrance
Waltham, MA 02154
If to Executive:
___________________
___________________
___________________
Either party may change its address for receiving notices by giving notice
to the other party.
In witness whereof, the parties hereto have executed this Agreement as of
the date first set forth above.
______________________________________
[Executive]
OAK INDUSTRIES INC.
By:___________________________________
Exhibit A
"Change of Control" means the occurrence of any of the following events:
(1) any Person becomes the owner of 20% or more of the Company's Common
Stock; provided, however, that the Board of Directors of the Company may
unilaterally amend this clause (1) to increase the 20% threshold to any
percentage up to, but not exceeding, 50%; or
(2) individuals who, as of the Effective Date, constitute the Board of
Directors of the Company (the "Continuing Directors") cease for any reason
to constitute at least a majority of such Board; provided, however, that
any individual becoming a director after the Effective Date whose election
or nomination for election by the Company's shareholders, was approved by a
vote of at least a majority of the Continuing Directors will be deemed to
be a Continuing Director, but excluding for this purpose any such
individual whose initial assumption of office occurs as a result of either
an actual or threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Securities and Exchange Act
of 1934 (the "Exchange Act")) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board; or
(3) approval by the shareholders of the Company of a reorganization,
merger, consolidation or other transaction that will result in the transfer
of ownership of more than 50% of the Company's Common Stock; or
(4) liquidation or dissolution of the Company or sale of substantially
all of the Company's assets.
In addition, for purposes of this definition the following terms have the
meanings set forth below:
"Common Stock" means the then outstanding Common Stock of the Company
plus, for purposes of determining the stock ownership of any Person, the
number of unissued shares of Common Stock which such Person has the right
to acquire (whether such right is exercisable immediately or only after the
passage of time) upon the exercise of conversion rights, exchange rights,
warrants or options or otherwise. Notwithstanding the foregoing, the term
Common Stock does not include shares of preferred stock or convertible debt
or options or warrants to acquire shares of Common Stock (including any
shares of Common Stock issued or issuable upon the conversion or exercise
thereof) to the extent that the Board expressly so determines in any future
transaction or transactions.
A Person will be deemed to be the "owner" of any Common Stock of which
such Person would be the "beneficial owner," as such term is defined in
Rule 13d-3 promulgated by the Securities and Exchange Commission under the
Exchange Act.
"Person" has the meaning used in Section 13(d) of the Exchange Act,
except that "Person" does not include (i) the Executive, an Executive
Related Party, or any group of which the Executive or Executive Related
Party is a member, or (ii) the Company or a wholly owned subsidiary of the
Company or an employee benefit plan (or related trust) of the Company or of
a wholly owned subsidiary.
An "Executive Related Party" means any affiliate or associate of the
Executive other than the Company or a subsidiary of the Company. The terms
"affiliate" and "associate" have the meanings given in Rule 12b-2 under the
Exchange Act; the term "registrant" in the definition of "associate" means,
in this case, the Company.
- -1-
OAK INDUSTRIES INC.
SEVERANCE PLAN
The purpose of this Plan is to induce those key executives of Oak Industries
Inc. (the "Company") who are chosen to participate in the Plan ("Executives")
to continue their employment with the Company notwithstanding any threatened
or actual change of control of the Company.
1. Term. The term during which this Plan (the "Plan") will be in effect (the
"Term of the Plan") will begin on May 1, 1996 (the "Effective Date") and,
except as provided below, will terminate on the second anniversary of the
Effective Date. The Term of the Plan may be extended by the Company for
successive two-year periods. If a Change of Control (as defined in Exhibit A)
occurs during the Term of the Plan, the Plan will remain in effect until all
obligations hereunder have been discharged.
2. Participation. The Compensation Committee of the Board of Directors of
the Company (the "Committee") will select Executives to participate in the
Plan upon recommendation of the Chief Executive Officer of the Company. The
Executives whose names or positions are set forth in attached Schedules B and
C will become participants on the Effective Date. If and when participants
are added or deleted, the Schedules will be appropriately amended.
3. Termination of Employment; Severance Benefits.
3.1 Window Period. If an Executive's employment terminates during that
Executive's "Window Period," the Company and such Executive will be required
to discharge the applicable obligations described in this Section 3 and
elsewhere in the Plan. The Window Period of an Executive will begin on the
date of any Change of Control that occurs during the Term of the Plan and will
end, in the case of an Executive whose name or position is listed on Schedule
B (a "Schedule B Executive"), on the second anniversary of the Change of
Control and, in the case of an Executive whose name or position is listed on
Schedule C (a "Schedule C Executive"), on the first anniversary of the Change
of Control. If an Executive's employment terminates at any time other than
during his or her Window Period, the Executive will have no rights under this
Plan, and the Plan will cease to be effective as to that person.
3.2 Termination upon Death or Disability. If an Executive ceases to be an
employee of the Company as a result of death or disability, the Company will
have no further obligation or liability to the Executive under this Plan, but
nothing in the Plan is intended to interfere with the rights of the Executive
and his or her family or beneficiaries under other applicable plans, policies
or arrangements of the Company. For purposes of this Section 3.2, the Company
may terminate an Executive's employment for "disability" if, because of
physical or mental incapacity, the Executive is unable for a period of 30
consecutive days to perform each of the material duties of his or her
position, and it is determined by a qualified physician chosen by the Company
and approved by the Executive or his or her conservator to be probable that
such incapacity will continue for an additional 60 consecutive days.
3.3 Termination by the Company for Cause or by an Executive Without Good
Reason. If the Company terminates an Executive's employment for Cause (as
defined in this Section 3.3) or if an Executive terminates his or her
employment other than for Good Reason (as defined in Section 3.4), the Company
will have no further obligation or liability to the Executive under this Plan.
"Cause" means (a) willful malfeasance or gross negligence in the performance
by the Executive of his or her duties, resulting in harm to the Company, (b)
fraud or dishonesty by the Executive with respect to the Company, or (c) the
Executive's conviction of a felony.
3.4 By the Company Without Cause or By the Executive for Good Reason.
(a) Entitlement to Severance Benefits. If, during an Executive's Window
Period, the Company terminates the Executive's employment without Cause, or if
the Executive terminates his or her employment for Good Reason, the Company
will, subject to Section 4, provide severance benefits to the Executive as set
forth below in paragraph (b).
"Good Reason" means (i) reduction of the Executive's base salary below the
level in effect immediately prior to the Change of Control without the
Executive's prior written consent, or (ii) relocation of the Executive's
principal place of work to a location more than 50 miles from its location
immediately prior to the Change of Control.
(b) Severance Benefits. The benefits to be provided to the Executive under
this Section 3.4 are as follows:
(i) The Company will pay to the Executive within 30 days of the
termination of employment a lump-sum cash amount equal to the applicable
percentage of the sum of (A) the Executive's annual base salary in effect
immediately prior to the termination (or, if his or her base salary has been
reduced after the Change of Control, the base salary in effect prior to the
reduction), plus (B) the average of the bonuses earned by the Executive for
the period of three years (or such fewer number of years as the Executive has
been employed by the Company) completed immediately prior to the termination
or immediately prior to the Change of Control, whichever is higher (for this
purpose, annualizing bonuses paid for less than a full year's employment). An
Executive's "applicable percentage" will be 200% in the case of Schedule B
Executives, and 100% in the case of Schedule C Executives.
(ii) The Company will also pay to the Executive within 30 days of the
termination of employment a pro-rata portion of his or her target bonus for
the year of termination.
(iii) The Company will continue for the applicable period to provide the
Executive with family medical, disability and life insurance coverage and
automobile allowance at the level in effect immediately prior to the Change of
Control. To the extent the Company is unable to provide such benefits to an
Executive under its existing plans and arrangements, it will either arrange to
provide the Executive with substantially similar benefits upon comparable
terms or pay the Executive cash amounts equal to the Executive's cost of
obtaining such benefits. An Executive's "applicable period" will be two years
in the case of a Schedule B Executive and one year in the case of a Schedule C
Executive.
(iv) Notwithstanding any contrary provision of plans or arrangements
under which they are granted, (A) all options to purchase Company stock held
by the Executive will immediately become exercisable and remain exercisable
for the applicable period (as defined in (iii) above), and (B) all restricted
stock held by the Executive under restricted stock plans and arrangements of
the Company will immediately become fully vested.
(v) The Executive's benefits under the Company's Supplemental Retirement
Income Plan will immediately become fully vested.
4. Limitation of Benefits.
4.1 The payments and benefits to which an Executive will be entitled under
Section 3 of this Plan will be reduced to the extent necessary to prevent the
Executive from becoming liable for the excise tax levied on certain "excess
parachute payments" under section 4999 of the Internal Revenue Code of 1986,
as amended (the "Code"). If a reduction is made under this Section 4.1, the
Executive will have the right to determine which payments and benefits will be
reduced.
4.2 Determinations under this Section 4 will be made by the firm of certified
public accountants then serving as the Company's auditor unless the Executive
has reasonable objections to the use of that firm, in which case the
determinations will be made by a comparable firm chosen by the Executive after
consultation with the Company. The determinations of such firm will be
binding upon the Company and the Executive.
5. Withholding. All payments required to be made by the Company under this
Plan will be subject to the withholding of such amounts, if any, relating to
tax and other payroll deductions as may be required by law.
6. Fees and Expenses. The Company will pay any and all fees and expenses
(including legal fees and other costs of arbitration or litigation) that may
be incurred by an Executive in enforcing his or her rights under this Plan.
7. No Duty to Mitigate. Benefits payable under this Plan as a result of
termination of an Executive's employment will be considered severance pay in
consideration of his or her past service and continued service from the
Effective Date, and the Executive's entitlement thereto will neither be
governed by any duty to mitigate damages by seeking further employment nor
offset by any compensation received from other employment.
8. Confidentiality and Exclusivity. Each Executive (by participation in the
Plan) agrees to maintain the confidentiality of the Company's (and its related
entities and projects) books, records, financial information, technical
information, business plans and/or strategies, and other confidential matters
unless required to make disclosure in the performance of his or her duties for
the Company or as a result of a legal proceeding or other legally mandated
cause. Should the Company be required to pursue a claim against an Executive
under this Section 8, the Company will likely be required to seek injunctive
relief as well as damages at law. Accordingly, Section 9, Arbitration, will
not apply to any action by the Company against an Executive for violation of
this Section 8. Each Executive (by participation in the Plan) agrees for
purposes of any disputes arising under this Section 8 to submit to the
exclusive jurisdiction of the federal and state courts in the Commonwealth of
Massachusetts.
9. Arbitration. Except as otherwise provided in Section 8, any dispute or
controversy between the Company and an Executive involving the construction or
application of any terms, covenants or conditions of this Plan, or any claim
arising out of this Plan, that is not resolved within ten days by the parties
will be settled by arbitration in Boston, Massachusetts, in accordance with
the rules of the American Arbitration Association then in effect, and judgment
upon the award rendered by the arbitrator(s) may be entered in any court
having jurisdiction thereof. The Company and all Executives (by participation
in this Plan) agree that the arbitrator(s) will have no authority to award
punitive or exemplary damages or so-called consequential or remote damages
such as damages for emotional distress. Any decision of the arbitrator(s)
will be final and binding upon the parties. Either party may request that the
arbitrator(s) submit written findings of fact and conclusions of law. The
Company and all Executives (by participation in this Plan) agree and
understand that they are waiving their rights to a jury trial of any dispute
or controversy relating to the matters specified above in this Section 9.
10. Rights of Survivors. If an Executive dies after becoming entitled to
benefits under Section 3 following termination of employment but before all
such benefits have been provided, (a) all unpaid cash amounts will be paid to
the beneficiary that has been designated by the Executive in writing (the
"beneficiary"), or if none, to the Executive's estate, (b) all applicable
insurance coverage will be provided to the Executive's family as though the
Executive had continued to live, and (c) any stock options that became
exercisable under Section 3.4(b)(iv) will be exercisable by the beneficiary,
or if none, the estate.
11. Successors. This Plan will inure to and be binding upon the Company's
successors. The Company will require any successor to all or substantially
all of the business and/or assets of the Company by sale, merger or
consolidation (where the Company is not the surviving corporation), lease or
otherwise, to adopt this Plan expressly. Obligations under this Plan are not
otherwise assignable by the Company.
12. Subsidiaries. For purposes of this Plan, employment by a corporation or
other entity that is controlled directly or indirectly by the Company will be
deemed to be employment by the Company. Thus, references in the Plan to
"Company" include such corporations or other entities where appropriate in the
context.
13. Amendment or Termination. This Plan may be amended or terminated by the
Company at any time prior to a Change of Control. Following a Change of
Control the Plan may not be amended or terminated with respect to any
Executive unless agreed to in writing by such Executive and the Company.
14. Severability. In the event that any provision of this Plan is determined
to be invalid or unenforceable, the remaining provisions are intended to
remain in full force and effect to the fullest extent permitted by law.
15. Controlling Law. This Plan will be controlled and interpreted pursuant
to Massachusetts law.
OAK INDUSTRIES INC.
By: __________________________________
Exhibit A
"Change of Control" means the occurrence of any of the following events:
(1) any Person becomes the owner of 20% or more of the Company's Common
Stock; or
(2) individuals who, as of the Effective Date, constitute the Board of
Directors of the Company (the "Continuing Directors") cease for any reason to
constitute at least a majority of such Board; provided, however, that any
individual becoming a director after the Effective Date whose election or
nomination for election by the Company's shareholders, was approved by a vote
of at least a majority of the Continuing Directors will be deemed to be a
Continuing Director, but excluding for this purpose any such individual whose
initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Securities and Exchange Act of 1934 (the
"Exchange Act")) or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(3) approval by the shareholders of the Company of a reorganization, merger,
consolidation or other transaction that will result in the transfer of
ownership of more than 50% of the Company's Common Stock; or
(4) liquidation or dissolution of the Company or sale of substantially all of
the Company's assets.
In addition, for purposes of this definition the following terms have the
meanings set forth below:
"Common Stock" means the then outstanding Common Stock of the Company plus,
for purposes of determining the stock ownership of any Person, the number of
unissued shares of Common Stock which such Person has the right to acquire
(whether such right is exercisable immediately or only after the passage of
time) upon the exercise of conversion rights, exchange rights, warrants or
options or otherwise. Notwithstanding the foregoing, the term Common Stock
does not include shares of preferred stock or convertible debt or options or
warrants to acquire shares of Common Stock (including any shares of Common
Stock issued or issuable upon the conversion or exercise thereof) to the
extent that the Board expressly so determines in any future transaction or
transactions.
A Person will be deemed to be the "owner" of any Common Stock of which such
Person would be the "beneficial owner," as such term is defined in Rule 13d-3
promulgated by the Securities and Exchange Commission under the Exchange Act.
"Person" has the meaning used in Section 13(d) of the Exchange Act, except
that "Person" does not include (i) the Executive, an Executive Related Party,
or any group of which the Executive or Executive Related Party is a member, or
(ii) the Company or a wholly owned subsidiary of the Company or an employee
benefit plan (or related trust) of the Company or of a wholly owned
subsidiary.
An "Executive Related Party" means any affiliate or associate of the Executive
other than the Company or a subsidiary of the Company. The terms "affiliate"
and "associate" have the meanings given in Rule 12b-2 under the Exchange Act;
the term "registrant" in the definition of "associate" means, in this case,
the Company.
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