<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
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:
------------------------------------------------------------------------
<PAGE>
AFC CABLE SYSTEMS, INC.
50 Kennedy Plaza, Suite 1250
Providence, Rhode Island 02903
-----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 6, 1997
-----------
Notice is hereby given that the Annual Meeting of Stockholders (the
"Meeting") of AFC Cable Systems, Inc. (the "Company") will be held at the
Biltmore Grand Heritage Hotel, Kennedy Plaza, Providence, Rhode Island at 10:00
a.m. on Tuesday, May 6, 1997 for the following purposes:
1. To elect two Class I directors.
2. To approve the adoption of the Company's 1997 Equity Incentive Plan.
3. To transact any other business that may properly come before the
Meeting or any adjournment thereof.
Stockholders of record at the close of business on April 4, 1997 are
entitled to notice of and to vote at the Meeting.
If you are unable to be present personally, please sign and date the
enclosed proxy and return it promptly in the enclosed envelope.
BY ORDER OF THE BOARD OF DIRECTORS
Raymond H. Keller
Secretary
April 14, 1997
<PAGE>
ANNUAL MEETING OF STOCKHOLDERS
May 6, 1997
-----------
PROXY STATEMENT
-----------
The enclosed form of proxy is solicited on behalf of the Board of Directors
of AFC Cable Systems, Inc. ("AFC" or the "Company") to be voted at the Annual
Meeting of Stockholders (the "Meeting") to be held at the Biltmore Grand
Heritage Hotel, Kennedy Plaza, Providence, Rhode Island 02903 at 10:00 a.m. on
Tuesday, May 6, 1997 or at any adjournment thereof. The enclosed form of proxy
and this Proxy Statement have been mailed to stockholders on or about April 14,
1997 and constitutes notice of the Meeting pursuant to Section 222 of the
Delaware General Corporation Law. A proxy may be revoked by a stockholder at any
time before it is voted (i) by returning to the Company another properly signed
proxy bearing a later date, (ii) by otherwise delivering a written revocation to
the Secretary of the Company or (iii) by attending the Meeting or any adjourned
session thereof and voting the shares covered by the proxy in person. Shares
represented by the enclosed form of proxy properly executed and returned, and
not revoked, will be voted at the Meeting.
The expense of soliciting proxies will be borne by the Company. Officers and
regular employees of the Company (who will receive no compensation therefor in
addition to their regular salaries) may solicit proxies. In addition to the
solicitation of proxies by use of the mails, the Company may use the services of
its directors, officers and regular employees to solicit proxies personally and
by mail, telephone or telegram from brokerage houses and other shareholders. The
Company will also reimburse brokers, banks and other custodians, nominees and
fiduciaries and other persons for their reasonable charges and expenses in
forwarding soliciting materials to their principals.
In the absence of contrary instructions, the persons named as proxies will
vote in accordance with the intentions stated below. The holders of record of
shares of the common stock, $.01 par value (the "Common Stock"), of the Company
at the close of business on April 4, 1997 are entitled to receive notice
of and to vote at the Meeting. As of that date, the Company had issued and
outstanding 7,458,025 shares of Common Stock. Holders of shares of Common Stock
are entitled to one vote for each share.
Consistent with state law and under the Company's by-laws, a majority of the
shares entitled to be cast on a particular matter, present in person or
represented by proxy, constitutes a quorum as to such matter. Votes cast by
proxy or in person at the Meeting will be counted by persons appointed by the
Company to act as election inspectors for the Meeting. The two nominees for
election as directors at the Meeting who receive the greatest number of votes
properly cast for the election of directors shall be elected directors. Approval
of the 1997 Equity Incentive Plan will require the affirmative vote of a
majority of the total votes of the outstanding shares of Common Stock
represented at and entitled to vote at the Meeting. The election inspector will
count shares represented by proxies that withhold authority to vote for the
nominees for election as directors or for the 1997 Equity Incentive Plan or that
reflect abstentions and "broker non-votes" (i.e., shares represented at the
Meeting held by brokers or nominees as to which (i) instructions have not been
received from the beneficial owners or persons entitled to vote and (ii) the
2
<PAGE>
broker or nominee does not have the discretionary voting power on a particular
matter) only as shares that are present and entitled to vote on the matter for
purposes of determining the presence of a quorum, but neither abstentions nor
broker non-votes will have any effect on the outcome of voting on the matter.
The Annual Report to Stockholders for AFC's fiscal year ended December 31,
1996 accompanies this Proxy Statement. This Proxy Statement and the enclosed
proxy are being mailed to Stockholders on the same date as the date of the
Notice of Annual Meeting. The principal executive offices of AFC are located at
50 Kennedy Plaza, Suite 1250, Providence, Rhode Island 02903.
3
<PAGE>
Item No. 1
ELECTION OF DIRECTORS
The persons named in the enclosed proxy intend to vote each share as to
which a proxy has been properly executed and returned and not revoked in favor
of the election as directors of the two nominees named below, each of whom are
now directors of the Company, unless authority to vote for the election of one
or both of such nominees is withheld by marking the proxy to that effect.
Pursuant to the Company's Restated Certificate of Incorporation, the Board
of Directors is divided into three classes, as nearly equal in number as
possible, so that each director will serve for three years, with one class of
directors being elected each year. Pursuant to the Restated Certificate of
Incorporation and By-Laws, the nominees include only the two directors
designated as Class I Directors, whose terms expire at the Meeting. The enclosed
proxy cannot be voted for a greater number of persons than two.
If Proposal I is approved, Raymond H. Keller and Malcolm M. Donahue will be
elected as directors for a term of three years, expiring at the Annual Meeting
to be held in the year 2000, and until their respective successors are elected
and shall qualify to serve.
It is expected that each of the nominees will be able to serve, but if
any nominee is unable to serve, the proxies reserve discretion to vote, or
refrain from voting, for a substitute nominee or nominees or to fix the
number of directors at a lesser number.
NOMINEES
<TABLE>
<CAPTION>
NAME, AGE (AS OF MARCH 31, 1997), DIRECTOR
BUSINESS EXPERIENCE AND CURRENT DIRECTORSHIPS SINCE
--------------------------------------------- --------
<S> <C>
MALCOLM M. DONAHUE, 75, has been a Director of the Company since 1996
March 1996. Mr. Donahue has been a Professor of Law at Suffolk
University Law School since 1956. From 1973 to 1991 Mr. Donahue
was the Associate Dean of Suffolk University Law School.
RAYMOND H. KELLER, 59, has been Vice President and Chief Financial 1989
Officer of the Company since December 1989, and a Director of the
Company since October 1993. From January 1989 he served as the
Vice President and Chief Financial Officer of the American Flexible
Conduit Division of Nortek. Prior to that time, Mr. Keller held
several positions with Microdot, Inc., a multi-industry components
manufacturer. Most recently, Mr. Keller served as Vice President
and Chief Financial Officer of the operating companies of Microdot,
Inc. Mr. Keller had been employed by Microdot, Inc. since 1972.
</TABLE>
4
<PAGE>
CURRENT DIRECTORS
<TABLE>
<CAPTION>
NAME, AGE (AS OF MARCH 31, 1997) DIRECTOR TERM
BUSINESS EXPERIENCE AND CURRENT DIRECTORSHIPS SINCE EXPIRES
--------------------------------------------- -------- -------
<S> <C> <C>
RALPH R. PAPITTO, 70, has been Chairman of the 1989 1999
Board and a Director of the Company since
December 1989 and was appointed Chief Executive
Officer in December 1995. Prior to December
1989, Mr. Papitto was the Chairman of the Board,
Chief Executive Officer and a director of Nortek,
Inc. ("Nortek"), an industrial conglomerate. Mr.
Papitto founded Nortek in 1967. In 1956, Mr.
Papitto founded Glass-Tite Industries, Inc., a
manufacturer of electronic semiconductor
components. Mr. Papitto is a Director of Lynch
Corporation, a communications and multi-media
services company and is also Chairman of the
Board of Trustees of Roger Williams University.
ANTHONY J. SANTORO, 54, has been a Director of 1993 1998
the Company since October 1993. Mr. Santoro has
been President of Roger Williams University and
Roger Williams University School of Law since
August 1993 and served as Dean of Roger Williams
University School of Law from July 1992 to
August 1993. Prior to that time, Mr. Santoro
served as Dean and Professor of Law at Widener
University School of Law from 1983 to 1992,
Professor of law at the University of Bridgeport
School of Law from 1976 to 1983 and Dean of the
University of Bridgeport School of Law from 1976
to 1980.
ROBERT R. WHEELER, 52, has been President and Chief 1996 1998
Operating Officer of the Company since December
1995, and a Director of the Company since March 1996.
Mr. Wheeler was Executive Vice President and Chief
Operating Officer of the Company from October 1995
to December 1995. From 1992 to 1995, Mr. Wheeler
served as President and Chief Executive Officer of The
North American Industrial Company of BICC Cable, Inc.
</TABLE>
5
<PAGE>
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held eight meetings during the fiscal year ended
December 31, 1996. Each current director attended at least 75% of the Board
meetings and the meetings held by committees on which he served during fiscal
1996. The Board of Directors currently has two standing committees, the Audit
Committee and the Compensation Committee. The Company does not have a standing
Nominating Committee.
The Audit Committee, composed of Messrs. Santoro and Donahue, held one
meeting during the fiscal year ended December 31, 1996. The Audit Committee
recommends to the Board of Directors the independent auditors of the Company,
reviews the professional services provided by the Company's independent
auditors, the independence of such auditors from management of the company,
the annual financial statements of the Company and the Company's system of
internal accounting controls. The Audit Committee also reviews such other
matters with respect to the accounting, auditing and financial reporting
practices and procedures of the Company as it may find appropriate or as may
be brought to its attention.
The Compensation Committee, composed of Messrs. Santoro and Donahue, held
four meetings during the fiscal year ended December 31, 1996. The Compensation
Committee reviews and establishes the Company's compensation practices and
policies and administers the equity incentive and stock option plans of the
Company.
6
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table and notes thereto set forth certain information with
respect to the beneficial ownership of the Company's Common Stock as of March
31, 1997 by (i) each person who is known to the Company to beneficially own more
than 5% of the outstanding shares of Common Stock of the Company, (ii) each of
the chief executive officer and all other executive officers of the Company
whose total compensation exceeded $100,000 in fiscal 1996 (the "Named Executive
Officers") and each director of the Company, and (iii) all Named Executive
Officers and directors of the Company as a group. Except as otherwise indicated,
each of the stockholders named below has sole voting and investment power with
respect to the shares of Common Stock beneficially owned:
<TABLE>
<CAPTION>
Common Stock
Beneficially Owned
------------------------------------------
<S> <C> <C>
PERCENTAGE OF
NAMES NUMBER OF SHARES OUTSTANDING SHARES(1)
- ------------------------------------------------------------------------ ----------------- -----------------------
Ralph R. Papitto*+(2) 2,330,000 31.2%
Raymond H. Keller*+(3) 33,102 **
Robert R. Wheeler*+(4) 28,732 **
Anthony J. Santoro+(5) 2,000 **
Malcolm M. Donahue+(6) 2,000 **
All Directors and Executive Officers as a group (5 persons) 2,395,834 32.1%
Harry M. Crump(7) 750,237 10.1%
155 Woodbridge Drive
East Greenwich, RI 02818
Andrea M. Crump(8) 750,237 10.1%
155 Woodbridge Drive
East Greenwich, RI 02818
FMR Corp. 705,300 9.5%
82 Devonshire Street
Boston, MA 02109
State Street Bank and Trust Company 455,000 6.1%
225 Franklin Street
Boston, MA 02110
Wellington Management Company, LLP 492,000 6.6%
75 State Street
Boston, MA 02129
</TABLE>
7
<PAGE>
* Named Executive Officer
+ Director of the Company
** Less than 1 percent
(1) Percentage of ownership is based on 7,458,025 shares of Common Stock
outstanding as of March 31, 1997.
(2) Mr. Papitto's address is c/o AFC Cable Systems, Inc., 50 Kennedy Plaza,
Suite 1250, Providence, RI 02903. Includes 20,000 shares owned by a private
foundation of which Mr. Papitto is President and 74,444 shares owned by a
partnership of which Mr. Papitto is a general partner.
(3) Includes 25,000 shares subject to exercisable stock options, 1,000 shares of
restricted stock on which forfeiture provisions lapse on December 21, 1997,
5,372 shares of restricted stock on which forfeiture provisions lapse with
respect to 2,686 shares per year commencing on March 11, 1998 and 385 shares
held pursuant to the Company's 401(k) plan.
(4) Includes 12,500 shares subject to exercisable stock options, 15,880 shares
of restricted stock on which forfeiture provisions lapse with respect to
7,940 shares per year commencing March 11, 1998 and 352 shares held pursuant
to the Company's 401(k) plan.
(5) Includes 1,000 shares subject to exercisable stock options.
(6) Includes 2,000 shares subject to exercisable stock options.
(7) Includes those shares owned by Andrea M. Crump, the wife of Harry M. Crump.
(8) Includes those shares owned by Harry M. Crump, the husband of Andrea M.
Crump.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee, which is responsible for making recommendations
to the Board of Directors on compensation relating to officers of the Company
and administering the Company's equity incentive and stock option plans, makes
the following report on executive compensation for fiscal 1996.
The Company's executive compensation program is designed to reward and
retain executives who are capable of leading the Company in achieving its
strategic and financial objectives.
The Company relies on three compensation components to motivate executive
performance: annual salary, incentive bonuses (in cash and/or Common Stock) and
stock-based incentive compensation. Each of the Named Executive Officers has an
annual base salary, established by an employment agreement or otherwise, at a
level the Company believes is comparable to companies in its industry and in the
mid-range for growth companies traded on the Nasdaq National Market. In addition
to base salary, each executive officer receives an incentive bonus at the end of
each fiscal year based upon corporate performance and that officer's individual
performance. Corporate performance is measured by the Company's strategic and
financial performance in that fiscal year, with particular emphasis on pre-tax
earnings. Individual performance is measured by the officer's contribution to
achieving targeted performance criteria. Mr. Papitto received a base salary of
$252,000 during fiscal 1996 and was also awarded a bonus of $100,000. Mr.
Papitto's salary and bonus increased over that earned in 1995 by $60,000 and
$25,000, respectively.
8
<PAGE>
The Compensation Committee believes that short-term fluctuations in stock
price do not necessarily reflect the underlying strength or future prospects
of the Company and therefore, does not emphasize year-to-year changes in
stock price in its evaluation of corporate performance. The Compensation
Committee believes that long-term stock price appreciation more accurately
reflects the Company's achievement of its strategic goals and objectives.
Accordingly, the Company seeks to create long-term performance incentives for
its key employees by aligning their economic interests with the interests of
the Company's long-term shareholders through the Company's stock-based
incentive compensation program. Stock options are granted to key employees
generally at a price equal to the fair market value on the date of grant, and
awards are based on the performance of such employees and anticipated
contributions by such employees in helping the Company achieve its strategic
goals and objectives. Stock option grants are also made by reference to the
number of stock options an employee already holds and actual shareholdings.
In fiscal 1996, stock options were granted to key employees, including one
Named Executive Officer, upon recommendation of management and approval of
the Compensation Committee. Details on stock option and restricted stock
grants are included in the tables following this report.
With respect to the above matters, the Compensation Committee submits this
report.
COMPENSATION COMMITTEE
Anthony J. Santoro
Malcolm M. Donahue
9
<PAGE>
The following tables set forth information with respect to the compensation
of the Named Executive Officers earned during fiscal 1996, 1995 and 1994:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------------- -------------------------
NAME AND RESTRICTED
PRINCIPAL OTHER ANNUAL STOCK ALL OTHER
POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(1) AWARD($)(2) OPTIONS(#) COMPENSATION($)(3)
- ------------ --------- --------- --------- ------------------- ------------- ----------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ralph R. Papitto 1996 252,501 100,000 10,914
Chairman of the 1995 189,996 75,000 10,200
Board and Chief 1994 189,996 100,000 4,050
Executive Officer
Robert R. Wheeler 1996 190,769 81,680 9,131 377,150 40,000 11,251
President and Chief 1995 30,769 20,000 30,000 1,821
Operating Officer
Raymond H. Keller 1996 131,000 64,479 127,585 11,223
Vice President and 1995 131,000 39,415 11,310
Chief Financial 1994 130,300 68,627 44,970 25,000 9,488
Officer
</TABLE>
- ------------------------
(1) The amount reported for Mr. Wheeler in 1996 represents a relocation expense
paid on his behalf.
(2) The restricted stock award for Mr. Keller in 1994 represents a grant of
restricted stock at $.01 per share under the Company's 1993 Equity Incentive
Plan. The restricted stock awards for Messrs. Wheeler and Keller in 1996
represent grants of restricted stock, at no cost, under the Company's 1993
Equity Incentive Plan pursuant to the Company's 1996 Bonus Plan. The dollar
value of the restricted stock is based on the closing market price of the
Company's Common Stock on the date of grant. During 1994, the Company
granted an aggregate of 3,000 shares of restricted stock to Mr. Keller. The
value of this grant as of December 31, 1996 was $71,625. Restrictions on Mr.
Keller's 1994 restricted stock grant lapse over three years commencing
December 21, 1995. During 1996, the Company granted an aggregate of 15,880
and 5,372 shares of restricted stock to Messrs. Wheeler and Keller,
respectively, in payment of 1996 incentive bonuses. The values of such
grants as of December 31, 1996 were $379,135 and $128,257, respectively.
Restrictions on this restricted stock lapse equally over two years
commencing March 11, 1998. Shares of restricted stock are entitled to the
same dividends as those paid, if any, to holders of unrestricted shares.
(3) Includes insurance premiums paid by the Company on behalf of the named
executive and, for Messrs. Wheeler and Keller, employer contributions under
the Company's Nonunion Salaried and Hourly Employees 401(k) Savings Plan.
(4) Mr. Papitto was named Chief Executive Officer of the Company in December
1995.
(5) Mr. Wheeler began employment with the Company in October 1995 and was named
President and Chief Operating Officer of the Company in December 1995.
10
<PAGE>
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
- ----------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL
RATES
% OF TOTAL OF STOCK PRICE
OPTIONS APPRECIATION
GRANTED TO FOR OPTION TERM($)(2)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION ----------------------
NAME GRANTED(#) FISCAL YEAR(1) PRICE($/SH) DATE 5% 10%
- --------------------------------------------- ----------- --------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert R. Wheeler............................ 20,000(3) 28.6% $ 12.50 3/6/06 $ 157,225 $ 398,425
Robert R. Wheeler............................ 20,000(4) 28.6% $ 15.75 8/1/06 $ 198,104 $ 502,016
</TABLE>
- ------------------------
(1) During fiscal 1996, the Company granted to its employees options covering
70,000 shares of Common Stock.
(2) Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to the expiration of their
term assuming the specified compounded rates of appreciation (5% and 10%) on
the market value of the Company's Common Stock on the date of option grant
over the term of the options. These numbers are calculated based on rules
promulgated by the Securities and Exchange Commission and do not reflect the
Company's estimate of future stock price growth. Actual gains, if any, on
stock option exercises and Common Stock holdings are dependent on the timing
of such exercise and the future performance of the Company's Common Stock.
There can be no assurance that the rates of appreciation assumed in this
table can be achieved or that the amounts reflected will be received by the
individual.
(3) The option is exercisable in annual increments of 5,000 shares each
commencing March 6, 1997.
(4) The option is exercisable in annual increments of 4,000 shares each
commencing August 1, 1997.
11
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FY-END(#) FY-END($)(1)
---------------------- --------------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------ ---------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Raymond H. Keller ........ ---- ---- 15,000 10,000 208,125 138,750
---- ---- 10,000 15,000 88,750 133,125
Robert R. Wheeler ........ ---- ---- 7,500 22,500 89,063 267,188
---- ---- 0 20,000 0 227,500
---- ---- 0 20,000 0 162,500
</TABLE>
- ------------------------
(1) The closing bid price for the Company's Common Stock on the Nasdaq National
Market on December 31, 1996, the last trading day of the fiscal year, was
$23.875 per share.
PENSION PLAN
The Company has in effect a Supplemental Executive Retirement Plan ("SERP")
for certain key executives. The SERP is designed to supplement the Company's
Nonunion Salaried and Hourly Employees 401(k) Savings Plan and primary Social
Security benefits. Under the SERP, participating key executives who retire at or
after the age of 55 and have participated in the SERP for at least 10 years are
provided monthly benefits payable over a period of 180 months after retirement.
The benefits are based on discretionary annual contributions made by the
Company. Such contributions represent a percent of the participants' annual
compensation, which percent is determined annually by the Company. Of the Named
Executive Officers of the Company, Messrs. Wheeler and Keller each participate
in the SERP and their respective estimated annual benefits payable upon normal
retirement are approximately $183,799 and $73,169, respectively.
COMPENSATION OF DIRECTORS
Directors who are not executive officers of the Company receive annual
compensation of $9,600, payable monthly, plus $500 for each board or committee
meeting attended in person and $250 for each telephonic board meeting.
Additionally, pursuant to the Company's 1993 Directors' Stock Option Plan (the
"Plan") each non-employee director of the Company is awarded a stock option
covering 10,000 shares of Common Stock on the date of his or her first election
as a director. The exercise price of all options granted under the Plan may not
be less than 100% of the fair market value of the Common Stock on the date of
the grant. Options expire 10 years after the date of grant and become
exercisable in equal installments over a five year period starting with the
first anniversary of grant. Pursuant to the Plan, Mr. Donahue received on March
29, 1996, an option to purchase 10,000 shares of Common Stock at the then
current market price of $13.25 per share.
12
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Company's
Common Stock with the cumulative total return on the Nasdaq National Market--US
Index and the Standard & Poors ("S&P") Electrical Equipment Index from December
16, 1993, the date the Company's Common Stock began to trade publicly, through
December 31, 1996, the last trading day of fiscal 1996. The cumulative total
shareholder return is based on $100 invested in Common Stock of the Company and
in the respective indices on December 16, 1993 (including reinvestment of
dividends).
<TABLE>
<CAPTION>
12/16/93 12/31/93 12/31/94 12/31/95 12/31/96
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
AFC CABLE SYSTEMS, INC. 100 94 145 138 239
NASDAQ STOCK MARKET - US INDEX 100 103 101 142 175
S&P ELECTRICAL EQUIPMENT INDEX 100 102 100 136 182
</TABLE>
The stock prices on the Performance Graph are not necessarily indicative of
future stock price performance. Each of the Report of the Compensation Committee
of the Board of Directors and the Performance Graph shall not be deemed
incorporated by reference by any general statement incorporating this Proxy
Statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such acts.
13
<PAGE>
Compliance with Section 16(a) of the 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 initial reports of beneficial ownership and reports of
changes in beneficial ownership of Common Stock and other equity securities of
the Company. Such persons are required by regulations of the Securities Exchange
Act of 1934 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
forms furnished to the Company with respect to fiscal 1996, or written
representations that no other reports were required, the Company believes that
all Section 16(a) filing requirements applicable to its officers, directors and
ten percent beneficial owners were complied with, except that Harry M. Crump, a
ten percent beneficial owner, filed three late Forms 4 in connection with five
transactions during fiscal 1996.
Item No. 2
APPROVAL OF 1997 EQUITY INCENTIVE PLAN
On March 4, 1997, the Board of Directors approved, subject to stockholder
approval, the 1997 Equity Incentive Plan (the "Plan"), and the issuance of
400,000 shares of Common Stock pursuant to awards thereunder.
The purpose of the Plan is to advance the interests of the Company and its
subsidiaries by enhancing their ability to attract and retain employees and
other persons or entities who are in a position to make significant
contributions to the success of the Company and its subsidiaries, and to reward
participants for such contributions, through ownership of shares of Common Stock
(the "Stock") of the Company and cash incentives. The Plan is intended to
accomplish these goals by enabling the Company to grant awards in the form of
options, stock appreciation rights, restricted stock, unrestricted stock or
deferred stock, or performance awards, or combinations thereof, all as more
fully described below.
GENERAL
The Plan will be administered by a committee of the Board of Directors
designated for such purposes, consisting of at least two directors (the
"Committee"). During such times as the Stock is registered under the Securities
Exchange Act of 1934 (the "1934 Act"), all members of the Committee will be
"non-employee directors" within the meaning of Rule 16b-3 promulgated under the
1934 Act and "outside directors" within the meaning of Section 162(m)(4)(C)(i)
of the Internal Revenue Code of 1986, as amended (the "Code"). Under the Plan,
the Committee may grant stock options, stock appreciation rights, restricted
stock, unrestricted stock, deferred stock, and performance awards (in cash or
stock), or combinations thereof, and may waive the terms and conditions of any
award. A total of 400,000 shares of Stock are reserved for issuance under the
Plan. Employees of the Company and its subsidiaries and other persons or
entities who are in a position to make a significant contribution to the success
of the Company are eligible to receive awards under the Plan.
Section 162(m) of the Code places annual limitations on the deductibility by
public companies of
14
<PAGE>
compensation in excess of $1,000,000 paid to each of the chief executive
officer and the other four most highly compensated officers, unless, among
other things, the compensation is performance-based. For compensation
attributable to stock options and stock appreciation rights to qualify as
performance-based, the plan under which they are granted must state a maximum
number of shares with respect to which options and rights may be granted to
an individual during a specified period and must be approved by the Company's
stockholders. To comply with these requirements, the Plan provides that the
maximum number of shares as to which awards may be granted to any participant
in any one calendar year is 150,000, and the Plan is being submitted for
stockholder approval.
STOCK OPTIONS. The exercise price of an incentive stock option ("ISO")
granted under the Plan or an option intended to qualify as performance-based
compensation under Section 162(m) of the Code shall not be less than 100% of the
fair market value of the Stock at the time of grant. The exercise price of a
non-ISO granted under the Plan is determined by the Committee. Options granted
under the Plan will expire and terminate 10 years from the date of grant. The
exercise price may be paid in cash or by check, bank draft or money order
payable to the order of the Company. Subject to certain additional limitations,
the Committee may also permit the exercise price to be paid by tendering shares
of Stock, by delivery to the Company an undertaking by a broker to deliver
promptly sufficient funds to pay the exercise price, or a combination of the
foregoing.
STOCK APPRECIATION RIGHTS (SARs). Stock appreciation rights ("SARs") may be
granted either alone or in tandem with stock option grants. Each SAR entitles
the holder on exercise to receive an amount in cash or Stock or a combination
thereof (such form to be determined by the Committee) determined in whole or in
part by reference to appreciation in the fair market value of a share of Stock.
SARs may be based solely on appreciation in the fair market value of Stock or on
a comparison of such appreciation with some other measure of market growth. The
date as of which such appreciation or other measure is determined shall be the
exercise date unless another date is specified by the Committee. If an SAR is
granted in tandem with an option, the SAR will be exercisable only to the extent
the option is exercisable. To the extent the option is exercised, the
accompanying SAR will cease to be exercisable, and vice versa.
STOCK AWARDS; DEFERRED STOCK. The Plan provides for awards of
nontransferable shares of restricted Stock subject to forfeiture ("Restricted
Stock"), as well as unrestricted shares of Stock. Shares of Restricted Stock may
not be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated until the end of the applicable period and the satisfaction of any
other conditions or restrictions established by the Committee. Except as the
Committee may otherwise determine, if a participant dies or ceases to be an
employee or ceases to continue the consulting or other similar relationship
engaged in by such participant with the Company for any reason during the
restricted period, the Company may purchase the shares of Restricted Stock
subject to certain restrictions and conditions. Other awards under the Plan may
also be settled with Restricted Stock. The Plan also provides for deferred
grants entitling the recipient to receive shares of Stock in the future at such
times and on such conditions as the Committee may specify.
PERFORMANCE AWARDS. The Plan provides for performance awards entitling the
recipient to receive cash or Stock following the attainment of performance goals
determined by the Committee. Performance conditions and provisions for deferred
stock may also be attached to other awards under the Plan. In the case of any
performance award intended to qualify for the performance-based remuneration
exception described in Section 162(m) of the Code (an "Exempt Award"), the
Committee will in writing pre-establish specific performance goals that are
based upon any one or more operational, result or event-specific goals. The
maximum Exempt Award payable to an individual in respect of any performance goal
for any year cannot exceed $2,500,000. Payment of performance awards based upon
a performance goal for calendar years 2003 and thereafter is conditioned upon
re-approval by
15
<PAGE>
the stockholders of the Company no later than the first meeting
of stockholders in 2002.
TERMINATION. Except as otherwise provided by the Committee, if a
participant dies, options and SARs exercisable immediately prior to death may be
exercised by the participant's executor, administrator or transferee during a
period of one year following such death (or for the remainder of their original
term, if less). Options and SARs not exercisable at a participant's death
terminate. Outstanding awards of Restricted Stock must be transferred to the
Company upon a participant's death, and deferred stock grants, performance
awards and supplemental awards to which a participant is not irrevocably
entitled will be terminated unless otherwise provided. In the case of
termination for reasons other than death, options and SARs remain exercisable,
to the extent they were exercisable immediately prior to termination, for three
months (or for the remainder of their original term, if less), shares of
Restricted Stock must be sold to the Company, and other awards terminate, except
as otherwise provided.
In the case of certain mergers, consolidations or other transactions in
which the Company is acquired or is liquidated, all outstanding awards will
terminate. The Committee may, however, in its discretion cause unvested awards
to vest or become exercisable, remove performance or other conditions on the
exercise of or vested right to an award, or in certain circumstances provide for
replacement awards.
AMENDMENT. The Committee may amend the Plan or any outstanding award at any
time, provided that no such amendment will, without the approval of the
stockholders of the Company, effectuate a change for which stockholder approval
is required in order for the Plan to continue to qualify for the award of ISOs
under Section 422 of the Code or for the award of performance-based compensation
under Section 162(m) of the Code.
NEW PLAN BENEFIT
The future benefits or amounts that would be received under the Plan by the
executive officers, the non-executive officer directors and the non-executive
officer employees are discretionary and are therefore not determinable at this
time.
FEDERAL TAX EFFECTS
The following discussion summarizes certain federal income tax consequences
of the issuance and receipt of options under the Plan. The summary does not
purport to cover federal employment tax or other federal tax consequences that
may be associated with the Plan, nor does it cover state, local or non-U.S.
taxes.
INCENTIVE STOCK OPTIONS. In general, an optionee realizes no taxable income
upon the grant or exercise of an ISO. However, the exercise of an ISO may result
in an alternative minimum tax liability to the optionee. With certain
exceptions, a disposition of shares purchased under an ISO within two years from
the date of grant or within one year after exercise produces ordinary income to
the optionee (and a deduction to the Company) equal to the value of the shares
at the time of exercise less the exercise price. Any additional gain recognized
in the disposition is treated as a capital gain for which the Company is not
entitled to a deduction. If the optionee does not dispose of the shares until
after the expiration of these one- and two-year holding periods, any gain or
loss recognized upon a subsequent sale is treated as a long-term capital gain or
loss for which the Company is not entitled to a deduction.
NONSTATUTORY (NON-ISO) OPTIONS. In general, in the case of a non-ISO, the
optionee has no taxable income at the time of grant but realizes income in
connection with exercise of the option in an amount equal to the excess
16
<PAGE>
(at the time of exercise) of the fair market value of the shares acquired
upon exercise over the exercise price. A corresponding deduction is available
to the Company. Upon a subsequent sale or exchange of the shares,
appreciation or depreciation after the date of exercise is treated as capital
gain or loss for which the Company is not entitled to a deduction.
In general, an ISO that is exercised more than three months after
termination of employment (other than termination by reason of death) is
treated as a non-ISO. ISOs are also treated as non-ISOs to the extent they
first become exercisable by an individual in any calendar year for shares
having a fair market value (determined as of the date of grant) in excess of
$100,000.
Under the so-called "golden parachute" provisions of the Code, the vesting
or accelerated exercisability of awards in connection with a change in control
of the Company may be required to be valued and taken into account in
determining whether participants have received compensatory payments, contingent
on the change in control, in excess of certain limits. If these limits are
exceeded, a substantial portion of amounts payable to the participant, including
income recognized by reason of the grant, vesting or exercise of awards under
the Plan, may be subject to an additional 20% federal tax and may be
nondeductible to the Company.
AUDIT MATTERS
Ernst & Young LLP has been selected to audit the financial statements of the
Company for the fiscal year ending December 31, 1997, and to report the results
of their examination.
A representative of Ernst & Young LLP is expected to be present at the
Meeting and will be afforded the opportunity to make a statement if he or she
desires to do so and to respond to appropriate questions from stockholders.
STOCKHOLDER PROPOSALS
Proposals of stockholders submitted for consideration at the Annual Meeting
of Stockholders in 1998 must be received by the Company no later than December
1, 1997.
OTHER BUSINESS
The Board of Directors knows of no business that will come before the
meeting for action except as described in the accompanying Notice of Meeting.
However, as to any such business, the persons designated as proxies will have
discretionary authority to act in their best judgment.
FORM 10-K
A COPY OF AFC'S ANNUAL REPORT ON FORM 10-K FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS AVAILABLE WITHOUT CHARGE BY WRITING TO:
AFC CABLE SYSTEMS, INC., ATTN: VIRGINIA JOHNSON, ASSISTANT SECRETARY, 50 KENNEDY
PLAZA, SUITE 1250, PROVIDENCE, RHODE ISLAND 02903.
17
<PAGE>
AFC CABLE SYSTEMS, INC.
1997 EQUITY INCENTIVE PLAN
1. PURPOSE
The purpose of this Equity Incentive Plan (the "Plan") is to advance the
interests of AFC Cable Systems, Inc. (the "Company") and its subsidiaries by
enhancing their ability to attract and retain employees and other persons or
entities who are in a position to make significant contributions to the success
of the Company and its subsidiaries through ownership of shares of the Company's
common stock, $.01 par value ("Stock"), and cash incentives.
The Plan is intended to accomplish these goals by enabling the Company to
grant Awards in the form of Options, Stock Appreciation Rights, Restricted Stock
or Unrestricted Stock Awards, Deferred Stock Awards or Performance Awards, or
combinations thereof, all as more fully described below.
2. ADMINISTRATION
Unless otherwise determined by the Board of Directors of the Company (the
"Board"), the Plan will be administered by a Committee of the Board designated
for such purpose (the "Committee"). The Committee shall consist of at least two
directors. A majority of the members of the Committee shall constitute a
quorum, and all determinations of the Committee shall be made by a majority of
its members. Any determination of the Committee under the Plan may be made
without notice or meeting of the Committee by a writing signed by a majority of
the Committee members. During such times as the Stock is registered under the
Securities Exchange Act of 1934 (the "1934 Act"), all members of the Committee
shall be "non-employee directors" within the meaning of Rule 16b-3 promulgated
under the 1934 Act and "outside directors" within the meaning of Section
162(m)(4)(C)(i) of the Internal Revenue Code of 1986, as amended (the "Code").
The Committee will have authority, not inconsistent with the express
provisions of the Plan and in addition to other authority granted under the
Plan, to (a) grant Awards at such time or times as it may choose; (b)
determine the size of each Award, including the number of shares of Stock
subject to the Award; (c) determine the type or types of each Award; (d)
determine the terms and conditions of each Award; (e) waive compliance by a
holder of an Award with any obligations to be performed by such holder under
an Award and waive any terms or conditions of an Award; (f) amend or cancel
an existing Award in whole or in part (and if an award is canceled, grant
another Award in its place on such terms and conditions as the Committee
shall specify), except that the Committee may not, without the consent of the
holder of an Award, take any action under this clause with respect to such
Award if such action would adversely affect the rights of such holder; (g)
prescribe the form or forms of instruments that are required or deemed
appropriate under the Plan, including any written notices and elections
required of Participants (as defined below), and change such forms from time
to time; (h) adopt, amend and rescind rules and regulations for
<PAGE>
the administration of the Plan; and (i) interpret the Plan and
decide any questions and settle all controversies and disputes that may arise in
connection with the Plan. Such determinations and actions of the Committee, and
all other determinations and actions of the Committee made or taken under
authority granted by any provision of the Plan, will be conclusive and will bind
all parties. Nothing in this paragraph shall be construed as limiting the power
of the Committee to make adjustments under Section 7.3 or Section 8.6.
3. EFFECTIVE DATE AND TERM OF PLAN
The Plan will become effective on the date on which it is approved by the
stockholders of the Company. Awards may be made prior to such stockholder
approval if made subject thereto. No Award may be granted under the Plan after
[May __, 2007], but Awards previously granted may extend beyond that date.
4. SHARES SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 8.6, the aggregate number of
shares of Stock that may be delivered under the Plan will be 400,000. If any
Award requiring exercise by the Participant for delivery of Stock terminates
without having been exercised in full, or if any Award payable in Stock or cash
is satisfied in cash rather than Stock, the number of shares of Stock as to
which such Award was not exercised or for which cash was substituted will be
available for future grants.
Subject to Section 8.6(a), the maximum number of shares of Stock as to
which Options or Stock Appreciation Rights may be granted to any Participant in
any one calendar year is 150,000, which limitation shall be construed and
applied consistently with the rules under Section 162(m) of the Code.
Stock delivered under the Plan may be either authorized but unissued Stock
or previously issued Stock acquired by the Company and held in treasury. No
fractional shares of Stock will be delivered under the Plan.
5. ELIGIBILITY AND PARTICIPATION
Each key employee of the Company or any of its subsidiaries (an "Employee")
and each other person or entity (including without limitation non-Employee
directors of the Company or a subsidiary of the Company) who, in the opinion of
the Committee, is in a position to make a significant contribution to the
success of the Company or its subsidiaries will be eligible to receive Awards
under the Plan (each such Employee, person or entity receiving an Award, "a
Participant"). A "subsidiary" for purposes of the Plan will be a corporation in
which the Company owns, directly or indirectly, stock possessing 50% or more of
the total combined voting power of all classes of stock.
6. TYPES OF AWARDS
6.1. OPTIONS
<PAGE>
(1) NATURE OF OPTIONS. An Option is an Award giving the recipient the
right on exercise thereof to purchase Stock.
Both "incentive stock options," as defined in Section 422(b) of the Code
(any Option intended to qualify as an incentive stock option being hereinafter
referred to as an "ISO"), and Options that are not ISOs, may be granted under
the Plan. ISOs shall be awarded only to Employees. An Option awarded under the
Plan shall be a non-ISO unless it is expressly designated as an ISO at time of
grant.
(2) EXERCISE PRICE. The exercise price of an Option will be determined by
the Committee subject to the following:
(1) The exercise price of an ISO or an Option intended to qualify as
performance based compensation under Section 162(m) of the Code shall not
be less than 100% of the fair market value of the Stock subject to the
Option, determined as of the time the Option is granted.
(2) In no case may the exercise price paid for Stock which is part of
an original issue of authorized Stock be less than the par value per share
of the Stock.
(3) DURATION OF OPTIONS. The latest date on which an Option may be
exercised will be the tenth anniversary of the day immediately preceding the
date the Option was granted, or such earlier date as may have been specified by
the Committee at the time the Option was granted.
(4) EXERCISE OF OPTIONS. An Option will become exercisable at such time
or times, and on such conditions, as the Committee may specify. The Committee
may at any time and from time to time accelerate the time at which all or any
part of the Option may be exercised. Any exercise of an Option must be in
writing, signed by the proper person and delivered or mailed to the Company,
accompanied by (1) any documents required by the Committee and (2) payment in
full in accordance with paragraph (e) below for the number of shares for which
the Option is exercised.
(5) PAYMENT FOR STOCK. Stock purchased on exercise of an Option must be
paid for as follows: (1) in cash or by check (acceptable to the Company in
accordance with guidelines established for this purpose), bank draft or money
order payable to the order of the Company or (2) if so permitted by the
Committee at or after the grant of the Option or by the instrument evidencing
the Option, (i) through the delivery of shares of Stock which have been held for
at least six months (unless the Committee approves a shorter period) and which
have a fair market value equal to the exercise price, (ii) by delivery of an
unconditional and irrevocable undertaking by a broker to deliver promptly to the
Company sufficient funds to pay the exercise price, or (iii) by any combination
of the foregoing permissible forms of payment.
(6) DISCRETIONARY PAYMENTS. If (i) the market price of shares of Stock
subject to an Option (other than an Option which is in tandem with a Stock
Appreciation Right as described in Section 6.2) exceeds the exercise price of
the Option at the time of its exercise, and (ii) the person exercising the
Option so requests the Committee in writing, the Committee may in its sole
discretion cancel the Option and cause the Company to pay in cash or in
shares of Common Stock (at a price per share equal to the fair market value
per share) to the person exercising the Option an amount equal to the
difference between the fair
<PAGE>
market value of the Stock which would have been purchased pursuant to the
exercise (determined on the date the Option is canceled) and the aggregate
exercise price which would have been paid.
6.2. STOCK APPRECIATION RIGHTS.
(1) NATURE OF STOCK APPRECIATION RIGHTS. A Stock Appreciation Right (or
"SAR") is an Award entitling the holder on exercise to receive an amount in cash
or Stock or a combination thereof (such form to be determined by the Committee)
determined in whole or in part by reference to appreciation, from and after the
date of grant, in the fair market value of a share of Stock. SARs may be based
solely on appreciation in the fair market value of Stock or on a comparison of
such appreciation with some other measure of market growth such as (but not
limited) to appreciation in a recognized market index. The date as of which
such appreciation or other measure is determined shall be the exercise date
unless another date is specified by the Committee.
(2) GRANT OF STOCK APPRECIATION RIGHTS. Stock Appreciation Rights may be
granted in tandem with, or independently of, Options granted under the Plan.
(1) RULES APPLICABLE TO TANDEM AWARDS. When Stock Appreciation
Rights are granted in tandem with Options, (a) the Stock Appreciation Right
will be exercisable only at such time or times, and to the extent, that the
related Option is exercisable and will be exercisable in accordance with
the procedure required for exercise of the related Option; (b) the Stock
Appreciation Right will terminate and no longer be exercisable upon the
termination or exercise of the related Option, except that a Stock
Appreciation Right granted with respect to less than the full number of
shares covered by an Option will not be reduced until the number of shares
as to which the related Option has been exercised or has terminated exceeds
the number of shares not covered by the Stock Appreciation Right; (c) the
Option will terminate and no longer be exercisable upon the exercise of the
related Stock Appreciation Right; and (d) the Stock Appreciation Right will
be transferable only with the related Option.
(2) EXERCISE OF INDEPENDENT STOCK APPRECIATION RIGHTS. A Stock
Appreciation Right not granted in tandem with an Option will become
exercisable at such time or times, and on such conditions, as the Committee
may specify. The Committee may at any time accelerate the time at which
all or any part of the Right may be exercised.
Any exercise of an independent Stock Appreciation Right must be in writing,
signed by the proper person and delivered or mailed to the Company, accompanied
by any other documents required by the Committee.
6.3. RESTRICTED AND UNRESTRICTED STOCK.
(1) GRANT OF RESTRICTED STOCK. Subject to the terms and provisions of the
Plan, the Committee may grant shares of Stock in such amounts and upon such
terms and conditions as the Committee shall determine subject to the
restrictions described below ("Restricted Stock").
<PAGE>
(2) RESTRICTED STOCK AGREEMENT. The Committee may require, as a condition
to an Award, that a recipient of a Restricted Stock Award enter into a
Restricted Stock Award Agreement, setting forth the terms and conditions of the
Award. In lieu of a Restricted Stock Award Agreement, the Committee may provide
the terms and conditions of an Award in a notice to the Participant of the
Award, on the stock certificate representing the Restricted Stock, in the
resolution approving the Award, or in such other manner as it deems appropriate.
(3) TRANSFERABILITY AND OTHER RESTRICTIONS. Except as otherwise provided
in this Section 6.3, the shares of Restricted Stock granted herein may not be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated
until the end of the applicable period or periods established by the Committee
and the satisfaction of any other conditions or restrictions established by the
Committee (such period during which a share of Restricted Stock is subject to
such restrictions and conditions is referred to as the "Restricted Period").
Except as the Committee may otherwise determine under Section 7.1 or Section
7.2, if a Participant dies or suffers a Status Change (as defined at Section
7.2(a)) for any reason during the Restricted Period, the Company may purchase
the shares of Restricted Stock subject to such restrictions and conditions for
the amount of cash paid by the Participant for such shares; provided, that if no
cash was paid by the Participant such shares of Restricted Stock shall be
automatically forfeited to the Company.
During the Restricted Period with respect to any shares of Restricted
Stock, the Company shall have the right to retain in the Company's possession
the certificate or certificates representing such shares.
(4) REMOVAL OF RESTRICTIONS. Except as otherwise provided in this Section
6.3, a share of Restricted Stock covered by a Restricted Stock grant shall
become freely transferable by the Participant upon completion of the Restricted
Period, including the passage of any applicable period of time and satisfaction
of any conditions to vesting. The Committee, in its sole discretion, shall have
the right at any time immediately to waive all or any part of the restrictions
and conditions with regard to all or any part of the shares held by any
Participant.
(5) VOTING RIGHTS, DIVIDENDS AND OTHER DISTRIBUTIONS. During the
Restricted Period, Participants holding shares of Restricted Stock granted
hereunder may exercise full voting rights and shall receive all regular cash
dividends paid with respect to such shares. Except as the Committee shall
otherwise determine, any other cash dividends and other distributions paid to
Participants with respect to shares of Restricted Stock, including any dividends
and distributions paid in shares, shall be subject to the same restrictions and
conditions as the shares of Restricted Stock with respect to which they were
paid.
(6) OTHER AWARDS SETTLED WITH RESTRICTED STOCK. The Committee may, at the
time any Award described in this Section 6 is granted, provide that any or all
the Stock delivered pursuant to the Award will be Restricted Stock.
(7) UNRESTRICTED STOCK. Subject to the terms and provisions of the Plan,
the Committee may grant shares of Stock free of restrictions under the Plan in
such amounts and upon such terms and conditions as the Committee shall
determine.
(8) NOTICE OF SECTION 83(b) ELECTION. Any Participant making an election
under Section 83(b) of
<PAGE>
the Code with respect to Restricted Stock must provide a copy thereof to the
Company within 10 days of filing such election with the Internal Revenue
Service.
6.4. DEFERRED STOCK.
A Deferred Stock Award entitles the recipient to receive shares of Stock to
be delivered in the future. Delivery of the Stock will take place at such time
or times, and on such conditions, as the Committee may specify. The Committee
may at any time accelerate the time at which delivery of all or any part of the
Stock will take place. At the time any Award described in this Section 6.4 is
granted, the Committee may provide that, at the time Stock would otherwise be
delivered pursuant to the Award, the Participant will instead receive an
instrument evidencing the Participant's right to future delivery of Deferred
Stock.
6.5. PERFORMANCE AWARDS; PERFORMANCE GOALS.
(1) NATURE OF PERFORMANCE AWARDS. A Performance Award entitles the
recipient to receive, without payment, an amount in cash or Stock or a
combination thereof (such form to be determined by the Committee) following
the attainment of Performance Goals (as hereinafter defined). Performance
Goals may be related to personal performance, corporate performance,
departmental performance or any other category of performance established by
the Committee. The Committee will determine the Performance Goals, the period
or periods during which performance is to be measured and all other terms and
conditions applicable to the Award.
(2) OTHER AWARDS SUBJECT TO PERFORMANCE CONDITION. The Committee may, at
the time any Award described in this Section 6.5 is granted, impose the
condition (in addition to any conditions specified or authorized in this Section
6 or any other provision of the Plan) that Performance Goals be met prior to the
Participant's realization of any payment or benefit under the Award. Any such
Award made subject to the achievement of Performance Goals (other than an Option
or SAR) shall be treated as a Performance Award for purposes of Section 6.5(c)
below.
(3) LIMITATIONS AND SPECIAL RULES. In the case of any Performance Award
intended to qualify for the performance-based remuneration exception
described in Section 162(m)(4)(C) of the Code and the regulations thereunder
(an "Exempt Award"), the Committee shall in writing preestablish specific
Performance Goals. A Performance Goal must be established prior to passage of
25% of the period of time over which attainment of such goal is to be
measured. "Performance Goal" means criteria based upon any one or more of
the following (on a consolidated, divisional, subsidiary, line of business or
geographical basis or in combinations thereof): (i) sales; revenues; assets;
expenses; earnings before or after deduction for all or any portion of
interest, taxes, depreciation or amortization, whether or not on a continuing
operations or an aggregate or per share basis; return on equity, investment,
capital or assets; inventory level or turns; one or more operating ratios;
borrowing levels, leverage ratios or credit rating; market share; capital
expenditures; cash flow; stock price; stockholder return; or any combination
of the foregoing; or (ii) acquisitions and divestitures (in whole or in
part); joint ventures and strategic alliances; spin-offs, split-ups and the
like; reorganizations; recapitalizations, restructurings, financings
(issuance of debt or equity) and refinancings; transactions that would
constitute a Change of Control; or any combination of the foregoing.
<PAGE>
A Performance Goal and targets with respect thereto determined
by the Committee need not be based upon an increase, a positive or improved
result or avoidance of loss. The maximum Exempt Award payable to any
Participant in respect of any such Performance Goal for any year shall not
exceed $2,500,000. Payment of Exempt Awards based upon a Performance Goal for
calendar years 2003 and thereafter is conditioned upon reapproval by Employer's
shareholders no later than Employer's first meeting of shareholders in 2002.
7. EVENTS AFFECTING OUTSTANDING AWARDS
7.1. DEATH.
If a Participant dies, the following will apply:
(1) All Options and Stock Appreciation Rights held by the Participant
immediately prior to death, to the extent then exercisable, may be exercised by
the Participant's executor or administrator or the person or persons to whom the
Option or Right is transferred by will or the applicable laws of descent and
distribution, at any time within the one year period ending with the first
anniversary of the Participant's death (or such shorter or longer period as the
Committee may determine), and shall thereupon terminate. In no event, however,
shall an Option or Stock Appreciation Right remain exercisable beyond the latest
date on which it could have been exercised without regard to this Section 7.
Except as otherwise determined by the Committee, all Options and Stock
Appreciation Rights held by a Participant immediately prior to death that are
not then exercisable shall terminate at death.
(2) Except as otherwise determined by the Committee, all Restricted Stock
held by the Participant must be transferred to the Company (and, in the event
the certificates representing such Restricted Stock are held by the Company,
such Restricted Stock will be so transferred without any further action by the
Participant) in accordance with Section 6.3(c).
(3) Any payment or benefit under a Deferred Stock Award or Performance
Award to which the Participant was not irrevocably entitled prior to death will
be forfeited and the Award canceled as of the time of death, except as otherwise
determined the Committee.
7.2. TERMINATION OF SERVICE (OTHER THAN BY DEATH).
If a Participant who is an Employee ceases to be an Employee for any reason
other than death or retirement with consent of the Company after attainment of
age 65, or if there is a termination (other than by reason of death) of the
consulting, service or similar relationship in respect of which a non-Employee
Participant was granted an Award hereunder (such termination of the employment
or other relationship being hereinafter referred to as a "Status Change"), the
following will apply:
(1) Except as otherwise determined by the Committee, all Options and Stock
Appreciation Rights held by the Participant that were not exercisable
immediately prior to the Status Change shall terminate at the time of the Status
Change. Any Options or Rights that were exercisable immediately prior to the
Status Change will continue to be exercisable for a period of three months (or
such longer period as the
<PAGE>
Committee may determine), and shall thereupon terminate, unless the Award
provides by its terms for immediate termination in the event of a Status
Change (unless otherwise determined by the Committee) or unless the Status
Change results from a discharge for cause which in the opinion of the
Committee casts such discredit on the Participant as to justify immediate
termination of the Award. In no event, however, shall an Option or Stock
Appreciation Right remain exercisable beyond the latest date on which it
could have been exercised without regard to this Section 7. For purposes of
this paragraph, in the case of a Participant who is an Employee, a Status
Change shall not be deemed to have resulted by reason of (i) a sick leave or
other bona fide leave of absence approved for purposes of the Plan by the
Committee, so long as the Employee's right to reemployment is guaranteed
either by statute or by contract, or (ii) a transfer of employment between
the Company and a subsidiary or between subsidiaries, or to the employment of
a corporation (or a parent or subsidiary corporation of such corporation)
issuing or assuming an option in a transaction to which Section 424(a) of the
Code applies.
(2) Except as otherwise determined by the Committee, all Restricted Stock
held by the Participant at the time of the Status Change must be transferred to
the Company (and, in the event the certificates representing such Restricted
Stock are held by the Company, such Restricted Stock will be so transferred
without any further action by the Participant) in accordance with Section 6.3(c)
above.
(3) Any payment or benefit under a Deferred Stock Award or Performance
Award to which the Participant was not irrevocably entitled prior to the Status
Change will be forfeited and the Award cancelled as of the date of such Status
Change unless otherwise determined by the Committee.
7.3. CERTAIN CORPORATE TRANSACTIONS.
Except as otherwise provided by the Committee at the time of grant, in the
event of a consolidation or merger in which the Company is not the surviving
corporation or which results in the acquisition of substantially all the
Company's outstanding Stock by a single person or entity or by a group of
persons and/or entities acting in concert, or in the event of the sale or
transfer of substantially all the Company's assets or a dissolution or
liquidation of the Company (a "covered transaction"), the following rules shall
apply:
(1) Subject to paragraph (b) below, all outstanding Awards requiring
exercise will cease to be exercisable, and all other Awards to the extent not
fully vested (including Awards subject to conditions not yet satisfied or
determined) will be forfeited, as of the effective time of the covered
transaction, provided that the Committee may in its sole discretion (but subject
to Section 7.4), on or prior to the effective date of the covered transaction,
(1) make any outstanding Option and Stock Appreciation Right exercisable in
full, (2) remove the restrictions from any Restricted Stock, (3) cause the
Company to make any payment and provide any benefit under any Deferred Stock
Award or Performance Award and (4) remove any performance or other conditions or
restrictions on any Award; or
(2) With respect to an outstanding Award held by a participant who,
following the covered transaction, will be employed by or otherwise providing
services to an entity which is a surviving or acquiring entity in the covered
transaction or an affiliate of such an entity, the Committee may at or prior to
the effective time of the covered transaction, in its sole discretion and in
lieu of the action described in
<PAGE>
paragraph (a) above, arrange to have such surviving or acquiring entity or
affiliate assume any Award held by such participant outstanding hereunder or
grant a replacement award which, in the judgment of the Committee, is
substantially equivalent to any Award being replaced.
7.4. CHANGE OF CONTROL PROVISIONS.
(1) IMPACT OF EVENT. Notwithstanding any other provision of the Plan to
the contrary, in the event of a Change of Control:
(1) ACCELERATION OF OPTIONS AND SARs. Any Options and SARs
outstanding as of the date such Change of Control is determined to have
occurred and which are not then exercisable shall become exercisable to the
full extent of the original grant, and all shares of Restricted Stock which
are not otherwise vested shall vest. Holders of Performance Awards granted
hereunder as to which the relevant performance period has not ended as of
the date such Change of Control is determined to have occurred shall be
entitled at the time of such Change of Control to receive a cash payment
per Performance Award equal to the full value of the cash component of such
Award (if any) plus the fair market value of Stock included in such Award.
(2) RESTRICTION ON APPLICATION OF PLAN PROVISIONS APPLICABLE IN THE
EVENT OF TERMINATION OF EMPLOYMENT. After a Change of Control, Options and
SARs shall not be terminated as a result of a termination of employment
other than by reason of death, disability (as determined by the Company) or
retirement for seven months following such termination of employment or
until expiration of the original terms of the Option or SAR, whichever
period is shorter.
(3) RESTRICTION ON AMENDMENT. In connection with or following a
Change of Control, neither the Committee nor the Board may impose
additional conditions upon exercise or otherwise amend or restrict an
Option, SAR, share of Restricted Stock or Performance Award, or amend the
terms of the Plan in any manner adverse to the holder thereof, without the
written consent of such holder.
Notwithstanding the foregoing, if any right granted pursuant to this
Section 7.4 would make a Change of Control transaction ineligible for pooling of
interests accounting under applicable accounting principles that but for this
Section 7.4 would otherwise be eligible for such accounting treatment, the
Committee shall have the authority to substitute stock for the cash which would
otherwise be payable pursuant to this Section 7.4 having a fair market value
equal to such cash.
(b) DEFINITION OF CHANGE OF CONTROL. A "Change of Control" shall be
deemed to have occurred if (i) any corporation, person or other entity (other
than the Company, a majority-owned subsidiary of the Company, any employee
benefit plan maintained by the Company or any of its subsidiaries or members
of the Board on the date the Plan is approved by the stockholders of the
Company), including a "group" as defined in Section 13(d)(3) of the 1934 Act
becomes the beneficial owner of Stock representing more than twenty-five
percent of the voting power of the Company (other than by consolidation or
merger) or (ii) within any 24 consecutive month period, persons who were
members of the Board immediately prior to such 24-month period, together with
any persons who were first elected as directors (other than as a
<PAGE>
result of any settlement of a proxy or consent solicitation contest or any
action taken to avoid such a contest) during such 24-month period by or upon
the recommendation of persons who were members of the Board immediately prior
to such 24-month period and who constituted a majority of the Board at the
time of such election, cease to constitute a majority of the Board.
8. GENERAL PROVISIONS
8.1. DOCUMENTATION OF AWARDS.
Awards will be evidenced by such written instruments, if any, as may be
prescribed by the Committee from time to time. Such instruments may be in the
form of agreements to be executed by both the Participant and the Company, or
certificates, letters or similar instruments, which need not be executed by the
Participant but acceptance of which will evidence agreement to the terms
thereof.
8.2. RIGHTS AS A STOCKHOLDER, DIVIDEND EQUIVALENTS.
Except as specifically provided by the Plan, the receipt of an Award will
not give a Participant rights as a stockholder; the Participant will obtain such
rights, subject to any limitations imposed by the Plan or the instrument
evidencing the Award, only upon the issuance of Stock. However, the Committee
may, on such conditions as it deems appropriate, provide that a Participant will
receive a benefit in lieu of cash dividends that would have been payable on any
or all Stock subject to the Participant's Award had such Stock been outstanding.
Without limitation, the Committee may provide for payment to the Participant of
amounts representing such dividends, either currently or in the future, or for
the investment of such amounts on behalf of the Participant.
8.3. CONDITIONS ON DELIVERY OF STOCK.
The Company will not be obligated to deliver any shares of Stock pursuant
to the Plan or to remove restriction from shares previously delivered under the
Plan (a) until all conditions of the Award have been satisfied or removed, (b)
until, in the opinion of the Company's counsel, all applicable federal and state
laws and regulation have been complied with, (c) if the outstanding Stock is at
the time listed on any stock exchange or The Nasdaq National Market, until the
shares to be delivered have been listed or authorized to be listed on such
exchange or market upon official notice of notice of issuance, and (d) until all
other legal matters in connection with the issuance and delivery of such shares
have been approved by the Company's counsel. If the sale of Stock has not been
registered under the Securities Act of 1933, as amended, the Company may
require, as a condition to exercise of the Award, such representations or
agreements as counsel for the Company may consider appropriate to avoid
violation of such Act and may require that the certificates evidencing such
Stock bear an appropriate legend restricting transfer.
If an Award is exercised by the Participant's legal representative, the
Company will be under no obligation to deliver Stock pursuant to such exercise
until the Company is satisfied as to the authority of such representative.
8.4. TAX WITHHOLDING.
<PAGE>
The Company will withhold from any cash payment made pursuant to an Award
an amount sufficient to satisfy all federal, state and local withholding tax
requirements (the "withholding requirements").
In the case of an Award pursuant to which Stock may be delivered, the
Committee will have the right to require that the Participant or other
appropriate person remit to the Company an amount sufficient to satisfy the
withholding requirements, or make other arrangements satisfactory to the
Committee with regard to such requirements, prior to the delivery of any Stock
or removal of restrictions thereon. If and to the extent that such withholding
is required, the Committee may permit the Participant or such other person to
elect at such time and in such manner as the Committee provides to have the
Company hold back from the shares to be delivered, or to deliver to the Company,
Stock having a value calculated to satisfy the withholding requirement. The
Committee may make such share withholding mandatory with respect to any Award at
the time such Award is made to a Participant.
If at the time an ISO is exercised the Committee determines that the
Company could be liable for withholding requirements with respect to the
exercise or with respect to a disposition of the Stock received upon exercise,
the Committee may require as a condition of exercise that the person exercising
the ISO agree (a) to provide for withholding under the preceding paragraph of
this Section 8.4, if the Committee determines that a withholding responsibility
may arise in connection with tax exercise, (b) to inform the Company promptly of
any disposition (within the meaning of section 424(c) of the Code) of Stock
received upon exercise, and (c) to give such security as the Committee deems
adequate to meet the potential liability of the Company for the withholding
requirements and to augment such security from time to time in any amount
reasonably deemed necessary by the Committee to preserve the adequacy of such
security.
8.5. TRANSFERABILITY OF AWARDS.
Unless otherwise permitted by the Committee, no Award (other than an Award
in the form of an outright transfer of cash or Unrestricted Stock) may be
transferred other than by will or by the laws of descent and distribution .
8.6. ADJUSTMENTS IN THE EVENT OF CERTAIN TRANSACTIONS.
(1) In the event of a stock dividend, stock split or combination of
shares, recapitalization or other change in the Company's capitalization, or
other distribution to holders of Stock other than normal cash dividends, after
the effective date of the Plan, the Committee will make any appropriate
adjustments to the maximum number of shares that may be delivered under the Plan
under the first paragraph of Section 4 above and to the limits described in the
second paragraph of Section 4 and in Section 6.5(c).
(2) In any event referred to in paragraph (a), the Committee will also
make any appropriate adjustments to the number and kind of shares of Stock or
securities subject to Awards then outstanding or subsequently granted, any
exercise prices relating to Awards and any other provision of Awards affected
by such change. The Committee may also make such adjustments to take into
account material changes in law or in accounting practices or principles,
mergers, consolidations, acquisitions, dispositions or similar
<PAGE>
corporate transactions, or any other event, if it is determined by the
Committee that adjustments are appropriate to avoid distortion in the
operation of the Plan; provided, that adjustments pursuant to this sentence
shall not be made to the extent it would cause any Award intended to be
exempt under Section 162(m)(4)(c) of the Code to fail to be so exempt.
(3) In the case of ISOs, the adjustments described in (a) and (b) will be
made only to the extent consistent with continued qualification of the Option
under Section 422 of the Code (in the case of an ISO) or Section 162(m) of the
Code.
8.7. EMPLOYMENT RIGHTS, ETC.
Neither the adoption of the Plan nor the grant of Awards will confer upon
any person any right to continued retention by the Company or any subsidiary as
an Employee or otherwise, or affect in any way the right of the Company or
subsidiary to terminate an employment, service or similar relationship at any
time. Except as specifically provided by the Committee in any particular case,
the loss of existing or potential profit in Awards granted under the Plan will
not constitute an element of damages in the event of termination of an
employment, service or similar relationship even if the termination is in
violation of an obligation of the Company to the Participant.
8.8. DEFERRAL OF PAYMENTS.
The Committee may agree at any time, upon request of the Participant, to
defer the date on which any payment under an Award will be made.
8.9. PAST SERVICES AS CONSIDERATION.
Where a Participant purchases Stock under an Award for a price equal to the
par value of the Stock the Committee may determine that such price has been
satisfied by past services rendered by the Participant.
9. EFFECT, AMENDMENT AND TERMINATION
Neither adoption of the Plan nor the grant of Awards to a Participant will
affect the Company's right to grant to such Participant awards that are not
subject to the Plan, to issue to such Participant Stock as a bonus or otherwise,
or to adopt other plans or arrangements under which Stock may be issued to
Employees.
The Committee may at any time or times amend the Plan or any outstanding
Award for any purpose which may at the time be permitted by law, or may at any
time terminate the Plan as to any further grants of Awards, provided that
(except to the extent expressly required or permitted by the Plan) no such
amendment will, without the approval of the stockholders of the Company,
effectuate a change for which stockholder approval is required in order for the
Plan to continue to qualify for the award of ISOs under Section 422 of the Code
or for the award of performance-based compensation under Section 162(m) of the
Code.
<PAGE>
ANNUAL MEETING OF AFC CABLE SYSTEMS, INC.
May 6, 1997
PROXY
The undersigned hereby constitutes and appoints Ralph R. Papitto and
Raymond H. Keller, or either of them individually, with power of substitution
to each, proxies to vote and act at the Annual Meeting of Stockholders of AFC
Cable Systems, Inc. to be held on May 6, 1997 at the Biltmore Grand Heritage
Hotel, Kennedy Plaza, Providence, Rhode Island 02903, at 10:00 a.m., and at
any adjournments thereof, upon and with respect to the number of shares of
Common Stock, par value $.01 per share, that the undersigned would be
entitled to vote if personally present. The undersigned instructs such
proxies, or their substitutes, to vote in such manner as they may determine
on any matters which may come before the meeting, all as indicated in the
accompanying Notice of Meeting and Proxy Statement, receipt of which is
acknowledged, and to vote on the following as specified by the undersigned.
All proxies heretofore given by the undersigned in repect of said meeting are
hereby revoked.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. Unless
otherwise specified in the boxes provided on the reverse side hereof, the
proxy will be voted IN FAVOR of the nominees for director, IN FAVOR of the
1997 Equity Incentive Plan and in the discretion of the named proxies as to
any other matter that may come before this meeting or any adjournments
thereof.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
/SEE REVERSE SIDE/
<PAGE>
/X/Please mark
votes as in
this example.
PLEASE DO NOT FOLD THIS PROXY.
1. Election of Directors
The undersigned hereby GRANTS authority to elect the following
nominees: Raymond H. Keller and Malcolm M. Donahue
FOR WITHHELD
/ / / /
/ /
------------------------------------------
For all nominees except as noted above
FOR AGAINST ABSTAIN
2. Adoption of 1997 Equity Incentive / / / / / /
Plan
3. In their discretion, the proxies are authorized to vote upon
such other business as may properly come before the Meeting.
MARK HERE
FOR ADDRESS / /
CHANGED AND
NOTE AT LEFT
Please sign exactly as name(s) appear hereon. When signing as attorney,
executor, administrator, trustee, or guardian, please sign your full title
as such. Each joint owner should sign.
Signature Date:
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Signature Date:
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