<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $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 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / 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:
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<PAGE> 2
AUGAT INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 23, 1996
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 23, 1996 at 1:30 P.M. for the following purposes:
1. To elect two Directors in Class II to serve until the 1999 Annual
Meeting of Shareholders or until their successors are elected and
qualify.
2. To consider and act upon a proposal to approve the 1996 Stock Plan.
3. To consider and act upon a proposal to approve the 1996 Stock Retainer
Plan for Nonemployee Directors.
4. To consider and act upon a proposal to approve the 1996 Stock Bonus Plan
for Senior Executives.
5. To consider and act upon a proposal to ratify the employment of Deloitte
& Touche LLP as the Company's auditor for 1996.
6. 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 1, 1996 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 25, 1996
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 23, 1996
SOLICITATION OF PROXIES
This Proxy Statement is being furnished on or about March 25, 1996 to all
shareholders of Augat Inc. (the "Company") of record on March 1, 1996 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 23, 1996, 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, 1995
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 1, 1996, the record date for determining
the shareholders entitled to vote at the annual meeting, there were outstanding
19,806,450 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 1996 Stock
Plan, the 1996 Stock Retainer Plan for Nonemployee Directors, the 1996 Stock
Bonus Plan for Senior Executives and the ratification of the selection by the
Board of Directors of Deloitte & Touche LLP as the Company's auditor for 1996.
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 forward proxy material to their principals or customers who are the
beneficial owners of shares, and will reimburse them for their expenses.
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
The following table sets forth certain information, as of March 1, 1996,
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>
Fidelity Management & Research Group............................... 1,291,720(2) 6.4
82 Devonshire Street
Boston, Massachusetts 02109
Jurika & Voyles Inc. .............................................. 1,258,675(2) 6.3
1999 Harrison Street
Lake Merritt Plaza
Suite 700
Oakland, CA 94612
Norwest Corporation................................................ 1,089,690(2) 5.4
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479
Brandywine Asset Management, Inc................................... 990,245(2) 5.0
3 Christina Centre
201 North Walnut Street, Suite 1200
Wilmington, Delaware 19801
William R. Fenoglio................................................ 66,000(3) (a)
President and Chief Executive Officer
Larry E. Buffington................................................ 28,250(3) (a)
Vice President and General Manager
Communication Products Business
Sam Smookler....................................................... 7,500(3) (a)
Vice President and General Manager
Interconnection Products Business
L. Ronald Hoover................................................... 24,602(3) (a)
Vice President Business and
Technology Development
Anthony F. Lefkowicz............................................... 22,075(3) (a)
Vice President and General Manager
Wiring Systems and Components Business
All directors and officers as a group (25 persons)................. 670,883(4) 3.3
<FN>
- ---------------
(a) Less than one percent
(1) Including as shares outstanding those which officers and directors may
acquire within 60 days upon the exercise of stock options.
(2) The above information is based upon a Schedule 13D or 13G filed with the
Securities and Exchange Commission as of December 31, 1995.
(3) The amounts include the following shares that may be acquired within 60 days
pursuant to outstanding stock options: William R. Fenoglio, 25,000 shares;
Larry E. Buffington, 17,250 shares; Sam Smookler, 5,000 shares; L. Ronald
Hoover, 17,450 shares; and Anthony F. Lefkowicz, 18,075 shares.
</TABLE>
2
<PAGE> 5
(4) The number of shares stated as being beneficially owned by all directors and
officers as a group includes 273,187 shares with respect to which beneficial
ownership may be acquired within 60 days upon the exercise of such options,
and includes an aggregate of 209,629 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 II expires this year. Vernon R. Alden, Samuel S. Dennis, 3d and Thomas L.
King will not seek re-election to the Board at the annual meeting. Messrs. Alden
and Dennis had seventeen and twenty-seven years of service, respectively. The
Board of Directors has set the number of directors in Class II at two, and it is
proposed that the following individuals be elected to the Board of Directors in
that class:
John D. Curtin, Jr. and Thomas C. McDermott
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 II 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 two.
<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 1, 1996, is as follows:
<CAPTION>
SHARES OF PERCENTAGE
FIRST COMMON STOCK OF
BECAME BENEFICIALLY OUTSTANDING
NAME AND PRINCIPAL OCCUPATION AGE DIRECTOR OWNED COMMON STOCK
- ------------------------------------------------ --- -------- ------------ ------------
<S> <C> <C> <C> <C>
Class II Nominees -- Term to Expire in 1996
John D. Curtin, Jr.*............................ 63 1994 4,500(1) (a)
Chairman and Chief Executive Officer,
Cabot Safety Corporation
Thomas C. McDermott............................. 59 1996 -- (a)
Chairman, President and Chief Executive
Officer,
Gould Pumps, Inc.
Class I Directors -- Term to Expire in 1997
Bruce L. Crockett*.............................. 51 1994 3,000(1) (a)
President and Chief Executive Officer,
COMSAT Corporation
Marcel P. Joseph#............................... 60 1988 142,639(2) (a)
Chairman of the Board
Alan J. Zakon#*................................. 60 1989 13,000(1) (a)
Director of several corporations,
Former Chairman, Boston Consulting Group
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
SHARES OF PERCENTAGE
FIRST COMMON STOCK OF
BECAME BENEFICIALLY OUTSTANDING
NAME AND PRINCIPAL OCCUPATION AGE DIRECTOR OWNED COMMON STOCK
- ----------------------------- --- -------- ------------ ------------
<S> <C> <C> <C> <C>
Class III Directors -- Term to Expire in 1998
William R. Fenoglio.................................... 56 1994 66,000(1) (a)
President and Chief Executive Officer
Jerald G. Fishman+..................................... 50 1992 5,000(1) (a)
President and Chief Operating Officer,
Analog Devices, Inc.
John N. Lemasters+..................................... 62 1988 6,750(1) (a)
Director of several corporations,
Former Chief Executive Officer, Contel Corporation
David V. Ragone#*...................................... 65 1979 12,000(1) (a)
Partner -- Ampersand
Specialty Materials Ventures and Senior Lecturer,
Department of Materials Science,
Massachusetts Institute of Technology
<FN>
- ---------------
+ Member of Compensation Committee
* Member of Audit Committee
# Member of Nominating Committee
(a) Less than one percent
(1) For all directors (other than Mr. Joseph), includes the beneficial ownership
of options which may be exercised within 60 days as follows: Mr.
Curtin -- 2,500 shares; Mr. Crockett -- 2,500 shares; Mr. Zakon -- 7,500
shares; Mr. Fenoglio -- 25,000 shares; Mr. Fishman -- 5,000 shares; Mr.
Lemasters -- 6,250 shares; Mr. Ragone -- 6,250 shares.
(2) Includes 1,000 shares owned by Mr. Joseph's wife as to which he disclaims
any beneficial interest and 73,000 shares which he has the right to acquire
within 60 days upon the exercise of stock options.
</TABLE>
During the past five years each director has had the principal occupation
or employment shown on the table except as follows:
Mr. Curtin has been Chairman of the Board and Chief Executive Officer of
Cabot Safety Corporation since April 1994. He was Executive Vice President of
Cabot Corporation for the period October 1992 to July 1995 and served 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.
Mr. McDermott has been Chairman of the Board of Gould Pumps, Inc. since May
1995 and President and Chief Executive Officer of that corporation since June
1994. For the period 1986 to 1993, he was with Bausch & Lomb, Inc. serving as
President and Chief Operating Officer of that corporation. He became a director
of the Company effective February 1996.
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.
Mr. Joseph was elected Chairman of the Board effective February 28, 1989.
He was elected President and Chief Executive Officer of the Company on February
29, 1988 and retired as President and Chief Executive Officer on December 20,
1994.
4
<PAGE> 7
Mr. Zakon has been non-executive Vice Chairman of the Board, Autotote
Corporation since May 1995. He was Managing Director, Bankers Trust Company from
May 1989 to April 1995.
Mr. Fenoglio was elected President and Chief Operating Officer of the
Company on September 6, 1994 and on December 20, 1994, he was elected Chief
Executive Officer of the Company. For the period 1985 to 1994, he was with the
Barnes Group, Inc. serving as President and Chief Operating Officer of that
corporation from 1985 to 1991 and Chief Executive Officer from 1991 to 1994. For
twenty-four years prior to that he was with the General Electric Company serving
in various management positions, the last being Vice President and General
Manager of the Motor Division.
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.
Mr. Lemasters was Chairman of the Board, President and Chief Executive
Officer of Computer Products, Inc. from March 1988 to August 1994. Previously,
he served as 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.
In addition, certain of these individuals serve as directors of other
publicly-held corporations as follows:
Mr. Curtin is a director of Imperial Holly Corporation.
Mr. McDermott is a director of A.T. Cross Company.
Mr. Crockett is a director or trustee of funds of The AIM Management Group,
Inc. and a director of Ascent Entertainment Group and ACE Limited.
Mr. Joseph is a director of Barnes Group, Inc.
Mr. Zakon is a director of Arkansas-Best Freight Corporation, Autotote
Corporation and Hechinger Corporation.
Mr. Fenoglio is a director of Southern New England Telephone Co.
Mr. Fishman is a director of Kollmorgen Corp. and SQA Inc.
Mr. Lemasters is a director of Computer Products Inc. and Dialogic Inc.
Mr. Ragone is a director of Cabot Corporation and SIFCO Industries
Incorporated.
BOARD AND COMMITTEE MEETINGS
In 1995 the Company's Board of Directors held seven meetings. Each
incumbent director attended more than 85% of the aggregate number of such
meetings. With respect to meetings of committees of the Board, each committee
member attended all the meetings of the committee of which he was a member.
The Audit Committee, consisting of Messrs. Crockett (Chairman), Curtin,
Ragone, and Zakon, 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.
5
<PAGE> 8
The Compensation Committee, which is responsible for determining the
compensation for the key executives of the Company and its subsidiaries, held
three meetings during the year. Its membership consists of Messrs. Alden
(Chairman), Dennis, Fishman, King and Lemasters.
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 25, 1996.
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.
COMPLIANCE WITH SECTION 16(A) OF SECURITIES EXCHANGE ACT OF 1934
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, 1995 all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten-percent beneficial owners were complied
with, except that a report of change in ownership of common stock was filed late
by the Company on behalf of Mr. Larry Buffington, Vice President and General
Manager, Communication Products Business.
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.
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 Company goals.
- reward executives for long-term strategic management and the enhancement
of shareholder value by providing equity ownership in the Company.
6
<PAGE> 9
- align executive and shareholder interest by requiring ownership of
Company stock.
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. 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
competitive with 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") and
earnings per share ("EPS"). Under this program, bonus awards consist 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, 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 EPS at the corporate level and based on PBT at the Company's various
divisional levels. Each division of the Company is assigned a PBT objective.
Bonuses for participants in the bonus program at the divisional level are based
70% on the division objective and 30% on the Corporate objective. Additionally,
each division's PBT result is adjusted,
7
<PAGE> 10
either positively or negatively, on how well assets related to accounts
receivable, accounts payable and inventory are managed.
No participants are eligible for a bonus until a minimum threshold of 75%
of the targeted corporate and divisional objectives in any given year are
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 all executive officers in 1995 based upon 1994 results. In February
1996, the Committee awarded bonuses to eligible executive officers, based upon
achieving certain financial 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.
In accordance with the Compensation Committee's policy of aligning the
interests of executives with the interests of shareholders, 50% of an
executive's bonus will be paid in the form of Augat common stock and 50% will be
paid in cash. Any bonus deferred under the Deferred Compensation Plan will be
credited to the account of an executive in units of Augat common stock. See
Proposal No. 4 for greater details. The 1995 bonus was paid in a similar manner
except that executives could allocate the 50% stock portion between their
deferred and nondeferred bonuses.
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.
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.
8
<PAGE> 11
Stock Ownership Requirements. In accordance with the Compensation
Committee's policy of furthering the alignment of the interests of the
executives with the interests of the shareholders, the Compensation Committee
has instituted stock ownership requirements for officers. Each officer, except
the Chief Executive Officer, will be required to own Augat common stock
equivalent in value to one times his or her base compensation. The ownership
requirement for the Chief Executive Officer is three times his base
compensation. These requirements must be met no later than the year 2000 or, in
the case of new officers, five years after becoming an officer. All common stock
of Augat in which an executive has a beneficial interest will be counted. Thus,
common stock in which the officer has an interest individually under the
Company's 401(k) plan or in notational units under the Deferred Compensation
Plan will be taken into account.
Chief Executive Officer Compensation. The Compensation Committee evaluates
the performance of the Chief Executive Officer on an annual basis and reports
its assessment to the outside members of the Board of Directors. The Committee's
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 September 6, 1994, the Company entered into an Employment Agreement with
William R. Fenoglio pursuant to which Mr. Fenoglio will serve as President and
Chief Operating Officer and, since December 20, 1994, as Chief Executive
Officer. The Agreement provides for a three-year term, renewable for a
subsequent two-year period. Mr. Fenoglio will receive a minimum annual salary of
$400,000, as well as retirement, insurance, medical and other fringe benefits.
Mr. Fenoglio was awarded a bonus of $80,000 in February 1996 based upon the
achievement of PBT and EPS objectives discussed above under "Annual Incentive
Compensation." The award of this bonus reflected the achievement of certain
financial performance objectives which established eligibility for approximately
one-third of the target bonus award.
COMPLIANCE WITH THE 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 $1 million
paid during any year to the corporation's Chief Executive Officer and four other
most highly compensated executive officers. The Company intends to comply with
the provisions of Section 162(m).
COMPENSATION COMMITTEE
Vernon R. Alden, Chairman*
Samuel S. Dennis 3d*
Jerald G. Fishman
Thomas L. King*
John N. Lemasters
* Retiring from the Company's Board of Directors as of this annual meeting.
9
<PAGE> 12
SUMMARY COMPENSATION TABLE
<TABLE>
The following table sets forth certain information regarding compensation
paid during each of the Company's last three fiscal years to the Company's Chief
Executive Officer and each of the Company's four other most highly compensated
officers, based on salary and bonus earned during 1995.
<CAPTION>
LONG TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION -----------------------
------------------------------------------ RESTRICTED NUMBER OF
OTHER ANNUAL STOCK SECURITIES ALL OTHER
COMPENSATION AWARDS UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1) ($)(2) OPTIONS ($)(3)
- --------------------------- ---- --------- -------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
William R. Fenoglio...... 1995 $400,000 $ 80,000 -- $ 89,400 50,000 $18,900
President and Chief 1994 130,400 115,000 -- 347,250 100,000 113
Executive Officer (4) 1993 -- -- -- -- -- --
Larry E. Buffington...... 1995 221,666 55,000 -- 35,760 20,000 7,797
Vice President and 1994 200,833 110,000 -- 63,090 20,000 9,109
General Manager -- 1993 176,666 126,000 -- 48,120 15,000 1,259
Communications
Products Business
Sam Smookler............. 1995 186,154 85,000 -- 26,820 32,500 1,437
Vice President and
General Manager --
Interconnection
Products Business(5)
L. Ronald Hoover......... 1995 238,500 31,000 -- -- 16,500 9,115
Vice President 1994 238,500 65,000 -- -- 11,800 11,791
Business and 1993 236,250 -- -- 36,090 7,000 2,726
Technology
Development
Anthony F. Lefkowicz..... 1995 266,666 -- -- -- -- 9,542
Vice President and 1994 248,083 126,000 -- 21,030 21,300 14,096
General Manager -- 1993 236,250 194,250 -- 36,090 13,000 3,205
Wiring Systems and
Components Business
<FN>
- ---------------
(1) While officers receive certain executive perquisites, such perquisites do
not exceed the lesser of $50,000 or 10% of such officer's salary and bonus.
(2) The following named executive officers were awarded restricted stock in the
indicated amounts and values (valued at $17.88 per share at February 1,
1996).
</TABLE>
<TABLE>
<CAPTION>
NO. OF SHARES VALUE
------------- -------
<S> <C> <C>
Mr. Fenoglio...................................... 5,000 $89,400
Mr. Buffington.................................... 2,000 35,760
Mr. Smookler...................................... 1,500 26,820
</TABLE>
Dividends are paid to all recipients of restricted stock awards at the same
time and at the same rate as paid to all shareholders. The values are calculated
without giving effect to the diminution in value attributable
10
<PAGE> 13
to the restrictions on such stock. The number and value of the aggregate
restricted stock holdings as of December 31, 1995, based on the closing market
price of the Common Stock on December 29, 1995 of $17.13, are as follows:
<TABLE>
<CAPTION>
NO. OF SHARES VALUE
------------- --------
<S> <C> <C>
Mr. Fenoglio..................................... 20,000 $342,600
Mr. Buffington................................... 6,334 108,501
Mr. Smookler..................................... 1,000 17,130
Mr. Hoover....................................... 2,000 34,260
Mr. Lefkowicz.................................... 4,000 68,520
</TABLE>
<TABLE>
(3) Amounts reported in this column for 1995 are comprised of the following
items:
<CAPTION>
VALUE OF
MATCH-SAVINGS AND INTEREST SPLIT-DOLLAR
RETIREMENT DEFERRED LIFE INSURANCE
PLAN(a) COMPENSATION(b) PREMIUMS(c)
----------------- --------------- --------------
<S> <C> <C> <C>
Mr. Fenoglio.................. $1,062 $ 433 $17,405
Mr. Buffington................ 1,284 1,083 5,430
Mr. Smookler.................. -- 8 1,429
Mr. Hoover.................... 1,302 298 7,515
Mr. Lefkowicz................. -- 3,905 5,637
<FN>
- ---------------
(a) Represents the Company's matching contribution of Common Stock
under the Savings and Retirement Plan.
(b) Represents the portion of interest earned on certain deferred
compensation above 120% of the applicable federal rate.
(c) Represents the present value calculated for the net premiums paid
by the Company and treated as an interest-free loan.
</TABLE>
(4) Elected President and Chief Operating Officer, effective September 6, 1994
and elected Chief Executive Officer, effective December 20, 1994.
(5) Elected Vice President and General Manager -- Interconnection Products
Business, effective February 7, 1995.
11
<PAGE> 14
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants in calendar year
1995 to each of the named executive officers.
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENTAGE ANNUAL RATES OF
SECURITIES OF TOTAL STOCK PRICE
UNDERLYING OPTIONS EXERCISE APPRECIATION FOR
OPTIONS GRANTED TO OR BASE OPTION TERM(2)
GRANTED EMPLOYEES IN PRICE EXPIRATION --------------------------
NAME (1) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- --------------------------- ---------- ------------ -------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
William R. Fenoglio........ 50,000(3) 10.1% $15.25 12/19/2000 $ 213,500 $ 465,000
Larry E. Buffington........ 20,000 4.5 15.25 12/19/2000 85,400 186,000
Sam Smookler............... 15,000 3.4 19.63 4/25/2000 82,500 179,550
17,500 3.6 15.25 12/19/2000 74,725 162,750
L. Ronald Hoover........... 16,500(3) 3.3 15.25 12/19/2000 70,455 153,450
Anthony F. Lefkowicz....... -- -- -- -- -- --
All Shareholders........... N/A N/A N/A N/A 88,013,000 191,850,000
All Optionees.............. 485,400(3) 100 $15.90 -- 2,160,000 4,708,000
Optionee Gain as % of all
Shareholders Gain........ N/A N/A N/A N/A 2.5% 2.5%
<FN>
- ---------------
(1) The options set forth above become exercisable on a cumulative basis in
installments as to 25% of the shares commencing one year after the date of
grant with the balance becoming exercisable in three installments of 25% per
year thereafter.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock appreciation of 5% and 10% compounded
annually from the date the respective options were granted to their
expiration date. Actual gains, if any, on stock option exercises will depend
on the future performance of the common stock and the date on which the
options are exercised.
(3) Includes options granted under the 1996 Stock Plan which are subject to
shareholder approval at this annual meeting (Mr. Fenoglio, 17,000 shares;
Mr. Hoover, 5,500 shares; and all optionees, 40,000 shares).
</TABLE>
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
The following table provides information on option exercises in calendar
year 1995 by the named executive officers and the value of such officers'
unexercised options at December 31, 1995.
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FY-END(#) AT FY-END($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William R. Fenoglio......... -- -- 25,000 108,000 -- $61,875
Larry E. Buffington......... 12,250 $123,312 17,250 47,250 $45,219 64,906
Sam Smookler................ -- -- 1,250 36,250 -- 32,813
L. Ronald Hoover............ 11,000 68,531 17,450 28,100 74,844 47,031
Anthony F. Lefkowicz........ 17,000 204,488 18,075 27,225 63,156 27,156
<FN>
- ---------------
(1) The closing price for the Company's common stock as reported by the New York
Stock Exchange on December 29, 1995 was $17.13 per share. Value is
calculated on the basis of the difference between the option exercise price
and $17.13 multiplied by the number of shares of common stock underlying
the option.
</TABLE>
12
<PAGE> 15
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, 1995 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, 1991 in the
Company's common stock and in each of the foregoing indices and assumes
reinvestment of dividends.
[LINE GRAPH]
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Augat Inc. S&P 500 Peer Group
- --------------------- ---------- ------- ----------
<S> <C> <C> <C>
1990 $100.00 $100.00 $100.00
1991 96.70 130.47 140.00
1992 125.30 140.41 143.36
1993 198.84 154.56 168.60
1994 206.48 156.60 203.25
1995 188.94 215.45 222.95
</TABLE>
SEVERANCE AGREEMENTS
The Board of Directors of the Company in 1989 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
13
<PAGE> 16
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 Agreements. 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 Agreements 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
common 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 $15,000 per year. In
addition, all such directors are compensated at the rate of $1,400 for each
directors' meeting attended and $1,000 for each committee meeting attended, with
the Chairmen of the various committees being compensated at the rate of $1,250
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. Messrs. Curtin and Lemasters elected to participate in
this plan for 1995. As of December 31, 1995, the following named directors had
deferred stock units; Mr. Curtin, 2,054; Mr. Lemasters, 10,631; Mr. Ragone,
13,890; and Mr. Zakon, 6,404.
The Company has established the Directors' Pension Plan to provide a
retirement benefit to each present or future non-employee Director who has
served as a non-employee Director for at least five years. The benefit for an
eligible individual begins when he or she ceases to serve on the Board or at a
future designated age elected by the retiree. The annual benefit is determined
by multiplying the annual Board retainer in effect at the time the eligible
individual ceased to serve on the Board, by a fraction, the numerator of which
is the number of years of service for the Company as a non-employee Director or
officer of the Company and the denominator of which is ten. The benefit will be
paid for a period equal to the number of years and full months the non-employee
Director served on the Board as a non-employee Director or for life, whichever
is shorter. In the year of death the benefit amount will be prorated based on
the portion of the year during which the non-employee Director was alive.
Benefits under this plan are paid from the general assets of the Company and may
not be assigned, pledged or otherwise transferred.
On July 19, 1994, the Company extended Mr. Joseph's employment agreement as
President and Chief Executive Officer through December 31, 1994. Pursuant to
this agreement, during 1995 Mr. Joseph served as Chairman of the Board of
Directors, provided assistance to senior management for 1995 and received an
annual salary of $500,000. In addition, pursuant to the agreement, Mr. Joseph
was paid relocation costs and a
14
<PAGE> 17
lump sum payment from the Augat Inc. Supplementary Employee Retirement Plan
amounting to approximately $2.7 million in 1995.
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.
PENSION PLAN TABLE
<CAPTION>
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
</TABLE>
The salary used for the Plan and the SERP as of December 31, 1995 and the
approximate number of years of benefit service as of December 31, 1995 for
officers named in the table under Executive Compensation are: William R.
Fenoglio $440,000, 1 year; Larry E. Buffington $260,000, 4 years; Sam Smookler
$232,500, 1 year; L. Ronald Hoover $254,000, 4 years; and Anthony F. Lefkowicz
$313,000, 8 years.
PROPOSAL 2 -- APPROVAL OF 1996 STOCK PLAN
On February 13, 1996, the Board adopted, subject to shareholder approval,
the Company's 1996 Stock Plan (the "1996 Plan"). Under the terms of the 1996
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 1,000,000 shares of common stock, of which options to purchase
40,000 shares have been granted as of March 1, 1996, subject to shareholder
approval. Any shares of the Company's common stock
15
<PAGE> 18
issued pursuant to the 1996 Plan which are returned to the Company shall be
available for future awards under the 1996 Plan. The purpose of the 1996 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 100,000 shares for the Chief Executive Officer and 50,000
shares for all other individuals.
Because option grants under the 1996 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
non-executive 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 1996 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 300,000
shares of the Company's common stock.
The following summary of the 1996 Plan is qualified in its entirety by the
full text of the 1996 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 1996 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 1996 Plan will be
administered by the Board of Directors of the Company or any other committee
designated by the Board of Directors to administer the Plan (the "Committee"),
which will designate the optionees, option prices, dates of grant and terms of
exercise. The Committee members must qualify as "disinterested persons" as
defined for purposes of Rule 16b-3 promulgated under the Securities Exchange Act
of 1934 and 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 1996 Plan by such Committee shall be final and
conclusive. Incentive and non-statutory options issuable under the 1996 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 1996 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.
16
<PAGE> 19
It is expected that options granted under the 1996 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 the earlier
of the end of the original option term, and the period of four and one-half
years after the date of 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 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 person to whom the option is transferred by will or the laws of
descent and distribution may exercise the option within one year after the date
of the optionee's death.
Special Provisions for Incentive Stock Options. In accordance with the
provisions of the Tax Reform Act of 1986, the 1996 Plan provides that no
incentive stock option granted under the 1996 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 appropriate, including
conditions based upon the achievement of specified performance objectives as may
be established by the Committee which may be based on earnings, earnings growth,
revenues, expenses, stock price, market share, charge-offs, reductions in
non-performing assets, return on assets, equity or investment, regulatory
compliance, satisfactory internal or external audits, improvement of financial
ratings, achievement of balance sheet or income statement objectives, or any
other objective goals established by the Committee, and may be absolute in their
terms or measured against or in relationship to other companies comparably,
similarly or otherwise situated. Such performance objectives may be particular
to the recipient or the division, department, branch, line of business,
subsidiary or other unit in which the recipient works, or may be based on the
performance of the Company generally, and may cover such period as may be
specified by the Committee. 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 canceled options.
17
<PAGE> 20
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.
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 1996 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
non-statutory and incentive stock 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 or other person required to report under
Section 16 of the Securities Exchange Act of 1934 (a "Reporting Person"), no
18
<PAGE> 21
income will be recognized by such optionee until the date which is six months
after the date of grant, 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, 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 sale 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. If the
optionee sells the stock for less than the option price, he or she will
recognize a capital loss equal to the difference between the sale price and the
option price. The loss will be a long-term capital loss if the shares are held
for more than one year prior to the sale and as a short-term capital loss if the
shares are held for a shorter period.
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 gains.
19
<PAGE> 22
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 1996 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, the recipient is a Reporting Person, if later, the date
which is six months after the date of transfer 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. When
the recipient sells the stock, he or she will recognize a capital gain or loss
at the time of sale on the difference between his or her basis (the price paid
plus any taxed amount) and the sale price. Such capital gain or loss will be a
long-term capital gain or loss if the stock is held for more than one year from
the date of grant if a Section 83(b) election is made, and, for all other cases,
for more than one year from the date that the forfeiture provisions or
restrictions on transfer lapse. The Company will be entitled to deduct, subject
to Section 162(m), 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.
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 1996 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 recommends a vote FOR the proposal.
PROPOSAL 3 -- APPROVAL OF 1996 STOCK RETAINER PLAN
FOR NONEMPLOYEE DIRECTORS
On February 13, 1996, the Board adopted, subject to shareholder approval,
the Company's 1996 Stock Retainer Plan for Nonemployee Directors (the "1996
Retainer Plan"). Under the terms of the 1996 Retainer Plan, the Company is
required to make awards of cash and common stock to nonemployee directors of the
Company in the amount of $15,000 per year for each individual, none of which
have been granted as of March 1, 1996. The Company has reserved an aggregate of
50,000 shares of the Company's common stock, $.10 par value per share, for
issuance under the Plan. Any shares of the Company's common stock issued
pursuant to the 1996 Retainer Plan which are returned to the Company shall be
available for future awards under the 1996 Retainer Plan. The purposes of this
Plan are (a) to further align the interests of nonemployee directors of the
Company with the interests of the Company's shareholders, (b) to stimulate and
sustain constructive and imaginative thinking by such nonemployee directors, and
(c) to induce the service or continued service of the most highly qualified
individuals to serve as nonemployee directors of the Company.
Because the number of shares to be issued under the 1996 Retainer Plan will
vary, depending on the price at which the common stock is trading on the date
for determining the award, the Company cannot now determine the number of shares
to be received by any particular current director, or the directors as a group.
20
<PAGE> 23
For additional information concerning the ownership of shares by the directors
of the Company, see "Executive Compensation" and "Directors' Compensation"
above.
The following summary of the 1996 Retainer Plan is qualified in its
entirety by the full text of the 1996 Retainer Plan, a copy of which may be
obtained by shareholders of the Company upon request directed to the Company's
Treasurer at 89 Forbes Boulevard, Mansfield, Massachusetts 02048.
ELIGIBILITY
All nonemployee directors are eligible to participate in the 1996 Retainer
Plan. The amounts and nature of the Stock Retainers granted under the 1996
Retainer Plan shall be automatic, as outlined below.
STOCK RETAINER AWARDS
Plan Administration. The 1996 Retainer Plan is to be administered by the
Compensation Committee of the Board of Directors of the Company (the
"Committee"). All questions of interpretation of the 1996 Retainer Plan shall be
determined by the Committee.
The Company shall pay to each nonemployee director in office on January 1
of each calendar year beginning after 1995 a retainer (the "Retainer Amount"),
half in the form of cash and half in the form of common stock. For 1996 and
future years the Retainer Amount shall be $15,000, subject to amendment. The
number of shares of common stock to be paid shall be determined by dividing half
the Retainer Amount by the price of the common stock at the close of trading on
the date of the regularly scheduled meeting of the Board of Directors which
occurs in December of the preceding year, or, if there is no such meeting, the
last day of the previous year on which the common stock was traded.
The Company shall pay the stock retainer in two substantially equal
installments in the first week of the first and second calendar quarters of such
year and the cash retainer in two substantially equal installments in the first
week of the third and fourth calendar quarters of the year. However, for 1996
only, the cash retainer shall be paid in the first and second quarters and the
stock retainer in the third and fourth quarters.
If a nonemployee director ceases to serve in a calendar year, no further
installments of the Retainer Amount shall be paid after the date such individual
ceases to serve. If an individual becomes a Director during a calendar year,
such individual shall receive a prorated retainer. Such reduced retainer shall
be paid half in the form of cash and half in the form of common stock, with the
number of shares of common stock to be paid determined as outlined above. Such
prorated retainer shall be paid in equal installments during the first week of
each calendar quarter remaining in such year.
AMENDMENT AND TERMINATION OF THE PLAN
This Plan may be terminated, suspended or amended at any time by the Board
of Directors upon the recommendation of the Committee; provided however, that
(i) no amendment shall become effective without the approval of the shareholders
of the Company to the extent shareholder approval is required in order to comply
with Rule 16b-3 of the Securities Exchange Act of 1934 ("Exchange Act"), and
(ii) neither the Retainer Amount, nor any other provision of this Plan affecting
the number of shares of common stock received pursuant to a stock retainer or
the frequency with which stock retainers are paid, shall be amended or otherwise
modified more than once every six months, except as may be necessary or
appropriate to conform with the Internal Revenue Code or the Employee Retirement
Income Security Act, as either of the same may be amended, or the rules and
regulations promulgated thereunder.
No termination, suspension or amendment of this Plan shall adversely affect
any stock retainer theretofor paid.
21
<PAGE> 24
WITHHOLDING TAXES
Payments of the stock retainer are not subject to withholding. However,
nonemployee directors may be subject to requirements to make estimated tax
payments.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the federal income tax treatment of the Stock
Retainers granted.
Grantees must recognize income in an amount equal to the fair market value
of the shares of common stock on a date which is six months after the date such
shares are received, unless the grantee makes an election under Section 83(b) of
the Code to have the fair market value of the shares of common stock recognized
as ordinary income as of the time of receipt. The Company will be entitled to a
business expense deduction equal to the amount of ordinary income recognized by
the grantee. If the grantee sells the shares of common stock, he or she will
recognize a capital gain or loss at a time of sale on the difference between his
or her basis (the amount taxed as ordinary income) and the sale price. Such
capital gain or loss will be a long-term capital gain or loss if the stock is
sold from more than one year from the date of receipt of a Section 83(b)
election is made, and for all other cases, for more than one year from the date
that is six months after the date of receipt.
RECOMMENDATION
The 1996 Retainer 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 recommends a vote FOR the
proposal.
PROPOSAL 4 -- APPROVAL OF 1996 STOCK BONUS PLAN
FOR SENIOR EXECUTIVES
On February 13, 1996, the Board adopted, subject to shareholder approval,
the Company's 1996 Stock Bonus Plan for Senior Executives (the "1996 Bonus
Plan"). Under the terms of the 1996 Bonus Plan, half of any bonus payable to a
senior executive shall be paid in the form of cash and half shall be paid in the
form of common stock (the "Stock Bonus"). The Company has reserved an aggregate
of 150,000 shares of the Company's common stock, $.10 par value per share, for
issuance under the Plan. Any shares of the Company's common stock issued
pursuant to the 1996 Bonus Plan which are returned to the Company shall be
available for future awards under the 1996 Bonus Plan. The purposes of this Plan
are (a) to further align the interests of senior executives of the Company with
the interests of the Company's shareholders, (b) to stimulate and sustain
constructive and imaginative thinking by such senior executives, and (c) to
induce the service or continued service of the most highly qualified individuals
to serve as senior executives of the Company.
Because the number of shares to be issued under the 1996 Bonus Plan will
vary, depending on the amount of the bonus payable to each senior executive and
the price at which the common stock is trading on the date for determining the
award, the Company cannot now determine the number of shares to be received by
any particular current senior executive, or the senior executives as a group.
For additional information concerning the ownership of shares by the named
executive officers of the Company, see "Executive Compensation" above.
The following summary of the 1996 Bonus Plan is qualified in its entirety
by the full text of the 1996 Bonus 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.
22
<PAGE> 25
ELIGIBILITY
All senior executives designated by the Compensation Committee of the Board
of Directors or any other committee designated by the Board of Directors to
administer the Plan (the "Committee") are eligible to participate in the Stock
Bonus Plan.
STOCK BONUSES
The Stock Bonus Plan is to be administered by the Committee. All questions
of interpretation of the Plan shall be determined by the Committee.
Half of any bonus payable to a Senior Executive shall be paid in the form
of cash and half shall be paid in the form of common stock. The number of shares
of common stock to be paid shall be determined by dividing the amount of the
Stock Bonus by the price of the common stock at the close of trading on the day
next preceding the date of payment of the bonus, or, if such day shall be a day
on which the shares of the Company's common stock were not traded, on the next
preceding trading day.
If any part of the bonus is deferred under the Augat Inc. Deferred
Compensation Plan, half of the deferred bonus shall be subject to the terms of
said plan and the other half of said bonus shall be held in an account in stock
units, in accordance with the Deferred Compensation Plan. Whenever a dividend is
paid on the common stock, the amount of the stock account under the Deferred
Compensation Plan shall be increased by an amount equal to the dividend per
share multiplied by the number of stock units. When the account is distributed,
the Senior Executive shall receive the value of the units in the form of cash,
based on the value of the common stock at the close of trading on the day
preceding payment, or, if such day shall be a day on which the shares of the
Company's common stock were not traded, on the next preceding trading day.
AMENDMENT AND TERMINATION OF THE PLAN
This Plan may be terminated, suspended or amended at any time by the Board
of Directors upon the recommendation of the Committee; provided, however, that
no amendment shall become effective without the approval of the shareholders of
the Company to the extent shareholder approval is required in order to comply
with Rule 16b-3 of the Exchange Act. No termination, suspension or amendment of
this Plan shall adversely affect any Stock Bonus previously paid.
WITHHOLDING TAXES
The Company will have the right to deduct from any payments due to an
optionee or recipient of an award any federal, state or local taxes required to
be withheld with respect to any shares issued under the Plan. Subject to the
Company's approval, and to the provisions of Rule 16b-3 under the Exchange Act,
a grantee may elect to satisfy withholding requirements incurred, in whole or in
part, by (i) having the Company withhold shares of common stock which would
otherwise be issuable, or (ii) delivering to the Company shares of common stock
already owned by the grantee. The fair market value of the shares used to
satisfy such withholding obligation shall be determined by the Board of
Directors as being the price of the common stock of the Company at the close of
trading on the date the withholding obligation was so satisfied.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the federal income tax treatment of the Stock
Bonuses granted.
Grantees must recognize income in an amount equal to the fair market value
of the shares of common stock on the date such shares are received. However, if
the grantee is a Reporting Person, the grantee will recognize ordinary income on
the date which is six months after such shares are received and such income will
include any increase in the fair market value of the shares during such period,
unless the grantee makes an election under Section 83(b) of the Code to have the
fair market value of the shares of common stock
23
<PAGE> 26
recognized as ordinary income as of the time of receipt. The Company will be
entitled to a business expense deduction equal to the amount of ordinary income
recognized by the grantee, subject to Section 162(m). If the grantee sells the
shares of common stock, he or she will recognize a capital gain or loss at a
time of sale on the difference between his or her basis (the amount taxed as
ordinary income) and the sale price. Such capital gain or loss will be a
long-term capital gain or loss if the stock is sold from more than one year from
the date of receipt and for Reporting Persons, for more than one year from the
date that is six months after the date of receipt, unless such person makes a
Section 83(b) election.
RECOMMENDATION
The 1996 Bonus 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 recommends a vote FOR the
proposal.
PROPOSAL 5 -- RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected Deloitte & Touche LLP 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 LLP 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 1997 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 25, 1996.
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, 1995 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 25, 1996
24
<PAGE> 27
ANNUAL MEETING OF SHAREHOLDERS
P THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
R DIRECTORS
O
X
Y The undersigned hereby appoints William R. Fenoglio and Thomas E.
Neely, and each of them with full power of substitution, as proxies 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 23, 1996 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, 3, 4 and 5 unless
instructions to the contrary are indicated on the reverse side of this card.
(Continuted and to be signed on reverse side.)
-----------
SEE REVERSE
SIDE
-----------
/X/ Please mark
votes as in
this example.
The Board of Directors recommends a vote FOR the following
proposals:
1. The election of two Directors in Class II.
Nominees: John D. Curtin, Jr. and Thomas C. McDermott
FOR WITHHELD
/ / / /
/ /
--------------------------------------
Instructions: To withhold authority to
vote for an individual nominee mark their
name in the space provided above.
PLEASE MARK INSIDE BOXES SO THAT DATA
PROCESSING EQUIPMENT WILL RECORD YOUR VOTES.
FOR AGAINST ABSTAIN
2. Proposal to approve the 1996 / / / / / /
Stock Plan.
3. Proposal to approve the 1996 / / / / / /
Stock Retainer Plan for
Nonemployee Directors.
MARK HERE / /
FOR ADDRESS 4. Proposal to approve the 1996 / / / / / /
CHANGE AND Stock Bonus Plan for Senior
NOTE BELOW Executives.
5. Proposal to ratify the selec- / / / / / /
tion of Deloitte & Touche LLP
as the Company's auditor.
In their discretion, the proxies are authorized to vote
upon such other matters as may come before the meeting or
any adjournment thereof.
Please sign exactly as your name appears opposite. Each joint
owner must sign.
Signature: Date
---------------------------------- ------------
Signature: Date
---------------------------------- ------------
<PAGE> 28
AUGAT INC.
1996 STOCK PLAN
February 13, 1996
-----------
1. Purpose.
-------
The purpose of this plan (the "Plan") is to secure for Augat Inc. (the
"Company") and its shareholders the benefits arising from capital stock
ownership by employees, officers and directors of the Company and its parent
(if any) and subsidiary corporations who are expected to contribute to the
Company's future growth and success.
2. Options, Awards, and Administration.
-----------------------------------
(a) OPTIONS AND AWARDS. Options granted pursuant to the Plan shall be
authorized by action of the Board of Directors of the Company and may be either
incentive stock options ("Incentive Stock Options") meeting the requirements of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") or
non-statutory options which are not intended to meet the requirements of Section
422. Awards granted pursuant to the Plan shall be authorized by action of the
Board of Directors of the Company and shall meet the requirements of Section 5
of the Plan.
(b) ADMINISTRATION. The Plan will be administered by the Board of
Directors of the Company or any other committee designated by the Board of
Directors to administer the Plan (the "Committee"), whose construction and
interpretation of the terms and provisions of the Plan shall be final and
conclusive. The Committee, constituted in accordance with Section 2(d) below,
may in its sole discretion (i) make awards for the purchase of shares of the
Company's Common Stock, $.10 par value per share ("Common Stock"), pursuant to
Section 5, (ii) grant options to purchase shares of the Company's Common Stock,
pursuant to Section 6, and (iii) issue shares upon exercise of options as
provided in the Plan. The Committee shall have authority, subject to the
express provisions of the Plan, to construe the respective awards, option
agreements, and the Plan, to prescribe, amend and rescind rules and regulations
relating to the Plan, to determine the terms and provisions of the respective
awards and option agreements, which need not be identical, and to make all other
determinations in the judgment of the Committee necessary or desirable for the
administration of the Plan. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any award or option
agreement in the manner and to the extent it shall deem expedient to carry the
Plan into effect and it shall be the sole and final judge of such expediency.
<PAGE> 29
No director or person acting pursuant to authority delegated by the Board of
Directors shall be liable for any action or determination made in good faith.
(c) APPLICABILITY OF RULE 16B-3. Those provisions of the Plan which
make explicit reference to Rule 16b-3 of the Securities and Exchange Commission
("Rule 16b-3") shall apply only to such persons as are required to file reports
(a "Reporting Person") under Section 16(a) of the Securities Exchange Act of
1934 (the "Exchange Act").
(d) GRANTS TO OFFICERS AND DIRECTORS. The selection of a director or
an officer (as the terms "director" and "officer" are defined for purposes of
Rule 16b-3) as a recipient of an award or stock option, the selection of an
employee as a recipient of an award or stock option, the timing of a grant of
an option or award, the exercise or purchase price related to the same and the
number of shares subject to the option or award, or any conditions or waivers
thereof shall be determined by the Committee, which shall consist of two or
more directors, each of whom shall be a "disinterested person"; provided,
however, that each non-employee director shall be granted "Mandated Options"
(as hereinafter defined) pursuant to the provisions set forth below and shall
not be eligible to receive any other options hereunder. No non-employee
director shall be eligible to receive a restricted stock award under the Plan.
For the purposes of the Plan, a director shall be deemed to be "disinterested"
only if such person (i) qualifies as a "disinterested person" within the
meaning of paragraph (d)(3) of Rule 16b-3 (or any successor rule), as such term
is interpreted from time to time and (ii) qualifies as an "outside director"
for purposes of Section 162(m) of the Code. The term "Mandated Options" shall
mean options to purchase 5,000 shares of Common Stock, subject to adjustment as
provided in Section 10, below, which shall be granted, beginning in 1996, to
each non-employee director on the date he or she is elected or re-elected to
the Board of Directors. Mandated Options shall (a) be exercisable on a
cumulative basis in installments of 1,250 shares per year, commencing one year
from the date of grant, (b) have a purchase price per share of 100% of the fair
market value of such stock, as determined by the Board of Directors, at the
time of grant of such option and (c) expire five years from the date of grant.
Notwithstanding the foregoing, if a non-employee director is granted an option
in connection with his or her election or re-election to the Board of Directors
under any other stock option plan adopted by the Company, the number of shares
of Common Stock for which a Mandated Option under this Plan is exercisable
shall be reduced, share for share, by the number of shares for which any such
option is granted under such other plans.
-2-
<PAGE> 30
3. Eligibility.
-----------
Options and awards may be granted or made to persons who are, at the
time of grant or award, officers, employees or directors of the Company or any
Parent Corporation or Subsidiary (as those terms are defined in Section 14
hereof); PROVIDED THAT Incentive Stock Options shall be granted only to
employees of the Company. No person shall be granted any Incentive Stock
Option under the Plan who, at the time such option is granted, owns, directly
or indirectly, capital stock of the Company possessing more than 10% of the
total combined voting power of all classes of stock of the Company, unless the
requirements of subparagraph (g)(ii) of Section 6 are satisfied. The
attribution of stock ownership provisions of Section 424(d) of the Code, and
any successor provisions thereto, shall be applied in determining the shares of
stock owned by a person for purposes of applying the foregoing percentage
limitation. A person who has been granted an option or award may, if he or she
is otherwise eligible, be granted additional options or awards if the Committee
shall so determine.
4. Stock Subject to Plan.
---------------------
Subject to adjustment as provided in Section 9 below, the maximum
number of shares of Common Stock of the Company which may be issued and sold
under the Plan is 1,000,000 shares and the number of shares of Common Stock of
the Company for which options or restricted stock awards may be awarded in any
calendar year, in the aggregate, shall not exceed 100,000 shares for the Chief
Executive Officer or 50,000 shares for any other individual. Such shares may be
authorized and unissued shares or may be shares issued and thereafter acquired
by the Company. Any shares of Common Stock subject to an award which are not
purchased by the recipient of the award, or which are purchased by the recipient
of the award but later repurchased by the Company in accordance with the terms
of the award or the Plan, shall again be available for purposes of the Plan. If
an option granted under the Plan shall expire or terminate for any reason
without having been exercised in full, the unpurchased shares subject to such
option shall again be available for purposes of the Plan.
5. Awards.
------
A restricted stock award ("award") shall consist of the sale and
issuance by the Company of shares of Common Stock, and purchase by the recipient
of such shares, subject to the terms, conditions and restrictions described in
the document evidencing the award and in this Section 5 and elsewhere in the
Plan.
-3-
<PAGE> 31
(a) EXECUTION OF RESTRICTED STOCK AWARD. As a condition to an award
under the Plan, each recipient of an award shall execute an agreement
substantially in the form set forth as EXHIBIT A to the Plan or in such other
form, which may differ among recipients, as shall be specified by the Board of
Directors at the time of such award.
(b) PRICE. The Board of Directors shall determine the price (which
shall be not less than the par value of Common Stock) at which shares of Common
Stock shall be sold to recipients of awards under the Plan. The Board of
Directors may, in its discretion, sell and issue shares pursuant to awards at a
purchase price below the then fair market value of the Common Stock, provided
that the price shall not be less than the par value of the Common Stock on the
date of grant. The purchase price 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.
(c) NUMBER OF SHARES. The award shall specify the number of shares of
Common Stock granted thereunder.
(d) RESTRICTIONS ON TRANSFER. In addition to such other terms,
conditions and restrictions upon awards as shall be imposed by the Board of
Directors, all shares issued pursuant to an award shall be subject to the
following restrictions:
(1) All shares of Common Stock subject to an award (including any
shares issued pursuant to paragraph (e) of this Section) shall be subject to
certain restrictions on disposition and obligations of resale to the Company as
provided in subparagraph (2) below, and shall not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of until such
restrictions lapse. The period during which such restrictions are applicable is
referred to as the "Restricted Period." The Restricted Period applicable to an
award shall end no earlier than the third anniversary of the date the award is
made. In addition, vesting of an award may be subject to such additional
conditions as the body established under the first sentence of Section 2(d)
deems appropriate, including conditions based upon the achievement of such
specified performance objectives as may be established by the Committee which
may be based on earnings, earnings growth, revenues, expenses, stock price,
market share, charge-offs, reductions in non-performing assets, return on
assets, equity or investment, regulatory compliance, satisfactory internal or
external audits, improvement of financial ratings, achievement of balance sheet
or income statement objectives, or any other objective goals established by the
Committee, and may be absolute in their terms or measured against or in
relationship to other companies comparably, similarly or otherwise situated.
Such performance objectives may
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<PAGE> 32
be particular to the recipient or the division, department, branch, line of
business, subsidiary or other unit in which the recipient works, or may be
based on the performance of the Company generally, and may cover such period
as may be specified by the Committee.
(2) In the event that a recipient's employment with the Company,
a Parent Corporation or a Subsidiary is terminated within the Restricted
Period, 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
such termination of employment to buy for cash that number of the shares of
Common Stock purchased under the award as to which the restrictions on transfer
and the forfeiture provisions contained in the award have not then lapsed, at a
price equal to the price per share originally paid by the recipient. If such
termination of employment occurs within the last three months of the applicable
restrictions, the restrictions shall continue to apply until the expiration of
the Company's three month option period.
(3) Notwithstanding subparagraphs (1) and (2) above, the Board of
Directors may, in its discretion, either at the time that an award is made or
at any time thereafter, waive its right to repurchase shares of Common Stock
upon the occurrence of any of the events described in this paragraph (d) or
remove or modify any part or all of the restrictions. The preceding sentence
shall not be applicable with respect to awards which the Committee intends to
qualify as performance-based compensation for purposes of Section 162(m) of the
Code. In addition, the Board of Directors may, in its discretion, impose upon
the recipient of an award at the time of such award, such other restrictions on
any shares of Common Stock issued pursuant to such award as the Board may deem
advisable and in the best interests of the Company and its shareholders.
(e) ADDITIONAL SHARES. Any shares received by a recipient of an award
as a stock dividend on, or as a result of stock splits, combinations, exchanges
of shares, reorganizations, mergers, consolidations or otherwise with respect
to, shares of Common Stock received pursuant to such award shall have the same
status and shall bear the same restrictions, all on a proportionate basis, as
the shares initially purchased pursuant to such award.
(f) TRANSFERS IN BREACH OF AWARD; REPURCHASED SHARES. If any transfer
of shares purchased pursuant to an award is made or attempted contrary to the
terms of the Plan and of such award, the Board of Directors shall have the right
to purchase for the account of the Company those shares from the owner thereof
or his
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<PAGE> 33
transferee at any time before or after the transfer at the price paid for
such shares by the person to whom they were awarded under the Plan. In addition
to any other legal or equitable remedies which it may have, the Company may
enforce its rights by specific performance to the extent permitted by law. The
Company may refuse for any purpose to recognize as a shareholder of the Company
any transferee who receives any shares contrary to the provisions of the Plan
and the applicable award, and the Company may retain and/or recover all
dividends on such shares which were paid or payable subsequent to the date on
which the prohibited transfer was made or attempted.
(g) ADDITIONAL AWARD PROVISIONS. The Committee may, in its sole
discretion, include additional provisions in any award granted under the Plan,
including without limitation commitments to pay cash bonuses, make or guarantee
loans or transfer other property to recipients upon the grant of awards, or such
other provisions as shall be determined by the Board of Directors.
(h) RESTRICTIONS. No award shall be made if the award would cause the
number of shares subject to awards under the Plan to exceed 300,000 shares of
Common Stock of the Company.
6. Options.
-------
(a) EXECUTION OF OPTION AGREEMENTS. As a condition to the grant of an
option under the Plan, each recipient of an option shall execute an option
agreement in such form not inconsistent with the Plan as may be specified by the
Board of Directors. Such option agreements may differ among recipients.
(b) PURCHASE PRICE; PAYMENT FOR STOCK. The purchase price per share
of stock deliverable upon the exercise of an option shall be determined by the
Committee, PROVIDED THAT (i) in the case of an Incentive Stock Option, the
exercise price shall not be less than 100% of the fair market value of such
stock, as determined by the Committee, at the time of grant of such option, or
less than 110% of such fair market value in the case of options described in
subparagraph (g)(ii) of Section 6, and (ii) in the case of a non-statutory
option, the exercise price shall not be less than 100% of the fair market value
of such stock, as determined by the Committee, at the time of grant of such
option. Options granted under the Plan may provide for the payment of the
exercise price by delivery of cash or 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. The fair
market value of any shares of the Company's Common Stock
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which may be delivered upon exercise of an option shall be determined by the
Committee.
(c) OPTION PERIOD. Each option and all rights thereunder shall expire
on such date as the Committee shall determine, but, in no event after the
expiration of five years from the day on which the option is granted and shall
be subject to earlier termination as provided in the Plan.
(d) EXERCISE OF OPTIONS. Each option granted under the Plan shall be
exercisable either in full or in installments at such time or times and during
such period as shall be set forth in the agreement evidencing such option,
subject to the provisions of the Plan.
(e) NONTRANSFERABILITY OF OPTIONS. No option granted under the Plan
shall be assignable or transferable by the person to whom it is granted, either
voluntarily or by operation of law, except by will or the laws of descent and
distribution; provided however that non-statutory options may be transferred
pursuant to a qualified domestic relation order (as defined in Rule 16b-3).
During the life of the optionee, the option shall be exercisable only by such
person.
(f) EFFECT OF TERMINATION OF EMPLOYMENT OR DIRECTORSHIP. No option
may be exercised unless, at the time of such exercise, the optionee is, and has
been continuously since the date of grant of his or her option, employed by, or
a director of, the Company, a Parent Corporation or a Subsidiary except that if
and to the extent the option agreement or instrument so provides:
(i) the option may be exercised within the period of three months
after the date the optionee ceases to be an employee of the
Company (or within such lesser period as may be specified in
the option agreement or instrument);
(ii) if the optionee dies while in the employ of the Company, a
Parent Corporation or a Subsidiary or within three months
after the optionee ceases to be such an employee, the option
may be exercised by the person to whom it is transferred by
will or the laws of descent and distribution within the
period of one year after the date of death (or within such
lesser period as may be specified in the option agreement or
instrument);
(iii) if the optionee becomes disabled (within the meaning of
Section 22(e)(3) of the Code or any successor provision
thereto) while in the employ of
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<PAGE> 35
the Company, a Parent Corporation or a Subsidiary, the
option may be exercised within the period of six months
after the date the optionee ceases to be such an employee
because of such disability (or within such lesser period as
may be specified in the option agreement or instrument); and
(iv) if the optionee is a director of the Company, a Parent
Corporation or a Subsidiary, the option may be exercised up
to the earlier of the end of the original option term, and
the period of four and one-half years after the date of the
optionee's termination or retirement as a director;
PROVIDED THAT in no event may any option be exercised after the expiration date
of the option. For all purposes of the Plan and any option granted hereunder,
"employment" shall be defined in accordance with the provisions of Section
1.421-7(h) of the Income Tax Regulations (or any successor regulations).
(g) INCENTIVE STOCK OPTIONS. Options granted under the Plan which
are intended to be Incentive Stock Options shall be specifically designated as
Incentive Stock Options and shall be subject to the following additional terms
and conditions:
(i) DOLLAR LIMITATION. Incentive Stock Options granted to any
employee under the Plan (and any other incentive stock
option plans of the Company) shall not, in the aggregate,
become exercisable for the first time in any one calendar
year for shares of Common Stock with an aggregate fair
market value (determined as of the respective date or dates
of grant) of more than $100,000.
(ii) 10% SHAREHOLDER. If any employee to whom an Incentive Stock
Option is to be granted under the Plan is, at the time of
the grant of such option, the owner of stock possessing more
than 10% of the total combined voting power of all classes
of stock of the Company (after taking into account the
attribution of stock ownership rules of Section 424(d) of
the Code), then the following special provisions shall be
applicable to the Incentive Stock Option granted to such
individual:
(A) The purchase price per share of the Common Stock
subject to such Incentive Stock Option shall not be less than
110% of the fair market value of one share of Common Stock at
the time of grant; and
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<PAGE> 36
(B) The option exercise period shall not exceed five
years from the date of grant.
Except as modified by the preceding provisions of this paragraph 6(g),
all the provisions of the Plan shall be applicable to Incentive Stock Options
granted hereunder.
(h) ADDITIONAL OPTION PROVISIONS. The Committee may, in its sole
discretion, include additional provisions in any option granted under the Plan,
including without limitation restrictions on transfer, repurchase rights,
commitments to pay cash bonuses, make or guarantee loans or transfer other
property to optionees upon exercise of options, or such other provisions as
shall be determined by the Board of Directors; PROVIDED THAT such additional
provisions shall not be inconsistent with any other term or condition of the
Plan and such additional provisions shall not cause any Incentive Stock Option
granted under the Plan to fail to qualify as an Incentive Stock Option within
the meaning of Section 422 of the Code.
(i) ACCELERATION. The Board of Directors may, in its sole discretion,
accelerate the date on which all or any particular option or options granted
under the Plan may be exercised; provided, however, that no such acceleration
shall be permitted if it would cause the Plan to fail to comply with Section 422
of the Code or with Rule 16b-3 or if it would cause the disallowance of a
compensation deduction under Section 162(m) of the Code.
7. General Restrictions.
--------------------
(a) INVESTMENT REPRESENTATIONS. The Company may require any person to
whom an award is made or an option is granted, as a condition of purchasing the
shares subject to such award or exercising such option, to give written
assurances in substance and form satisfactory to the Company to the effect that
such person is acquiring the Common Stock subject to the award or option for his
or her own account for investment and not with any present intention of selling
or otherwise distributing the same, and to such other effects as the Company
deems necessary or appropriate in order to comply with federal and applicable
state securities laws, or with covenants or representations made by the Company
in connection with any public offering of its Common Stock.
(b) COMPLIANCE WITH SECURITIES LAWS. Each award and option shall be
subject to the requirement that if, at any time, counsel to the Company shall
determine that the listing, registration or qualification of the shares subject
to such award or option upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental or regulatory body,
is
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<PAGE> 37
necessary as a condition of, or in connection with, the issuance or purchase
of shares thereunder, such award or option may not be exercised, in whole or in
part, unless such listing, registration, qualification, consent or approval
shall have been effected or obtained on conditions acceptable to the Board of
Directors. Nothing herein shall be deemed to require the Company to apply for
or to obtain such listing, registration or qualification.
8. Rights as a Shareholder.
-----------------------
The recipient of an award or the holder of an option shall have no
rights as a shareholder with respect to any shares covered by the award or
option (including, without limitation, any rights to receive dividends or
non-cash distributions with respect to such shares) until the date of issue of a
stock certificate to him or her for such shares. No adjustment shall be made
for dividends or other rights for which the record date is prior to the date
such stock certificate is issued.
9. Adjustment Provisions.
---------------------
(a) If the outstanding shares of Common Stock are increased, decreased
or exchanged for a different number or kind of shares or other securities, or if
additional shares or new or different shares or other securities are distributed
with respect to such shares of Common Stock or other securities, through merger,
consolidation, sale of all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other distribution with respect to such shares of Common
Stock, or other securities, an appropriate and proportionate adjustment may be
made in (i) the maximum number and kind of shares reserved for issuance under
the Plan, (ii) the maximum number of shares for which options or awards may be
made to any individual, (iii) the number and kind of shares or other securities
subject to then outstanding options under this Plan, and (iv) the price for each
share subject to any then outstanding options under the Plan, without changing
the aggregate purchase price as to which such options remain exercisable.
Notwithstanding the foregoing, no adjustment shall be made pursuant to this
Section 9 if such adjustment would cause the Plan to fail to comply with Section
422 of the Code or with Rule 16b-3.
(b) Adjustments under this Section 9 will be made by the Board of
Directors, whose determination as to what adjustments, if any, will be made and
the extent thereof will be final, binding and conclusive. No fractional shares
will be issued under the Plan on account of any such adjustments.
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<PAGE> 38
10. Mergers, etc.
------------
(a) In the event of any merger or consolidation in which 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), or in the event 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 in the event of a liquidation of the Company, the
Board of Directors of the Company, or the board of directors of any corporation
assuming the obligations of the Company, shall provide for the assumption by
such successor corporation of 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 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.
(b) The Company may grant options under the Plan in substitution for
options held by employees of another corporation who currently 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 of Directors considers appropriate in the circumstances.
11. No Special Employment Rights.
----------------------------
Nothing contained in the Plan or in any award or option shall confer
upon any recipient of an award or any optionee any right with respect to the
continuation of his or her employment by the Company or interfere in any way
with the right of the Company at any time to terminate such employment or to
increase or decrease the compensation of the recipient or optionee. Whether an
authorized leave of absence, or absence in military or government service, shall
constitute termination of employment shall be determined by the Board of
Directors at the time of such absence.
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<PAGE> 39
12. Other Employee Benefits.
-----------------------
The value of an award granted to an employee, the amount of any
compensation deemed to be received by an employee as a result of the exercise of
an option or the sale of shares received pursuant to an award or upon the
exercise of an option will not constitute compensation with respect to which any
other employee benefits of such employee are determined, including, without
limitation, benefits under any bonus, pension, profit-sharing, life insurance or
salary continuation plan, except as otherwise specifically determined by the
Board of Directors.
13. Definition of Subsidiary and Parent Corporation.
-----------------------------------------------
(a) SUBSIDIARY. The term "Subsidiary" as used in the Plan shall mean
any corporation (other than the Company) in an unbroken chain of corporations
beginning with the Company if, at the time of the granting of an option, each of
the corporations other than the last corporation in the unbroken chain owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
(b) PARENT CORPORATION. The term "Parent Corporation" as used in the
Plan shall mean any corporation (other than the Company) in an unbroken chain of
corporations ending with the Company if, at the time of the granting of an
option, each of the corporations other than the Company owns stock possessing
50% or more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
14. Amendment of the Plan.
---------------------
The Board of Directors may at any time, and from time to time, modify
or amend the Plan in any respect, except that without the approval of the
shareholders of the Company the Board of Directors may not (a) materially
increase the benefits accruing to individuals who participate in the Plan, (b)
increase the maximum number of shares which may be issued under the Plan or any
limits applicable to individuals (except for adjustments specifically provided
in the Plan), (c) materially modify the requirements as to eligibility for
participation in the Plan or (d) modify or amend the Plan if the approval of the
shareholders is required under Section 422 of the Code or any successor
provisions with respect to Incentive Stock Options or under Rule 16b-3. The
termination or any modification or amendment of the Plan shall not, without the
consent of a recipient of an award or an optionee, affect his or her rights
under an award previously made or an option previously granted to him or her.
With the consent of the recipient of the award or of the optionee affected, the
Board of Directors may amend outstanding awards or option
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<PAGE> 40
agreements in a manner not inconsistent with the Plan but, except as
provided in Section 10, above, may not reduce the purchase or exercise price.
The Board of Directors shall have the right to amend or modify (i) the terms and
provisions of the Plan and of any outstanding Incentive Stock Options granted
under the Plan to the extent necessary to qualify any or all such options for
such favorable federal income tax treatment (including deferral of taxation upon
exercise) as may be afforded incentive stock options under Section 422 of the
Code and (ii) the terms and provisions of the Plan and of any outstanding option
to the extent necessary to ensure the qualification of the Plan under Rule
16b-3.
15. Withholding.
-----------
(a) The Company shall have the right to deduct from payments of any
kind otherwise due to the optionee any federal, state or local taxes of any kind
required by law to be withheld with respect to any shares issued upon exercise
of options under the Plan. With the consent of the Company, which may be
withheld in its sole discretion, the optionee may elect to satisfy such
obligations, in whole or in part, (i) by having the Company withhold shares of
Common Stock otherwise issuable pursuant to the exercise of an option or (ii)
delivering to the Company shares of Common Stock already owned by the optionee
having a fair market value equal to such withholding obligation. An optionee
who has made an election pursuant to this paragraph 14(a) may only satisfy his
or her withholding obligation with shares of Common Stock which are not subject
to any repurchase, forfeiture, unfulfilled vesting or other similar
requirements. The fair market value of the shares used to satisfy such
withholding obligation shall be determined in good faith by the Board of
Directors as of the date that the amount of tax to be withheld is to be
determined.
(b) Notwithstanding the foregoing, in the case of a Reporting Person,
no election to use shares for the payment of withholding taxes shall be
effective unless made in compliance with any applicable requirements of Rule
16b-3.
(c) If the recipient of an award under the Plan elects, in accordance
with Section 83(b) of the Code, to recognize ordinary income in the year of
acquisition of any shares awarded under the Plan, the Company will require at
the time of such election an additional payment for withholding tax purposes
based on the difference, if any, between the purchase price of such shares and
the fair market value of such shares as of the date immediately preceding the
date of the award.
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<PAGE> 41
16. No Repricing.
------------
Neither the Committee nor the Board of Directors shall have any
authority, with or without the consent of the affected option holders, to cancel
outstanding options and issue new options with a lower exercise price in
substitution for the cancelled options.
17. Effective Date and Duration of the Plan.
---------------------------------------
(a) EFFECTIVE DATE. The Plan shall become effective when adopted by
the Board of Directors, but no options granted under the Plan shall become
exercisable unless and until the Plan shall have been approved by the Company's
shareholders. If such shareholder approval is not obtained within twelve months
after the date of the Board's adoption of the Plan, no options shall be granted.
Amendments to the Plan not requiring shareholder approval shall become effective
when adopted by the Board of Directors. Amendments requiring shareholder
approval (as provided in Section 15) shall become effective when adopted by the
Board of Directors, but no Incentive Stock Option issued after the date of such
amendment shall become exercisable (to the extent that such amendment to the
Plan was required to enable the Company to grant such Incentive Stock Option to
a particular optionee) unless and until such amendment shall have been approved
by the Company's shareholders. If such shareholder approval is not obtained
within twelve months of the Board's adoption of such amendment, any Incentive
Stock Options granted on or after the date of such amendment shall terminate to
the extent that such amendment to the Plan was required to enable the Company to
grant such option to a particular optionee. Subject to these limitations,
options may be granted under the Plan at any time after the effective date and
before the date fixed for termination of the Plan.
(b) TERMINATION. Unless sooner terminated in accordance with Section
11, the Plan shall terminate upon the earlier of (i) the close of business on
the day next preceding the tenth anniversary of the date of its adoption by the
Board of Directors, or (ii) the date on which all shares available for issuance
under the Plan shall have been issued pursuant to the final vesting of awards or
the exercise or cancellation of options granted under the Plan. If the date of
termination is determined under (i) above, then awards and options outstanding
on such date shall continue to have force and effect in accordance with the
provisions of the instruments evidencing such awards, options and stock
appreciation rights.
Adopted by the Board of Directors
on February 13, 1996
-----------
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<PAGE> 42
AUGAT INC.
-----------------
1996 STOCK RETAINER PLAN FOR NONEMPLOYEE DIRECTORS
1. PURPOSES: The purposes of this Plan are (a) to further align the
interests of nonemployee directors of the Company with the interests of the
Company's shareholders, (b) to stimulate and sustain constructive and
imaginative thinking by such nonemployee directors, and (c) to induce the
service or continued service of the most highly qualified individuals to serve
as nonemployee directors of the Company.
2. DEFINITIONS: When used in this Plan, the following terms shall
have the meanings set forth in this Section 2.
BOARD OF DIRECTORS: The Board of Directors of the Company.
CODE: The Internal Revenue Code of 1986, as amended.
COMMITTEE: The Compensation Committee of the Board of Directors of the
Company or any other committee designated by such Board of Directors to
administer stock incentive and stock option plans of the Company and its
Subsidiaries generally or this Plan specifically.
COMMON STOCK: The common stock of the Company, par value $.10 per
share, or such other class of shares or other securities or property as may be
applicable pursuant to the provisions of Section 6.
COMPANY: Augat Inc., a Massachusetts corporation.
ISSUANCE (OR WORDS OF SIMILAR IMPORT): The issuance of authorized but
unissued shares of Common Stock or the transfer of issued shares of Common
Stock held by the Company or a Subsidiary.
NONEMPLOYEE DIRECTOR: An individual, not employed by the Company or a
Subsidiary, who is serving as a director of the Company.
PLAN: the 1996 Stock Retainer Plan for Nonemployee Directors herein
set forth, as the same may from time to time be amended.
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<PAGE> 43
RETAINER AMOUNT: shall have the meaning set forth in Section 5 hereof.
RULE 16B-3: Rule 16b-3 of the Securities and Exchange Commission (or
any successor provision in effect at the applicable time).
STOCK RETAINER: shall have the meaning set forth in Section 5 hereof.
SUBSIDIARY: A corporation (or other form of business association) of
which shares (or other ownership interests) having 50% or more of the voting
power regularly entitled to vote for directors (or equivalent management
rights) are owned, directly or indirectly, by the Company.
3. ELIGIBILITY AND PARTICIPATION: All Nonemployee Directors are
eligible to participate in the Plan and each Nonemployee Director will
participate as described in Section 5.
4. STOCK SUBJECT TO THIS PLAN:
(a) Subject to the provisions of paragraph (c) of this Section 4 and
the provisions of Section 6, the maximum number of shares of Common Stock that
may be issued pursuant to Stock Retainers under this Plan shall not exceed in
the aggregate 50,000 shares of Common Stock.
(b) Authorized but unissued shares of Common Stock and issued shares
of Common Stock held by the Company or a Subsidiary, whether acquired
specifically for use under this Plan or otherwise, may be used for purposes of
this Plan.
(c) If any shares of Common Stock issued pursuant to a Stock Retainer
shall, after issuance, be reacquired by the Company for any reason, such shares
shall no longer be charged against the limitation provided for in paragraph (a)
of this Section 4 and may again be issued pursuant to Stock Retainers.
5. STOCK RETAINERS:
The Company shall pay to each Nonemployee Director in office on January
1 of each calendar year beginning after 1995 a retainer (the "Retainer
Amount"), half in the form of cash and half in the form of Common Stock. For
1996 and future years the Retainer Amount shall be $15,000, subject to
amendment pursuant to Section 9. The number of shares of Common Stock to be
paid shall be determined by dividing half the Retainer Amount by the closing
sale price of the Common Stock (the "Issuance Price") at the close
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<PAGE> 44
of trading on the date of the regularly scheduled meeting of the Board of
Directors which occurs in December of the preceding year, or, if there is no
such meeting, the last day of the previous year on which the Common Stock was
traded. If the preceding calculation results in the payment of fractional
shares, cash shall be paid in lieu of such fractional shares.
The Company shall pay that part of the Retainer Amount payable in the
form of stock (the "Stock Retainer") in two substantially equal installments in
the first week of the first and second calendar quarters of such year and that
part of the Retainer Amount payable in cash (the "Cash Retainer") in two
substantially equal installments in the first week of the third and fourth
calendar quarters of the year. Notwithstanding the preceding sentence, for 1996
only, the Cash Retainer shall be paid in the first and second quarters and the
Stock Retainer in the third and fourth quarters of calendar year 1996.
If a Nonemployee Director ceases to serve in a calendar year, no
further installments of the Retainer Amount shall be paid after the date such
individual ceases to serve as a Nonemployee Director. If an individual becomes
a Director during a calendar year, such individual shall receive a reduced
retainer determined by multiplying the Retainer Amount by a fraction, the
numerator of which is the number of days remaining in the year and the
denominator of which is 365. Such reduced retainer shall be paid in equal
installments during the first week of each calendar quarter remaining in such
year. Such reduced retainer shall be paid half in the form of cash and half in
the form of Common Stock. The number of shares of Common Stock to be paid shall
be determined by dividing half of the reduced Retainer Amount by the Issuance
Price.
6. ADJUSTMENT PROVISIONS:
(a) If the outstanding shares of Common Stock are increased, decreased
or exchanged for a different number or kind of shares or other securities, or
if additional shares or new or different shares or other securities are
distributed with respect to such shares of Common Stock or other securities,
through merger, consolidation, sale of all or substantially all of the assets
of the Company, reorganization, recapitalization, reclassification, stock
dividend, stock split, reverse stock split or other distribution with respect
to such shares of Common Stock, or other securities, an appropriate and
proportionate adjustment shall be made in (i) the maximum number and kind of
shares reserved for issuance under the Plan, and (ii) the number of shares that
have not yet been issued under effective Stock
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<PAGE> 45
Retainers. Notwithstanding the foregoing, no adjustment shall be made pursuant
to this Section 6 if such adjustment would cause the Plan to fail to comply with
Rule 16b-3.
(b) Adjustments under this Section 6 will be made by the Committee,
whose determination as to what adjustments, if any, will be made and the extent
thereof will be final, binding and conclusive. No fractional shares will be
issued under the Plan on account of any such adjustments.
7. TERM: This Plan shall be deemed adopted and shall become effective
on the date it is approved by the shareholders of the Company. No Stock
Retainers shall be paid under this Plan with respect to any period beginning
after December 31, 2000.
8. GENERAL PROVISIONS:
(a) The Committee shall supervise and administer the Plan. The amounts
and nature of the Stock Retainers granted under the Plan shall be automatic in
accordance with Section 5. However, all questions of interpretation of the Plan
or any such stock issued thereunder shall be determined by the Committee and
such determination shall be final and binding upon all persons having an
interest in this Plan.
(b) Nothing in this Plan or in any instrument executed pursuant hereto
shall confer upon any person any right to continue to serve as a Nonemployee
Director of the Company.
(c) No shares of Common Stock shall be issued pursuant to a Stock
Retainer unless and until all legal requirements applicable to the issuance of
such shares have, in the opinion of counsel to the Company, been complied with.
In connection with any such issuance, the person acquiring the shares shall, if
requested by the Company, give assurances, satisfactory to counsel to the
Company, in respect of such matters as the Company or a Subsidiary may deem
desirable to assure compliance with all applicable legal requirements.
(d) No person, individually or as a member of a group, and no
beneficiary or other person claiming under or through him, shall have any
right, title or interest in or to any shares of Common Stock allocated or
reserved for the purposes of this Plan or subject to any Stock Retainer except
as to such shares of Common Stock if any, as shall have been issued to him.
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<PAGE> 46
(e) Nothing in this Plan is intended to be a substitute for, or shall
preclude or limit the establishment or continuation of, any other plan,
practice or arrangement for the payment of compensation or benefits to
nonemployee directors that the Company now has or may hereafter put into
effect.
9. AMENDMENTS AND TERMINATION:
(a) This Plan may be terminated, suspended or amended at any time by
the Board of Directors upon the recommendation of the Committee; provided,
however, that (i) no amendment shall become effective without the approval of
the shareholders of the Company to the extent shareholder approval is required
in order to comply with Rule 16b-3, and (ii) neither the Retainer Amount, nor
any other provision of this Plan affecting the number of shares of Common Stock
received pursuant to a Stock Retainer or the frequency with which Stock
Retainers are paid, shall be amended or otherwise modified more than once every
six months, except as may be necessary or appropriate to comport with the Code
or the Employee Retirement Income Security Act, as either of the same may be
amended, or the rules and regulations promulgated thereunder.
(b) No termination, suspension or amendment of this Plan shall
adversely affect any Stock Retainer theretofore paid.
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AUGAT INC.
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1996 STOCK BONUS PLAN FOR SENIOR EXECUTIVES
1. PURPOSES: The purposes of this Plan are (a) to further align the
interests of senior executives of the Company with the interests of the
Company's shareholders, (b) to stimulate and sustain constructive and
imaginative thinking by such senior executives, and (c) to induce the service
or continued service of the most highly qualified individuals to serve as
senior executives of the Company.
2. DEFINITIONS: When used in this Plan, the following terms shall
have the meanings herein set forth in this Section 2.
BOARD OF DIRECTORS: The Board of Directors of the Company.
CODE: The Internal Revenue Code of 1986, as amended.
COMMITTEE: The Compensation Committee of the Board of Directors of the
Company or any other committee designated by such Board of Directors to
administer stock incentive and stock option plans of the Company and its
Subsidiaries generally or this Plan specifically.
COMMON STOCK: The common stock of the Company par value $.10 per
share, or such other class of shares or other securities or property as may be
applicable pursuant to the provisions of Section 6.
COMPANY: Augat Inc., a Massachusetts corporation.
ISSUANCE (OR WORDS OF SIMILAR IMPORT): The issuance of authorized but
unissued Common Stock or the transfer of issued Common Stock held by the
Company or a Subsidiary.
PLAN: The 1996 Stock Bonus Plan for Senior Executives herein set
forth, as the same may from time to time be amended.
RULE 16B-3: Rule 16b-3 of the Securities and Exchange Commission (or
any successor provision in effect at the applicable time).
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SENIOR EXECUTIVE: An individual, employed by the Company or a
Subsidiary, who is serving as an executive of the Company and who has been
designated as a Senior Executive for the purposes of the Plan.
STOCK BONUS: An issuance of shares of Common Stock in payment of bonus
to a Senior Executive.
SUBSIDIARY: A corporation (or other form of business association) of
which shares (or other ownership interests) having 50% or more of the voting
power regularly entitled to vote for directors (or equivalent management
rights) are owned, directly or indirectly, by the Company.
3. ELIGIBILITY AND PARTICIPATION: All Senior Executives designated by
the Committee are eligible to participate in the Plan.
4. STOCK SUBJECT TO THIS PLAN:
(a) Subject to the provisions of paragraph (c) of this Section 4 and
the provisions of Section 6, the maximum number of shares of Common Stock that
may be issued pursuant to Stock Bonuses under this Plan shall not exceed in the
aggregate 150,000 shares of Common Stock.
(b) Authorized but unissued shares of Common Stock and issued shares
of Common Stock held by the Company or a Subsidiary, whether acquired
specifically for use under this Plan or otherwise, may be used for purposes of
this Plan.
(c) If any shares of Common Stock issued pursuant to a Stock Bonus
shall, after issuance, be reacquired by the Company for any reason, such shares
shall no longer be charged against the limitation provided for in paragraph (a)
of this Section 4 and may again be issued pursuant to Stock Bonuses.
5. STOCK BONUSES:
Half of any bonus payable by the Company to a Senior Executive shall be
paid in the form of cash and half shall be paid in the form of Common Stock
(the "Stock Bonus"). Senior Executives shall have no discretion in the amount,
nature or timing of any such payments. The number of shares of Common Stock to
be paid shall be determined by dividing the Stock Bonus by the price of the
Common Stock at the close of trading on the day preceding the date of payment
of the bonus, or, if such day shall be a day on which the shares of the
Company's Common Stock are not traded, on the next preceding trading day.
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<PAGE> 49
If any part of the bonus is deferred under the Augat Inc. Deferred
Compensation Plan, half of the deferred bonus shall be subject to the terms of
said plan and the other half of said bonus shall be held in an account in stock
units, in accordance with such Deferred Compensation Plan. Whenever a dividend
is paid on the Common Stock, the amount of the stock account under the Deferred
Compensation Plan shall be increased by an amount equal to the dividend per
share multiplied by the number of stock units. When the account is distributed,
the Senior Executive shall receive the value of the units in the form of cash,
based on the value of the Common Stock at the close of trading on the day
preceding payment, or, if such day shall be a day on which the shares of the
Company's Common Stock are not traded, on the next preceding trading day.
6. ADJUSTMENT PROVISIONS:
(a) If the outstanding shares of Common Stock are increased, decreased
or exchanged for a different number or kind of shares or other securities, or
if additional shares or new or different shares or other securities are
distributed with respect to such shares of Common Stock or other securities,
through merger, consolidation, sale of all or substantially all of the assets
of the Company, reorganization, recapitalization, reclassification, stock
dividend, stock split, reverse stock split or other distribution with respect
to such shares of Common Stock, or other securities, an appropriate and
proportionate adjustment may be made in (i) the maximum number and kind of
shares reserved for issuance under the Plan and (ii) the number of shares that
have not been issued under effective Stock Bonuses. Notwithstanding the
foregoing, no adjustment shall be made pursuant to this Section 6 if such
adjustment would cause the Plan to fail to comply with Rule 16b-3.
(b) Adjustments under this Section 6 will be made by the Committee,
whose determination as to what adjustments, if any, will be made and the extent
thereof will be final, binding and conclusive. No fractional shares will be
issued under the Plan on account of any such adjustments.
7. TERM: This Plan shall be deemed adopted and shall become effective
on the date it is approved by the shareholders of the Company and shall apply
to bonuses paid to Senior Executives after the date of approval. No Stock
Bonuses shall be paid under this Plan with respect to any period beginning
after December 31, 2000.
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<PAGE> 50
8. GENERAL PROVISIONS:
(a) The Committee shall supervise and administer the Plan. The amounts
and nature of the Stock Bonuses granted under the Plan shall be automatic in
accordance with Section 5. However, all questions of interpretation of the Plan
or any such stock issued thereunder shall be determined by the Committee and
such determination shall be final and binding upon all persons having an
interest in this Plan.
(b) Nothing in this Plan or in any instrument executed pursuant hereto
shall confer upon any person any right to continue to serve as a Senior
Executive of the Company.
(c) No shares of Common Stock shall be issued pursuant to a Stock
Bonus unless and until all legal requirements applicable to the issuance of
such shares have, in the opinion of counsel to the Company, been complied with.
In connection with any such issuance, the person acquiring the shares shall, if
requested by the Company, give assurances, satisfactory to counsel to the
Company, in respect of such matters as the Company or a Subsidiary may deem
desirable to assure compliance with all applicable legal requirements.
(d) No person, individually or as a member of a group, and no
beneficiary or other person claiming under or through him, shall have any
right, title or interest in or to any shares of Common Stock allocated or
reserved for the purposes of this Plan or subject to any Stock Bonus except as
to such shares of Common Stock, if any, as shall have been issued to him.
(e) Nothing in this Plan is intended to be a substitute for, or shall
preclude or limit the establishment or continuation of, any other plan,
practice or arrangement for the payment of compensation or benefits to Senior
Executives that the Company now has or may hereafter put into effect.
(f) The Committee may institute such rules and procedures as it deems
necessary for compliance with Rule 16b-3.
9. AMENDMENTS AND TERMINATION:
(a) This Plan may be terminated, suspended or amended at any time by
the Board of Directors upon the recommendation of the Committee; provided
however, that no amendment shall become effective without the approval of the
shareholders of the Company to the extent shareholder approval is required in
order to comply with Rule 16b-3.
(b) No termination, suspension or amendment of this Plan shall
adversely affect any Stock Bonus theretofore paid.
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