<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT /X/ FILED BY A PARTY OTHER THAN THE REGISTRANT / /
- --------------------------------------------------------------------------------
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
AUGAT INC.
(Name of Registrant as Specified In Its Charter)
AUGAT INC.
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act
Rule 0-11:
4) Proposed maximum aggregate value of transaction:
Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
AUGAT INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 26, 1994
Notice is hereby given that the Annual Meeting of Shareholders of Augat
Inc. (the "Company") will be held at The Enterprise Room, State Street Bank and
Trust Company, 5th Floor, 225 Franklin Street, Boston, Massachusetts, on
Tuesday, April 26, 1994 at 1:30 P.M. for the following purposes:
1. To elect three Directors in Class I to serve until the 1997 Annual
Meeting of Shareholders or until their successors are elected and
qualify.
2. To consider and act upon a proposal to approve the 1994 Stock
Plan.
3. To consider and act upon a proposal to ratify the employment of
Deloitte & Touche as the Company's auditor for 1994.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 2, 1994 as
the record date for the determination of the shareholders entitled to notice of
and to vote at the Annual Meeting of Shareholders and at any adjournment
thereof.
Attention is directed to the Proxy Statement printed on the following
pages.
By order of the Board of Directors
THOMAS E. NEELY, Clerk
March 24, 1994
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWNED ON THE RECORD DATE
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, DATE
AND SIGN IT, AND RETURN IT IN THE ENVELOPE PROVIDED, WHICH IS ADDRESSED FOR YOUR
CONVENIENCE AND NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. IN ORDER TO
AVOID THE ADDITIONAL EXPENSE TO THE COMPANY OF FURTHER SOLICITATION, WE ASK YOUR
COOPERATION IN MAILING YOUR PROXY PROMPTLY.
<PAGE> 3
AUGAT INC.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 26, 1994
SOLICITATION OF PROXIES
This Proxy Statement is being furnished on or about March 24, 1994 to all
shareholders of Augat Inc. (the "Company") of record on March 2, 1994 in
connection with the solicitation by the Board of Directors of the Company of
proxies in the form enclosed, for use at the annual meeting of shareholders to
be held on April 26, 1994, and at any adjournments thereof. Any proxy may be
revoked at any time prior to its exercise by a written notification of such
revocation addressed to the Clerk at the Company's principal office or by
signing another proxy of a later date or by personally voting at the meeting of
shareholders. The Company's principal office is at 89 Forbes Boulevard, Post
Office Box 448, Mansfield, Massachusetts 02048. EACH PROXY WILL BE VOTED FOR ALL
PROPOSALS IF NO CONTRARY INSTRUCTION IS INDICATED IN THE PROXY.
The Annual Report of the Company for the year ended December 31, 1993
including financial statements is being sent to shareholders with this Proxy
Statement, but is not to be considered a part of the proxy solicitation
material.
At the close of business on March 2, 1994, the record date for determining
the shareholders entitled to vote at the annual meeting, there were outstanding
19,146,455 shares of the common stock, $.10 par value, of the Company entitled
to vote with respect to the matters to be considered at the meeting. Each share
has the right to one vote.
A majority in interest of the issued and outstanding common stock entitled
to vote constitutes a quorum at the annual meeting. The affirmative vote of the
holders of a plurality of the shares of common stock present or represented at
the annual meeting is required for the election of directors. The affirmative
vote of the holders of a majority of the shares of common stock present or
represented at the annual meeting is required for the approval of the 1994 Stock
Plan and the ratification of the selection by the Board of Directors of Deloitte
& Touche as the Company's auditor for 1994. Shares of common stock represented
in person or by proxy (including shares which abstain or do not vote with
respect to one or more of the matters presented for shareholder approval) will
be counted for purposes of determining whether a quorum is present at the annual
meeting. Abstentions will be treated as shares that are present and entitled to
vote for purposes of determining the number of shares present and entitled to
vote with respect to any particular matter, but will not be counted as a vote in
favor of such matter. Accordingly, an abstention from voting on a matter has the
same legal effect as a vote against the matter. If a broker or nominee holding
stock in "street name" indicates on the proxy that it does not have
discretionary authority to vote as to a particular matter, those shares will not
be considered as present and entitled to vote with respect to such matter.
The cost of soliciting proxies will be borne by the Company. The Company
has retained Corporate Investor Communications, Inc., 111 Commerce Road,
Carlstadt, New Jersey 07072, to aid in the solicitation of proxies. For these
services, the Company will pay Corporate Investor Communications, Inc., a fee of
$4,500 and reimburse it for certain out-of-pocket disbursements and expenses. In
addition, the officers, directors and regular employees of the Company, without
any additional compensation, may solicit proxies by mail, telephone or personal
contact. The Company will also request stockbrokers, banks and other fiduciaries
to
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<PAGE> 4
forward proxy material to their principals or customers who are the beneficial
owners of shares, and will reimburse them for their expenses.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
The following table sets forth certain information, as of March 2, 1994,
with respect to the beneficial ownership of the Company's common stock by (i)
each person known by the Company to beneficially own more than 5% of the
outstanding shares of common stock, (ii) each executive officer of the Company
named in the Summary Compensation Table set forth in this Proxy Statement and
(iii) all directors and officers of the Company as a group.
<CAPTION>
PERCENT
OF
SHARES OUTSTANDING
NAME AND ADDRESS BENEFICIALLY COMMON
OF BENEFICIAL OWNER OWNED STOCK(1)
------------------- ------------ -----------
<S> <C> <C>
Norwest Corp..................................... 2,605,795(2) 13.5
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479
Fidelity Management & Research Group............. 2,494,320(2) 12.9
82 Devonshire Street
Boston, Massachusetts 02109
Mitchell/Hutchins Institutional.................. 1,482,800(2) 7.7
Investors Inc.
1285 Avenue of the Americas
New York, New York 10019
RCM Capital Management........................... 1,156,200(2) 6.0
Four Embarcadero Center
Suite 2900
San Francisco, California 94111
Marcel P. Joseph................................. 134,494(3) .7
Chairman of the Board of Directors, Chief
Executive Officer and President
Anthony F. Lefkowicz............................. 28,250(3) (a)
Vice President and General Manager
Wiring Systems and Components Business
Larry E. Buffington.............................. 16,001(3) (a)
Vice President and General Manager
Communication Products Business
Ellen B. Richstone............................... 13,250(3) (a)
Vice President and
Chief Financial Officer
L. Ronald Hoover................................. 5,751 (a)
Vice President and General Manager
Interconnection Products Business
All directors and officers as a group (22
persons)....................................... 371,709(4) 1.9
- ---------------
<FN>
(a) Less than one percent
(1) Including as shares outstanding those which officers and directors may
acquire within sixty days upon exercise of stock options.
</TABLE>
2
<PAGE> 5
(2) The above information is based upon a Schedule 13D or 13G filed with
the Securities and Exchange Commission as of December 31, 1993.
(3) The amounts include the following shares that may be acquired within 60
days pursuant to outstanding stock options: Marcel P. Joseph, 57,000 shares;
Anthony F. Lefkowicz, 18,250 shares; Larry E. Buffington, 8,500 shares; Ellen B.
Richstone, 6,250 shares.
(4) The number of shares stated as being beneficially owned by all
directors and officers as a group includes 168,375 shares with respect to which
beneficial ownership may be acquired within sixty days, and includes an
aggregate of 62,517 shares believed to be beneficially owned by spouses,
relatives sharing their homes or by trusts with which directors or officers are
associated. See footnotes to the information concerning directors on page 4. The
inclusion of such shares does not constitute an admission by such directors or
officers that they are beneficial owners of these shares.
PROPOSAL 1 -- ELECTION OF DIRECTORS
The By-Laws of the Company provide that there shall be three classes of
directors as nearly equal in number as possible, with one class elected each
year to serve for a term of three years. The term of office of directors in
Class I expires this year. Norton Q. Sloan, who has served as a Class I director
since 1989, will not seek re-election to the Board at the annual meeting. The
Board of Directors has set the number of directors in Class I at three, and it
is proposed that the following individuals be elected to the Board of Directors
in that class:
Marcel P. Joseph, Alan J. Zakon and Bruce L. Crockett
UNLESS THE ENCLOSED PROXY IS MARKED TO INDICATE A VOTE AGAINST ANY ONE OR
MORE OF THE NOMINEES, THE PERSONS NAMED IN THE ENCLOSED PROXY WILL VOTE TO ELECT
AS DIRECTORS IN CLASS I THE INDIVIDUALS NAMED ABOVE.
In the event that any nominee for election should become unavailable, the
persons acting under the proxy may vote for the election of a substitute as may
be determined by the Board of Directors or a vacancy may be left to be filled
subsequently by the Board of Directors. The Company has no reason to believe
that any nominee will become unavailable. The enclosed proxy cannot be voted for
a greater number of persons than three.
<TABLE>
Information about each nominee and each other director whose term continues
after the meeting and their beneficial ownership of the Company's common stock
at March 2, 1994 is as follows:
<CAPTION>
SHARES
OF PERCENTAGE
COMMON OF
FIRST STOCK OUTSTANDING
NAME AND PRINCIPAL BECAME BENEFICIALLY COMMON
OCCUPATION AGE DIRECTOR OWNED STOCK
- ------------------------------------------------------- --- -------- ----------- -----------
<S> <C> <C> <C> <C>
Class I Nominees -- Term to Expire in 1994
Marcel P. Joseph#................................. 58 1988 134,494(1) .7
Chairman of the Board,
Chief Executive Officer and President
Alan J. Zakon+#................................... 58 1989 9,250(2) (a)
Managing Director Bankers Trust Company
Bruce L. Crockett*................................ 49 1994 500 (a)
President and Chief Executive Officer,
COMSAT Corporation
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
SHARES
OF PERCENTAGE
COMMON OF
FIRST STOCK OUTSTANDING
NAME AND PRINCIPAL BECAME BENEFICIALLY COMMON
OCCUPATION AGE DIRECTOR OWNED STOCK
------------------ --- -------- ------------ -----------
<S> <C> <C> <C> <C>
Class III Directors -- Term to Expire in 1995
John N. Lemasters+*............................... 60 1988 8,000(2) (a)
Chairman, President and Chief Executive Officer,
Computer Products, Inc.
David V. Ragone+#................................. 63 1979 8,250(2) (a)
Partner -- Ampersand Specialty Materials
Ventures and Senior Lecturer, Department of
Materials Science, Massachusetts Institute of
Technology
Jerald G. Fishman+*............................... 48 1992 1,250(2) (a)
President and Chief Operating Officer,
Analog Devices, Inc.
Class II Directors -- Term to Expire in 1996
Samuel S. Dennis 3d+*............................. 83 1969 63,036(3) (a)
Sole owner of a Professional Corporation which
is a partner of Hale and Dorr, Counsel for the
Company
Vernon R. Alden+*#................................ 71 1979 14,500(2)(4) (a)
Director and Trustee of several organizations,
Former Chairman, The Boston Company, Inc.
Thomas L. King*#.................................. 63 1993 1,000 (a)
Chairman, President and Chief Executive Officer,
Standex International Corporation
John D. Curtin, Jr.*.............................. 60 1994 2,000 (a)
Executive Vice President, Cabot Corporation
- ---------------
<FN>
+ Member of Compensation Committee
* Member of Audit Committee
# Member of Nominating Committee
- ---------------
(a) Less than one percent
- ---------------
(1) Includes 1,000 shares owned by Mr. Joseph's wife as to which he
disclaims any beneficial interest and 57,000 shares which he has the right to
acquire within 60 days upon the exercise of stock options.
(2) For all directors (except for Messrs. Dennis and Joseph (see (1)
above)), includes the beneficial ownership of options which may be exercised
within sixty days as follows: Mr. Zakon -- 3,750 shares; Mr. Lemasters -- 7,500
shares; Mr. Ragone -- 2,500 shares; Mr. Fishman -- 1,250 shares; and Mr. Alden
- -- 11,250 shares.
(3) Includes 59,836 shares held by trusts of which Mr. Dennis is a trustee
in which neither Mr. Dennis nor any other director or officer has any beneficial
interest.
(4) Includes 1,500 shares owned by Mr. Alden's wife as to which he
disclaims any beneficial interest.
</TABLE>
During the past five years each director has had the principal occupation
or employment shown on the table except as follows:
4
<PAGE> 7
Mr. Lemasters has been Chairman of the Board, President and Chief Executive
Officer of Computer Products, Inc. since March 8, 1988. From 1985 to 1987 he was
President and Chief Executive Officer of Contel Corporation.
Mr. Ragone has been Partner -- Ampersand Specialty Materials Ventures since
April 1992 and was General Partner of Ampersand from May 1989 to April 1992.
Since July 1987 he has been Senior Lecturer, Department of Materials Science,
Massachusetts Institute of Technology.
Mr. Joseph was elected Chairman of the Board effective February 28, 1989.
He was elected Chief Executive Officer and President of the Company on February
29, 1988. For the period April 1985 to February 1988 he was with Communications
Satellite Corporation where he served as Executive Vice President and President
and Chief Operating Officer.
Mr. Zakon has been Managing Director, Bankers Trust Company since May,
1989. Prior to that he was associated with the Boston Consulting Group for more
than twenty years. He was elected Chairman of the Board of that firm in May,
1985 and for five years prior to that he was Chief Executive Officer.
Mr. Fishman has been President and Chief Operating Officer of Analog
Devices, Inc. since November, 1991 and he serves on its Board of Directors. He
served as Executive Vice President of that corporation for the period August,
1988 to November, 1991. For the six years prior to that he was Group Vice
President-Components with that corporation.
Mr. King has been Chairman of the Board of Standex International
Corporation since January, 1992, President of that corporation since August,
1984 and Chief Executive Officer of that corporation since July, 1985. He became
a director of the Company and member of the Committees effective July, 1993.
Mr. Crockett has been President and Chief Executive Officer of COMSAT since
February, 1992 and he serves on its Board of Directors. He was President and
Chief Operating Officer of that corporation for the period April 1991 to
February, 1992. For the four years prior to that he was President COMSAT World
Systems Division. He became a director of the Company and member of the
Committee effective February, 1994.
Mr. Curtin has been Executive Vice President of Cabot Corporation since
October, 1992 and he serves on its Board of Directors. He was Executive Vice
President and Chief Financial Officer of that corporation for the period July,
1989 to October, 1992. For the fifteen years prior to that he was President,
Chief Executive Officer and a director of Curtin & Co., Incorporated. He became
a director of the Company and member of the Committee effective February, 1994.
In addition, certain of these individuals serve as directors of other
publicly-held corporations as follows:
Mr. Ragone is a director of Cabot Corporation and SIFCO Industries
Incorporated.
Mr. Dennis is a director of Standex International Corporation. He is sole
owner of a professional corporation that is a partner of Hale and Dorr, which
has acted as general counsel to the Company for a number of years.
Mr. Alden is a director of Colgate-Palmolive Company, Digital Equipment
Corporation, Intermet Corporation and Sonesta International Hotels Corp.
Mr. Joseph is a director of Barnes Group Inc.
Mr. Zakon is a director of Arkansas-Best Freight Corporation, Autotote
Corporation, Hechinger Corporation and Laurentian Capital.
Mr. Fishman is a director of Chipcom Corporation.
5
<PAGE> 8
Mr. Crockett is a director or trustee of funds of The AIM Management Group,
Inc.
Mr. Curtin is a director of American Oil and Gas Corporation and Imperial
Holly Corporation.
BOARD AND COMMITTEE MEETINGS
In 1993 the Company's Board of Directors held six meetings. Each incumbent
director attended more than 75% of the aggregate number of such meetings and the
number of meetings of committees of the Board of which he was a member.
The Audit Committee, consisting of Messrs. Sloan (Chairman), Alden, Dennis,
Fishman, King and Lemasters, held three meetings during the year. The Audit
Committee reviews with the auditors the scope of the audit work performed and
questions arising in the course of such work, and inquiries as to other
pertinent matters such as the adequacy of internal accounting controls,
financial reporting, security and personnel staffing.
The Compensation Committee, which is responsible for determining the
compensation for the key executives of the Company and its subsidiaries, held
two meetings during the year. Its membership consists of Messrs. Alden
(Chairman), Dennis, Fishman, Lemasters, Ragone and Zakon.
The Nominating Committee, consisting of Messrs. Ragone (Chairman), Alden,
Joseph, King and Zakon, held one meeting during the year. The duties of the
Committee are to recommend the criteria for the composition and size of the
Board and to seek out and recommend nominees for Directors to be submitted to a
vote of shareholders. The Committee will consider nominees recommended in
writing by shareholders if certain information is provided regarding the
nominees. Recommendations must be received on or before November 24, 1994.
Shareholders who wish to recommend nominees for directors should submit such
recommendations to the Company's Clerk, 89 Forbes Boulevard, P.O. Box 448,
Mansfield, Massachusetts 02048, who will forward such recommendations to the
Nominating Committee.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission and the New York Stock Exchange initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company. Officers, directors and greater than ten-percent
shareholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file. To the Company's knowledge, based solely
on a review of the copies of such reports furnished to the Company and written
representations that no other reports were required, during the year ended
December 31, 1993 all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten-percent beneficial owners were complied
with.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT
EXECUTIVE COMPENSATION PHILOSOPHY
The Company's executive compensation program is designed to align executive
compensation with financial performance, business strategies and Company values
and objectives. This program seeks to enhance the profitability of the Company,
and thereby enhance shareholder value, by linking the financial interests of the
Company's executives with those of the shareholders. Under the guidance of the
Company's Compensation Committee of the Board of Directors, the Company has
developed and implemented an executive compensation program to achieve these
objectives while providing executives with compensation opportunities that are
competitive with companies of comparable size in related industries.
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<PAGE> 9
In applying this philosophy, the Compensation Committee has established a
program to accomplish the following objectives:
- attract and retain executives of outstanding abilities who are critical
to the long-term success of the Company.
- reward executives for achievement of internal Company goals as well as
for Company performance relative to industry performance levels.
- reward executives for long-term strategic management and the enhancement
of shareholder value by providing equity ownership in the Company.
Through these objectives, the Company integrates its compensation programs
with its annual and long-term strategic planning.
EXECUTIVE COMPENSATION PROGRAM
The Compensation Committee, which is comprised solely of non-employee
Directors, approves the executive compensation program on an annual basis,
including specified levels of compensation for all executive officers. The
Company's executive compensation program has been designed to implement the
objectives described above and is comprised of the following fundamental three
elements:
- a base salary that is determined by individual contributions and
sustained performance within an established competitive salary range.
- an annual cash bonus that is directly tied to corporate and business unit
financial performance measures as well as the achievement of individual
business-related objectives.
- a long-term incentive program that rewards executives when shareholder
value is created through an increase in the market value of the Company's
common stock or through significant performance achievements that enhance
the long-term success of the Company. Stock option grants and restricted
stock unit awards focus executives on managing the Company from the
perspective of an owner with an equity position in the business.
Each of these three elements of compensation is discussed below.
Base Salary. Base salary levels for the Company's executive officers are
determined based primarily on salary levels at companies of comparable size
within the electronics and electrical industry. Salary data for such
determinations is obtained through established outside independent services,
specializing in compensation surveys representing a significant number of
comparable industry companies, including two companies within the Peer Group
identified on page 12. Based upon these independent compensation surveys, the
Company establishes a base salary range for each executive officer. The
mid-point of each of the Company's executive officer's salary range is at least
equal to the level of compensation for the comparable position reported in the
surveys.
Salaries for executive officers are reviewed by the Compensation Committee
on an annual basis. In determining salary adjustments, the Compensation
Committee considers individual performance and contributions to the Company as
well as the executive officer's position within the base salary range.
Annual Incentive Compensation. Annual incentives for the Company's
executive officers are intended to reflect the Company's belief that management
can make significant contributions to enhance shareholder value by achieving
Company objectives and maximizing earnings. Accordingly, the Company has
developed a management bonus plan that awards cash bonuses based on the
achievement of certain objectives relating to profit-before-tax ("PBT"),
earnings per share, sales and cash flow. Under this program, bonus awards
consist
7
<PAGE> 10
of mandatory and discretionary segments, with such segments comprising 75% and
25%, respectively, of the potential award for each participant. The
discretionary segment of an award is based on individual accomplishments
measured against certain non-budgeted objectives (primarily inventory turns,
accounts receivable, expenses, capital, customer service, market share, safety
and environmental compliance and program management) and exceptional
contributions to the Company.
Bonuses for executive officers are awarded under this program based upon
PBT and cash flow objectives at the corporate level and based on PBT, sales
objectives and cash flow targets at the Company's various divisional levels.
Each division of the Company is assigned PBT, sales and cash flow objectives,
while overall PBT objectives, comprised of an aggregate of PBT objectives at the
divisional levels, are set at the corporate level. Participants in the bonus
program at the divisional level are subject to the above divisional objectives
and, similarly, participants at the corporate level are subject to the above
corporate level objectives. Bonuses for the Chief Executive Officer and Chief
Financial Officer of the Company are based on PBT and earnings per share
objectives at the corporate level.
No participants are eligible for a bonus until a minimum threshold of 75%
of the targeted objectives in any given year is achieved. Attainment of
thresholds of 75%, 80% or 90%, respectively, of the targeted objectives results
in bonus eligibility of 25%, 40% and 70%, respectively, of targeted bonus awards
for such year. For each participant in the bonus program, targeted bonus awards
in any given year are determined by multiplying a target incentive percentage by
such participant's base salary. Target incentive percentages increase for higher
positions within the Company.
The Compensation Committee meets in February of each year to review the
results for the prior fiscal year ending December 31. Bonuses, if any, are
determined at this time and paid based on the prior year's performance. Bonuses
were paid to three executive officers in 1993 based upon 1992 results. In
February 1994, the Committee awarded bonuses to executive officers, including
the Chief Executive Officer, based upon achieving certain objectives. Such bonus
amounts are included in the Summary Compensation Table for each named executive.
The Company believes that this bonus program provides an important link
between shareholder value and incentives paid to executive officers.
Long-Term Incentive Compensation. The Company's long-term incentive
compensation program is implemented through the grant of stock options and
restricted stock awards. This program is intended to align executive interests
with the long-term interests of shareholders by linking executive compensation
with shareholder enhancement. In addition, the program motivates executives to
improve long-term stock market performance by allowing them to develop and
maintain a significant, long-term equity ownership position in the Company's
Common Stock. Stock options are granted at prevailing market rates and will only
have value if the Company's stock price increases in the future. Stock option
grants vest in equal annual amounts over a five-year period. Further, executives
must be employed by the Company at the time of vesting in order to exercise the
options. To date, restricted stock awards have been minimal and have been
limited to individuals whose performance the Company believes can significantly
improve Company earnings.
The Company employs a formula to determine the number of shares subject to
option grants to executive officers in any given year. The targeted number of
shares to be covered by such option grants to each participant is based upon a
long-term compensation factor multiplied by base salary and then divided by the
present value of an assumed discounted future appreciation of the Common Stock.
The long-term compensation factor is based on the compensation survey data for
similar positions with companies of comparable size in related industries, as
discussed under "Annual Incentive Compensation" above.
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<PAGE> 11
Stock option awards are determined in December of each year by the
Compensation Committee (based upon the established range for each individual),
upon consideration of management recommendations for each participant, financial
results for the current fiscal year and prior stock option awards. With respect
to the Chief Executive Officer, the Compensation Committee reviews his
performance and determines an appropriate award, if any.
Chief Executive Officer Compensation. The Compensation Committee evaluates
the performance of the Chief Executive Officer on an annual basis and reports
their assessment to the outside members of the Board of Directors. Their
assessment of the Chief Executive Officer is based on a number of factors,
including the following: achievement of short and long-term financial and
strategic targets and objectives, considering factors such as sales, earnings
per share and PBT; Company position within the industries in which it competes,
including market share; overall economic climate and individual contribution to
the Company.
On January 3, 1991 the Company entered into an Employment Agreement with
Mr. Joseph, which provides for a three-year term, commencing on March 7, 1991,
renewable for subsequent two-year periods. This Agreement provides for a minimum
annual base salary of $420,000 as well as retirement, insurance, medical and
other fringe benefits. Mr. Joseph is also entitled to additional vesting under
the Company's retirement plan in the event of a change in control or termination
without cause. Before entering into this Agreement, an independent management
compensation consulting group, engaged by the Compensation Committee, reviewed
the proposed agreement and determined that the benefits to Mr. Joseph were
comparable to commitments and incentives offered by other companies of similar
size and that such Agreement was in the best interests of the Company's
shareholders.
Mr. Joseph's annual base salary was increased from $420,000 to $445,000
effective March 1, 1993. This increase in base salary was based upon the
improvement of the financial performance of the Company in 1992 compared to
1991. In addition, Mr. Joseph was awarded options to purchase 70,000 shares of
common stock in December, 1993 and a bonus of $350,000 in February, 1994, based
on 1993 earnings per share increase of 131% and profit before taxes increase of
142% compared to 1992. Such bonus was determined based upon PBT and earnings per
share objectives, as described above under "Annual Incentive Compensation."
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to public companies for compensation over $1 million
paid to the corporation's Chief Executive Officer and four other most highly
compensated executive officers. The Company intends to comply with the
provisions of Section 162(m).
COMPENSATION COMMITTEE
Vernon R. Alden, Chairman
Samuel S. Dennis 3d
Jerald G. Fishman
John N. Lemasters
David V. Ragone
Alan J. Zakon
9
<PAGE> 12
<TABLE>
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation
paid during each of the Company's last three fiscal years to the Company's Chief
Executive Officer and each of the Company's four other most highly compensated
officers, based on salary and bonus earned during 1993.
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------------- AWARDS
OTHER ---------------------
ANNUAL RESTRICTED ALL OTHER
COMPEN- STOCK COMPEN-
SATION AWARDS SATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1) ($)(2) OPTIONS ($)(3)
--------------------------- ---- --------- -------- ------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Marcel P. Joseph........................... 1993 $440,833 $350,000 $67,000 $ 60,150 70,000 $15,255
Chairman of the Board of Directors, 1992 420,000 -- 45,000 -- 60,000 19,781
Chief Executive Officer and President 1991 414,384 -- * -- 52,000 *
Anthony F. Lefkowicz....................... 1993 236,250 194,250 -- 36,090 13,000 3,205
Vice President and General Manager 1992 225,000 17,500 -- -- 19,000 4,398
Wiring Systems and Components Business 1991 199,428 * * 17,520 19,000 *
Larry E. Buffington........................ 1993 176,666 126,000 -- 48,120 15,000 1,259
Vice President and General Manager 1992 160,000 -- 17,568 -- 19,000 --
Communications Products Business 1991 72,771 (4) -- * -- -- *
Ellen B. Richstone......................... 1993 200,000 90,000 -- -- 11,000 --
Vice President and 1992 80,769 (5) -- -- 66,900 25,000 --
Chief Financial Officer 1991 -- -- * -- -- *
L. Ronald Hoover........................... 1993 236,250 -- -- 36,090 7,000 2,726
Vice President and General Manager 1992 225,000 -- -- 41,175 19,000 521
Interconnection Products Business 1991 69,039 (6) -- * -- 25,000 *
- ---------------
<FN>
(1) The amounts indicated for the named individuals include the incremental
cost to the Company for executive benefit programs and expenses associated with
use of a company car as follows: for 1993, Mr. Joseph, Executive Benefit,
$22,700, Company car expenses, $13,800, tax reimbursements, $26,400. While other
officers receive certain perquisites, such perquisites do not exceed the lesser
of $50,000 or 10% of such officer's salary and bonus. Information for years
prior to 1992 is not required to be disclosed.
(2) In March, 1993, the following named executive officers were awarded
restricted stock in the indicated amounts and values (valued at $12.13 per share
at March 1, 1993): Mr. Joseph, 5,000 shares, $60,150 value; Mr. Lefkowicz, 3,000
shares, $36,090 value; Mr. Buffington, 4,000 shares, $48,120 value; and Mr.
Hoover, 3,000 shares, $36,090 value. These awards will vest over a three-year
period. At December 31, 1993, the following named executive officers held
restricted stock in the indicated aggregate amounts and values (valued at $18.25
per share at December 31, 1993): Mr. Joseph, 5,000 shares, $91,250 value; Mr.
Lefkowicz, 3,000 shares, $54,750 value; Mr. Buffington, 4,000 shares, $73,000
value; Ms. Richstone, 6,000 shares, $109,500 value; and Mr. Hoover, 8,250
shares, $150,563 value. The values are calculated without giving effect to the
diminution in value attributable to the restrictions on such stock. No dividends
were paid in 1993 on the restricted stock reported in this column.
(3) The amounts indicated for the named individuals include the portion of
interest earned on certain deferred compensation above 120% of the applicable
federal rate and the Company's matching contribution of the Company's common
stock under the Savings and Retirement Plan as follows: Interest earned: Mr.
Joseph, $12,481; Mr. Lefkowicz, $3,205; Mr. Hoover, $171; Savings and Retirement
Plan contributions (valued at $18.25 per share at December 31, 1993): Mr.
Joseph, 152 shares, $2,774 value (vested 100%); Mr. Buffington, 69 shares,
$1,259 value (vested 20%); Mr. Hoover, 140 shares, $2,555 value (vested 20%).
(4) Mr. Buffington became employed by the Company in August 1991. Such
amount includes a hiring bonus of $10,000.
</TABLE>
10
<PAGE> 13
(5) Ms. Richstone became employed by the Company in November 1992. Such
amount includes a hiring bonus of $50,000.
(6) Mr. Hoover became employed by the Company in December 1991. Such amount
includes a hiring bonus of $50,000.
* Under the Commission's transition rules, no disclosure required.
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants in calendar year
1993 to each of the named executive officers.
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF % OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO EXERCISE PRICE APPRECIATION FOR
OPTIONS EMPLOYEES OR BASE OPTION TERM(2)
GRANTED IN FISCAL PRICE EXPIRATION --------------------------
NAME (#)(1) YEAR ($/SH) DATE 5% ($) 10% ($)
---- ---------- ---------- -------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Marcel P. Joseph........................ 70,000 21.3% $16.88 12/17/98 $ 331,100 $ 721,000
Anthony F. Lefkowicz.................... 13,000 4.0% 16.88 12/17/98 61,490 133,900
Larry E. Buffington..................... 15,000 4.6% 16.88 12/17/98 70,950 154,500
Ellen B. Richstone...................... 11,000 3.3% 16.88 12/17/98 52,030 113,300
L. Ronald Hoover........................ 7,000 2.1% 16.88 12/17/98 33,110 72,100
--------------------------------------------------------------------------------------------------------------------------
All Shareholders........................ N/A N/A N/A N/A 89,946,000 195,865,000
All Optionees........................... 328,525 100 15.38 -- 1,416,000 3,081,000
Optionee Gain as % of all Shareholders
Gain.................................... N/A N/A N/A N/A 1.6% 1.6%
--------------------------------------------------------------------------------------------------------------------------
- ---------------
<FN>
(1) The options set forth above become exercisable on a cumulative basis in
installments as to 25% of the shares commencing one year after the date of grant
with the balance becoming exercisable in three installments of 25% per year
thereafter.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains are
based on assumed rates of stock appreciation of 5% and 10% compounded annually
from the date the respective options were granted to their expiration date.
Actual gains, if any, on stock option exercises will depend on the future
performance of the common stock and the date on which the options are exercised.
</TABLE>
11
<PAGE> 14
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
The following table provides information on Option/SAR exercises in
calendar year 1993 by the named executive officers and the value of such
officers' unexercised Options/SARs at December 31, 1993.
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FY-END (#) AT FY-END ($)(1)
SHARES ACQUIRED VALUE ---------------------------- ----------------------------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Marcel P. Joseph............. 141,000 $726,600 57,000 154,000 $ 416,600 $ 733,200
Anthony F. Lefkowicz......... 50,250 233,200 18,250 41,000 135,500 232,000
Larry E. Buffington.......... 3,750 25,800 8,500 36,750 53,800 159,200
Ellen B. Richstone........... -- -- 6,250 29,750 43,800 146,400
L. Ronald Hoover............. 6,250 30,100 11,000 33,750 86,300 213,200
- ---------------
<FN>
(1) The closing price for the Company's common stock as reported by the New
York Stock Exchange on December 31, 1993 was $18.25 per share. Value is
calculated on the basis of the difference between the option exercise price and
$18.25 multiplied by the number of shares of common stock underlying the option.
</TABLE>
STOCK PERFORMANCE GRAPH
The following chart compares the yearly percentage change in the cumulative
total shareholder return on the Company's common stock during the five years
ended December 31, 1993 with the cumulative total return on the S&P 500 Index
and Peer Group Index. The Peer Group Index consists of Amp, Inc., Amphenol
Corp., Methode Electronics, Inc., Molex Inc., Robinson Nugent Inc. and Thomas &
Betts Corp. The comparison assumes $100 was invested on January 1, 1988 in the
Company's common stock and in each of the foregoing indices and assumes
reinvestment of dividends.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Augat Inc. S&P 500 Peer Group
<S> <C> <C> <C>
1988 100.00 100.00 100.00
1989 117.16 131.69 103.46
1990 85.42 127.60 106.57
1991 82.60 166.47 149.19
1992 107.03 179.25 152.77
1993 169.85 197.21 178.14
</TABLE>
12
<PAGE> 15
SEVERANCE AGREEMENTS
On September 19, 1989, the Board of Directors of the Company approved
Severance Agreements for all corporate officers elected by the Board of
Directors. The Board has further provided that the Severance Agreements may be
extended to other executives subject to its approval.
The purpose of the Agreements is to assure the continued dedication of such
executives of the Company to their duties in the event of an unsolicited tender
offer. In the event of a "change in control" of the Company, and the termination
of the executive's employment by the Company at any time within the 36-month
period thereafter (other than for cause or disability) or by the executive for
good reason (as defined in the Agreement), the executive shall be eligible to
receive a cash severance payment equal to the executive's full base salary plus
any other amounts earned through the date of termination, plus an additional
lump sum cash payment equal to one-twelfth of the executive's annual base salary
and bonuses multiplied by the number of months remaining after the date of
termination in the 36-month period that commenced upon the date of the change in
control; provided, however, that the minimum payment will be 12 months if the
termination occurs within the 36-month period after a change in control. In
addition, for 12 months after termination, the Company shall arrange to provide
each executive with life, disability, accident and health insurance benefits
similar to those previously maintained (subject to offset for any equivalent
benefits obtained from another employer during this period).
A "change in control" for the purpose of the Agreements includes any change
in control during the term of the Agreement. A change in control will be deemed
to have occurred if (a) a person acquires 30% or more of the voting power of the
Company's Common Stock, (b) if during any two consecutive years ending during
the term of the Agreement the Board members at the beginning of such period
cease to constitute a majority of the Board, (c) the stockholders approve a
merger or consolidation (other than recapitalizations or where the Company's
stock would represent more than 80% of the voting power of the resulting or
surviving entity), or (d) the stockholders approve a plan of complete
liquidation of the Company or an agreement for the sale of all or substantially
all of the Company's assets.
DIRECTORS' COMPENSATION
The Company's directors who are not full-time employees of the Company are
reimbursed for their expenses and receive a fee of $13,500 per year. In
addition, all such directors are compensated at the rate of $800 for each
directors' meeting attended and $700 for each committee meeting attended, with
the Chairmen of the various committees being compensated at the rate of $875 for
each meeting attended. Each non-employee director receives a mandatory grant of
options to purchase 5,000 shares of common stock at fair market value, on the
date he or she is elected, or reelected, to the Board of Directors. Such options
are for a five year term and vest 25% after one year with an additional 25% for
each subsequent year. Non-employee directors are not eligible to receive awards
of restricted stock, stock appreciation rights or any other options.
Under a deferred compensation plan for directors, each director has an
option to make an annual election to defer his compensation as a director and to
receive the deferred amounts in shares of the Company's common stock or cash
either after he ceases to be a director or after he retires from his principal
occupation. All deferred compensation is credited quarterly in shares of stock
of the Company based on their market value on the last day of each quarter.
Dividends paid by the Company are credited to the participants in the plan in
amounts equal to the cash dividends which the participant would have received
had he been the owner of the number of shares credited to his stock unit account
on the dates of payment. Mr. Lemasters elected to participate in this plan for
1993. As of December 31, 1993 Mr. Lemasters had deferred stock units of 8,119.
13
<PAGE> 16
RETIREMENT PROGRAM
The Company maintains a non-contributory Pension Plan (the "Plan") for the
benefit of its domestic employees. Eligible employees with one year of service
who have reached age 21 are covered by the Plan, which provides for pension
payments after retirement or termination of employment after reaching age 65 or
completion of five years of vested service.
Plan benefits are based on an employee's years of benefit service and
five-year average of base compensation rates in the years prior to retirement or
termination. Generally, the Plan provides for an annual life annuity benefit
upon retirement at age 65 equalling .95% of average compensation up to Social
Security Covered Compensation plus 1.35% of average compensation in excess of
Social Security Covered Compensation for each year of benefit service (up to 35
years). The Plan includes certain minimum benefit guarantees based upon prior
benefit formulas.
The Company also maintains a Supplementary Employee Retirement Plan (the
"SERP") for the benefit of its executives designated by the Board. The aggregate
annual pension payable from the SERP and the Plan is 60% of highest base salary
plus 50% of the management bonus earned in the same calendar year, in any of the
last five years of employment, prorated if service is less than 15 years,
reduced by 100% of Social Security and other qualified plan benefits. Such
benefits, unless optional forms are chosen, are paid as a life annuity, or as a
joint and survivor annuity, if the participant is married, at age 62.
<TABLE>
The table below shows the aggregate annual pension that would be payable
under the Plan and the SERP, prior to deduction for Social Security, under
various assumptions as to highest Plan salary and years of benefit service.
<CAPTION>
PENSION PLAN TABLE
------------------
YEARS OF BENEFIT SERVICE
--------------------------------------------
HIGHEST PLAN SALARY 5 10 15 OR MORE
- ------------------- --------- --------- ----------
<S> <C> <C> <C>
$160,000 .................................. $ 32,000 $ 64,000 $ 96,000
260,000 .................................. 52,000 104,000 156,000
360,000 .................................. 72,000 144,000 216,000
460,000 .................................. 92,000 184,000 276,000
560,000 .................................. 112,000 224,000 336,000
660,000 .................................. 132,000 264,000 396,000
</TABLE>
The salary used for the Plan and the SERP as of December 31, 1993 and the
approximate number of years of benefit service as of December 31, 1993 for
officers named in the table under Executive Compensation are: Marcel P. Joseph
$595,000, 6 years; Anthony F. Lefkowicz $262,500, 6 years; Larry E. Buffington
$223,000, 2 years; Ellen B. Richstone $245,000, 1 year; and L. Ronald Hoover
$225,000, 2 years.
PROPOSAL 2 -- APPROVAL OF 1994 STOCK PLAN
On February 15, 1994, the Board adopted, subject to shareholder approval,
the Company's 1994 Stock Plan (the "1994 Plan"). Under the terms of the 1994
Plan, the Company is authorized to make awards of restricted stock and to grant
incentive and non-statutory options to employees and directors of the Company to
purchase up to 750,000 shares of common stock, none of which have been granted
as of March 1, 1994. Any shares of the Company's common stock issued pursuant to
the 1994 Plan which are returned to the Company shall be available for future
awards under the 1994 Plan. The purpose of the 1994 Plan is to ensure that the
Company may continue to attract and retain key employees and directors who are
expected to contribute to the Company's growth and success. The maximum number
of shares of common stock for which options and restricted stock awards may be
granted under the Plan to any one individual during any calendar year is 70,000
shares for the Chief Executive Officer and 30,000 shares for all other
individuals.
14
<PAGE> 17
Because option grants under the 1994 Plan are discretionary, the Company
cannot now determine the number of options to be received by any particular
current executive officer, by all current executive officers as a group or by
nonexecutive officer employees or directors as a group. The number of such
options shall be determined by the Compensation Committee of the Board of
Directors, pursuant to the terms of the 1994 Plan. For additional information
concerning the ownership of options by the named executive officers of the
Company, see "Executive Compensation" above.
No restricted stock award shall be made if the award would cause the number
of shares subject to restricted stock awards under the Plan to exceed 3% of the
total outstanding shares of the Company's common stock.
The following summary of the 1994 Plan is qualified in its entirety by the
full text of the 1994 Plan, a copy of which may be obtained by stockholders of
the Company upon request directed to the Company's Treasurer at 89 Forbes
Boulevard, Mansfield, Massachusetts 02048.
ELIGIBILITY
All officers, directors and employees of the Company and its subsidiaries
are eligible to receive incentive stock options, non-statutory stock options and
restricted stock awards under the 1994 Plan. Non-employee directors are only
eligible to receive a mandatory grant of options to purchase 5,000 shares of
common stock, at fair market value, on the date he or she is elected or
reelected to the Board of Directors. Mandated options vest 25% after one year
with an additional 25% vesting for each subsequent year. An award of mandated
options will be reduced to the extent that a non-employee director receives a
grant of mandated options under another stock option plan maintained by the
Company. Non-employee directors are not eligible to receive awards of restricted
stock or any other options.
STOCK OPTIONS
Administration, Option Exercise and Price. The 1994 Plan will be
administered by a committee of at least two non-employee Directors which will
designate the optionees, option prices, dates of grant and terms of exercise. On
or after the first meeting of shareholders at which Directors are to be elected
that occurs after July 1, 1994, the committee members must also qualify as
"outside directors" for purposes of Section 162(m) of the Internal Revenue Code.
Any construction or interpretation of the terms and provisions of the 1994 Plan
by such committee shall be final and conclusive. Incentive and non-statutory
options issuable under the 1994 Plan shall expire no later than 5 years from the
date of grant. The exercise price may not be less than 100% of the fair market
value for incentive stock options and non-statutory options granted to
employees; provided, that the exercise price for an incentive stock option
awarded to a person owning 10% or more of the Company's common stock may not be
less than 110% of fair market value. Options granted under the 1994 Plan may
provide for the payment of the exercise price of such options by the delivery of
a check to the order of the Company in an amount equal to the exercise price of
such options, or by delivery to the Company of shares of common stock of the
Company already owned by the optionee having a fair market value equal in amount
to the exercise price of the options being exercised, or by any combination of
such methods of payment.
It is expected that options granted under the 1994 Plan will generally be
exercisable on a cumulative basis in installments as to 25% of the shares
commencing one year after the date of grant with the balance becoming
exercisable in three installments of 25% per year thereafter. Options are not
assignable or transferable except by will or the laws of descent and
distribution. An optionee may exercise the option, to the extent vested, up to
three months after the optionee ceases to be an employee, or up to four and
one-half years after the optionee's termination or retirement from the Board of
Directors in the case of mandated options to non-employee directors. If the
optionee becomes disabled, the optionee may exercise the option for a period of
six months
15
<PAGE> 18
after the date the optionee ceases to be employed by the Company because of such
disability. If the optionee dies while an employee of the Company, the optionee
or the optionee's representative may exercise the option, during the year
following the optionee's death.
Special Provisions for Incentive Stock Options. In accordance with the
provisions of the Tax Reform Act of 1986, the 1994 Plan provides that no
incentive stock option granted under the 1994 Plan can, together with any other
incentive stock option granted under any other plan, become exercisable for the
first time in any one calendar year for shares of common stock with an aggregate
fair market value (at the date of grant) of more than $100,000.
RESTRICTED STOCK AWARDS
Restricted stock awards entitle the participant to purchase common stock
from the Company under terms which provide for vesting over a period of at least
three years and a right of repurchase of unvested stock when the recipient's
relationship with the Company terminates. The Committee selects the recipients
of restricted stock awards and (i) determines the number of shares of common
stock to be issued and sold to the recipient, (ii) the price, which can be less
than the fair market value, but not less than par value, of the common stock,
and (iii) the vesting schedule for such shares. No vesting may occur until three
years have elapsed from the date of grant. The Committee may also subject a
grant to such additional conditions as it deems necessary to obtain and receive
a tax deduction for the Company. The recipient may not sell, transfer or
otherwise dispose of such stock until it vests. The price set by the Board shall
be paid in cash or by check payable to the order of the Company at the time that
the award is accepted by the recipient. Upon termination of the recipient's
employment with the Company, whether such termination is voluntary or
involuntary, with or without cause, or because of the death or disability of the
recipient, the Company shall have the right and option for a period of three
months following any such termination to repurchase for cash those shares which
are not vested on the termination date at a price equal to their original
purchase price. It is anticipated that the repurchase right will generally
terminate as to 100% of the shares three years from the date of the award.
NO REPRICING
The Board has no authority, with or without the consent of affected option
holders, to cancel outstanding options and issue new options with a lower
exercise price in substitution for the cancelled options.
MERGERS, ETC.
In the event (a) of any merger or consolidation in which the outstanding
shares of common stock are exchanged for securities, cash or property of a third
party (other than any merger or consolidation with any wholly-owned subsidiary
of the Company), (b) that all or substantially all of the assets or more than
50% of the outstanding voting stock of the Company is acquired by any other
person or entity, or (c) of a liquidation of the Company, the Board, or the
board of directors of any corporation assuming the obligations of the Company,
shall provide for such successor corporation to assume the obligations of the
Company with regard to awards and, as to outstanding options, shall provide that
all outstanding options shall become exercisable in full immediately prior to
such event (except as otherwise provided in the option agreement) and shall
either (i) provide that all unexercised options shall be assumed, or equivalent
options shall be substituted by the acquiring or successor corporation (or an
affiliate thereof), provided that any such options substituted for Incentive
Stock Options shall meet the requirements of Section 424(a) of the Internal
Revenue Code (the "Code"), or (ii) upon written notice to the optionees, provide
that all unexercised options will terminate immediately prior to the
consummation of such merger, consolidation, acquisition, reorganization or
liquidation unless exercised by the optionee within a specified number of days
(but not less than fifteen days) following the date of such notice.
16
<PAGE> 19
The Company may grant options under the Plan in substitution for options
held by employees of another corporation who become employees of the Company, or
a subsidiary of the Company, as the result of a merger or consolidation of the
employing corporation with the Company or a subsidiary of the Company, or as a
result of the acquisition by the Company, or one of its subsidiaries, of
property or stock of the employing corporation. The Company may direct that
substitute options be granted on such terms and conditions as the Board
considers appropriate in the circumstances.
AMENDMENT AND TERMINATION OF THE PLAN
The Board may at any time amend or modify the terms of the 1994 Plan in any
respect except that, without the approval of the shareholders of the Company,
the Board may not materially increase the benefits accruing to participants
under such plan, materially increase the number of shares which may be issued
under such plan, increase individual limits on grants of options or restricted
stock units, or materially modify the requirements as to eligibility for
participation under such plan.
WITHHOLDING TAXES AND NET EXERCISE OPTIONS
Subject to the discretion of the Company, an optionee may elect to satisfy
federal, state or local withholding tax requirements incurred in connection with
the exercise of an option, in whole or in part, by (i) causing the Company to
withhold shares of common stock which would otherwise be issued to the optionee
pursuant to the exercise of an option, or (ii) delivering to the Company shares
of common stock already owned by the optionee.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the federal income tax treatment of incentive
stock and non-statutory options.
Non-Statutory Stock Options. No taxable income is recognized by the
optionee upon the grant of a non-statutory stock option. The optionee must
recognize as ordinary income in the year in which the option is exercised the
amount by which the fair market value of the purchased shares on the date of
exercise exceeds the option price. However, on the exercise of such option by an
officer or director of the Company, no income will be recognized by such
optionee until the sale of the stock would not subject the officer to suit under
Section 16(b) of the Securities Exchange Act of 1934, and the income then
recognized will include any appreciation in the value of the shares during such
period unless the officer or director makes an election under Section 83(b) of
the Code to have the difference between the exercise price and fair market value
at the time of exercise recognized as ordinary income as of the time of
exercise. The Company will be entitled to a business expense deduction equal to
the amount of ordinary income recognized by the optionee. Any additional gain or
any loss recognized upon the subsequent disposition of the purchased shares will
be a capital gain or loss, and will be a long-term gain or loss if the shares
are held for more than one year.
Incentive Stock Options. As in the case of non-statutory options, no
taxable income will be recognized by the optionee upon the grant of an incentive
stock option. However, unlike non-statutory options, no taxable income will be
recognized by the optionee upon the exercise of an incentive stock option, and
no corresponding expense deduction will be available to the Company. Generally,
if an optionee holds shares acquired upon the exercise of incentive stock
options for the later of (i) two years from the grant of the option, or (ii) one
year from the date of transfer of the purchased shares to the optionee (the
"Statutory Holding Period"), any gain recognized by the optionee on a subsequent
sale of such shares will be treated as long-term capital gain. The gain
recognized upon the sale of the stock is the difference between the option price
and the sale price of the stock. The net federal income tax effect on the holder
of incentive stock options is to defer,
17
<PAGE> 20
until the stock is sold, taxation of any increase in the stock's value from time
of grant to the time of exercise, and to treat such increase as capital gain.
If the optionee sells the shares prior to the expiration of the Statutory
Holding Period, the optionee will realize income taxed at ordinary income tax
rates in an amount equal to the lesser of (i) the value of the shares on the
date of exercise less the option price, or (ii) the amount realized on the date
of sales less the option price, and the Company will receive a corresponding
business expense deduction. The amount by which the proceeds of sale exceed the
fair market value of shares on the date of exercise will be treated as long-term
capital gain if the shares are held for more than one year prior to the sale and
as short-term capital gain if the shares are held for a shorter period. In the
case of a sale where a loss, if sustained, would have been recognized, the
amount of the optionee's income, and the amount of the Company's corresponding
expense deduction, will not exceed the difference between the sale price and the
adjusted basis of the shares.
For purposes of the "alternative minimum tax" applicable to individuals the
exercise of an incentive stock option is treated the same as a non-qualified
stock option. Thus, in the year of option exercise an optionee must generally
include in his alternative minimum taxable income the difference between the
exercise price and the fair market value of the stock on the date of exercise,
and in the year of sale any additional gain or loss is included in alternative
minimum taxable income. The alternative minimum tax is imposed upon an
individual's alternative minimum taxable income at a rate of 26% or 28%,
depending on the amount of alternative minimum taxable income, but only to the
extent that such tax exceeds the taxpayer's regular income tax liability for the
taxable year.
If an optionee transfers "statutory option stock" (which includes stock
acquired through the exercise of an incentive stock option) to exercise stock
options prior to the expiration of the applicable holding periods, the optionee
will recognize ordinary income and the Company will receive a corresponding
business expense deduction in an amount equal to the lesser of (i) the fair
market value of the statutory option stock on the date it was acquired less its
exercise price, or (ii) the fair market value of such statutory option stock on
the date of the exchange less its adjusted basis. The amount by which the fair
market value of the statutory option stock on the date of the exchange exceeds
the fair market value on the date it was acquired will be treated as long-term
or short-term capital gain.
Restricted Stock Awards. If an award is subject to forfeiture provisions
and restrictions on transfer (a "Restricted Award"), neither the Company nor the
recipient of an award will realize any federal tax consequences at the time such
award is granted under the 1994 Plan unless the recipient makes an election
under Section 83(b) of the Code. If the recipient of a Restricted Award makes a
Section 83(b) election within 30 days of the date of grant, or if the recipient
is granted an award that is not subject to forfeiture provisions and
restrictions on transfer, then the recipient will recognize ordinary income, for
the year in which the award is received, in an amount equal to the difference
between the fair market value of the common stock at the time the award is made
and the purchase price paid for the common stock. If the Section 83(b) election
is not made with respect to a Restricted Award, the recipient will recognize
ordinary income, at the time that the forfeiture provisions and restrictions on
transfer lapse (or, if later, the earliest date upon which an officer would be
able to sell such stock without being subject to suit under Section 16(b) of the
Securities Exchange Act of 1934), in an amount equal to the difference between
the fair market value of the common stock at that time and the original purchase
price per share. If the recipient holds the stock for more than one year, the
recipient will recognize capital gain at the time of sale on the difference
between the basis (the price paid plus any taxed amount) and the sales price.
The Company will be entitled to deduct, as compensation expense, the same amount
as the recipient shall include as ordinary income and such deduction shall take
place in the Company's tax year which includes the last day (generally December
31) of the recipient's tax year in which the income is recorded for federal tax
purposes.
18
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Compliance with Internal Revenue Code Section 162(m). As noted above, in
the discussion on page 9, the Compensation Committee intends to comply with the
provisions of Section 162(m).
RECOMMENDATION
The 1994 Plan will not be effective unless approved by the affirmative vote
of a majority of the shares of common stock present or represented by proxy at
the annual meeting. The Board of Directors believes that the 1994 Plan should be
approved in order to assist the Company in attracting and retaining employees of
ability. The Board recommends a vote FOR the proposal.
PROPOSAL 3 -- RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected Deloitte & Touche to act as the
Company's auditor for the current fiscal year, subject to the ratification of
such selection by the shareholders at their annual meeting. Proxies will be
voted in favor of such ratification unless a contrary intent is indicated.
Representatives of Deloitte & Touche are expected to be present at the
Annual Meeting of Shareholders. They will have an opportunity to make a
statement if they desire to do so, and will also be available to respond to
appropriate questions from shareholders.
SHAREHOLDER PROPOSALS
Shareholder proposals for inclusion in proxy materials for the 1995 Annual
Meeting should be addressed to the Company's Clerk, 89 Forbes Boulevard, P.O.
Box 448, Mansfield, Massachusetts 02048 and must be received on or before
November 24, 1994.
OTHER MATTERS
Management knows of no other matters which may come before the meeting. If
any other matters are properly presented, it is the intention of the persons
named in the proxy to vote or otherwise act in accordance with their best
judgment.
EACH YEAR THE COMPANY FILES AN ANNUAL REPORT ON FORM 10-K WITH THE SECURITIES
AND EXCHANGE COMMISSION. THIS REPORT INCLUDES A COPY OF THE COMPANY'S AUDITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1993 AS WELL AS ADDITIONAL
DESCRIPTION OF THE BUSINESS, FINANCIAL DATA, ETC. ANY SHAREHOLDER MAY OBTAIN A
COPY OF THE 10-K REPORT WITHOUT EXHIBITS AT NO CHARGE BY WRITING TO ELLEN B.
RICHSTONE, AT AUGAT INC., 89 FORBES BOULEVARD, POST OFFICE BOX 448, MANSFIELD,
MASSACHUSETTS 02048.
By order of the Board of Directors
THOMAS E. NEELY, Clerk
March 24, 1994
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PROXY AUGAT, INC. PROXY
ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICTED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Marcel P. Joseph and Thomas E. Neely,
and each of them with full power of substitution to represent and vote all
shares of stock which the undersigned would be entitled to vote, if personally
present at the Annual Meeting of Shareholders of Augat Inc. to be held at The
Enterprise Room, State Street Bank and Trust Company, 5th Floor, 225 Franklin
Street, Boston, Massachusetts, on Tuesday, April 26, 1994 at 1:30 P.M. Eastern
Time and at any adjournments thereof, with respect to the matters indicated on
this proxy.
THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3 UNLESS
INSTRUCTIONS TO THE CONTRARY ARE INDICATED ON THE REVERSE SIDE OF THIS CARD.
(Continued and to be signed on reverse side)
FOLD AND DETACH HERE
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS:
<S> <C>
PROPOSAL NO.1. The Election of three Directors in Class I. Check the box marked "Withheld" if you wish to withhold your
vote with respect to any individual nominee or nominees, and write his or their names in the space provided.
FOR WITHHELD NOMINEES: Marcel P. Joseph, Alan J. Zakon and Bruce L. Crockett
INSTRUCTIONS: To withhold authority to vote for one or more individual nominees write their names in the
space provided below.
/ / / / ----------------------------------------------------------------------------------------------------------
PROPOSAL NO 2. PROPOSAL NO. 3. A proposal to ratify In their discretion, the proxies are authorized
Approval of 1994 the selection of Deloitte & to vote upon such other matters as may come before
Stock Plan. Touche as the Company's auditor. the meeting or any adjournment thereof.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
/ / / / / / / / / / / /
Dated: _____________________________________, 1994
__________________________________________________
__________________________________________________
(sign above)
Please sign exactly as your name appears opposite.
Each joint owner must sign.
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