<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
AFC Cable Systems, Inc.
- --------------------------------------------------------------------------------
(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:
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<PAGE>
AFC CABLE SYSTEMS, INC.
50 Kennedy Plaza, Suite 1250
Providence, Rhode Island 02903
---------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 27, 1998
---------------
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 Wednesday, May 27, 1998 for the following purposes:
1. To elect two Class II directors.
2. To approve the adoption of the Company's 1998 Equity Incentive Plan.
3. To approve the Amendment to the Restated Certificate of Incorporation to
increase the authorized Common Stock from 15,000,000 to 50,000,000.
4. 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 6, 1998 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
May 5, 1998
<PAGE>
ANNUAL MEETING OF STOCKHOLDERS
May 27, 1998
---------------
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
Wednesday, May 27, 1998 or at any adjournment thereof. The enclosed form of
proxy and this Proxy Statement have been mailed to stockholders on or about
May 5, 1998 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 6, 1998 are entitled to receive notice
of and to vote at the Meeting. As of that date, the Company had issued and
outstanding 11,463,972 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 1998 Equity Incentive Plan and the amendment to the Restated Certificate
of Incorporation to increase the authorized common stock 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, for the 1998 Equity Incentive
Plan, for the amendment to the Restated Certificate of Incorporation 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
broker or nominee does not have the discretionary voting power on a
2
<PAGE>
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, 1997 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 II 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, Robert R. Wheeler and Anthony J. Santoro
will be elected as directors for a term of three years, expiring at the Annual
Meeting to be held in the year 2001, 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.
<TABLE>
NOMINEES
<CAPTION>
Name, Age (as of March 31, 1998), Director
Business Experience and Current Directorships Since
--------------------------------------------- -----
<S> <C>
ANTHONY J. SANTORO, 55, has been a Director of the Company since 1993
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, 53, has been President and Chief Operating Officer 1996
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>
4
<PAGE>
<TABLE>
CURRENT DIRECTORS
<CAPTION>
Name, Age (as of March 31, 1998) Director Term
Business Experience and Current Directorships Since Expires
--------------------------------------------- ----- -------
<S> <C> <C>
RALPH R. PAPITTO, 71, has been Chairman of the Board and a Director of 1989 1999
the Company since December 1989. Mr. Papitto has been Chief Executive
Officer since 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 also a director of Lynch Corporation, a
communications and multi-media services company, and ACS Industries,
Inc., a manufacturer of various industrial products, and is also
Chairman of the Board of Trustees of Roger Williams University.
MALCOLM M. DONAHUE, 76, has been a Director of the Company since March 1996 2000
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, 60, has been Vice President and Chief Financial 1989 2000
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>
5
<PAGE>
Board of Directors and Committees
The Board of Directors held seven meetings during the fiscal year ended
December 31, 1997. Each current director attended at least 75% of the Board
meetings and the meetings held by committees on which he served during fiscal
1997. 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, 1997. 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 five meetings during the fiscal year ended December 31, 1997. 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, 1998 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 1997 (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. Unless
otherwise indicated below, each person or entity listed maintains a mailing
address of c/o AFC Cable Systems, Inc., 55 Samuel Barnet Boulevard, New Bedford,
MA 02745.
<TABLE>
<CAPTION>
Common Stock
Beneficially Owned
----------------------------------------------------
Percentage of
Names Number of Shares Outstanding Shares(1)
---------------- ---------------------
<S> <C> <C>
Ralph R. Papitto*+(2) 2,498,657 21.8%
Robert R. Wheeler*+(3) 89,081 **
Raymond H. Keller*+(4) 62,399 **
Malcolm M. Donahue+(5) 3,274 **
Anthony J. Santoro+(6) 5,000 **
All Directors and Executive
Officers as a group (5 persons) 2,658,411 23.2%
FMR Corp. 1,479,950 12.9%
82 Devonshire Street
Boston, MA 02109
Wellington Management Company, LLP 637,500 5.6%
75 State Street
Boston, MA 02129
- ----------
<FN>
* Named Executive Officer
+ Director of the Company
** Less than 1 percent
</FN>
</TABLE>
7
<PAGE>
- ----------
(1) Percentage of ownership is based on 11,462,410 shares of Common Stock
outstanding as of March 31, 1998.
(2) Includes 43,750 shares subject to exercisable stock options.
(3) Includes 61,250 shares subject to exercisable stock options, 19,977 shares
of restricted stock on which forfeiture provisions lapse with respect to
9,925 shares on March 11, 1999, and 5,026 shares on each of March 13, 1999
and March 13, 2000, and 1,050 shares held pursuant to the Company's 401(k)
plan.
(4) Includes 48,437 shares subject to exercisable stock options, 9,205 shares
of restricted stock on which forfeiture provisions lapse with respect to
3,358 shares on March 11, 1999, 2,923 shares on March 13, 1999 and 2,924
shares on March 13, 2000 and 672 shares held pursuant to the Company's
401(k) plan.
(5) Includes 2,500 shares subject to exercisable stock options.
(6) Includes 3,750 shares subject to exercisable stock options.
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 1997.
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. In
recognition of the Company's improved sales and earnings, Mr. Papitto's 1997
salary and bonus were increased over that earned in 1996 by $48,000 and
$180,000, respectively.
The Compensation Committee believes that short-term fluctuations in
stock price do not necessarily reflect the underlying strength or future
prospects of the Company and therefore, does not emphasize year-to-year changes
in stock price in its evaluation of corporate performance. The Compensation
Committee believes that long-term stock price appreciation more accurately
reflects the Company's achievement of its strategic goals and objectives.
Accordingly, the Company seeks to create long-term performance incentives for
its key employees by aligning their economic interests with the interests of the
Company's long-term shareholders through the Company's stock-based incentive
compensation program. Stock options are granted to key employees generally at a
price equal to the fair market value on the date of grant, and awards are based
on the performance of such employees and anticipated contributions by such
employees in helping the Company achieve its strategic goals and objectives.
Stock option grants are also made by reference to the number of stock options an
employee already holds and actual shareholdings. In fiscal 1997, stock options
were granted to key employees, including three Named Executive Officers, upon
recommendation of management and approval of the Compensation Committee. Details
on stock option and restricted stock grants are included in the tables following
this report.
8
<PAGE>
With respect to the above matters, the Compensation Committee submits this
report.
COMPENSATION COMMITTEE
Anthony J. Santoro
Malcolm M. Donahue
9
<PAGE>
The following tables set forth information with respect to the
compensation of the Named Executive Officers earned during fiscal 1997, 1996 and
1995:
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term
Annual Compensation Compensation
--------------------------------------------- -------------------------
Restricted
Name and Principal Other Annual Stock All Other
Position Year Salary($) Bonus($) Compensation($)(1) Award($)(2) Options(#) Compensation($)(3)
- -------- ---- --------- -------- ------------------ ----------- ---------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ralph R. Papitto 1997 300,000 280,000 143,750 310
Chairman of the 1996 252,501 100,000 10,914
Board and Chief 1995 189,996 75,000 10,200
Executive Officer
Robert R. Wheeler 1997 200,000 332,199 356,846 100,000 14,710
President and Chief 1996 190,769 81,680 9,131 377,150 50,000 11,251
Operating Officer 1995 30,769 20,000 37,500 1,821
Raymond H. Keller 1997 131,000 140,056 207,569 18,750 11,484
Vice President and 1996 131,000 64,479 127,585 11,223
Chief Financial 1995 131,000 39,415 11,310
Officer
- ----------
<FN>
(1) The amount reported for Mr. Wheeler in 1996 represents a relocation expense
paid on his behalf.
(2) The restricted stock awards for Messrs. Wheeler and Keller in 1997
represent grants of restricted stock, at no cost, under the Company's 1997
Equity Incentive Plan pursuant to the Company's 1997 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 1997, the Company
granted an aggregate of 10,052 and 5,847 shares of restricted stock to
Messrs. Wheeler and Keller, respectively, in payment incentive bonuses.
Restrictions on this restricted stock lapse equally over two years
commencing March 13, 1999. 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 1996, the Company granted an aggregate of 19,850 and 6,715 shares of
restricted stock to Messrs. Wheeler and Keller, respectively, in payment of
1996 incentive bonuses. 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.
</FN>
</TABLE>
10
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
Individual Grants
------------------------------------------------------------------------------------
<CAPTION>
% of Total Potential Realizable Value
Options at Assumed Annual Rates
Granted to of Stock Price Appreciation
Options Employees in Exercise Expiration for Option Term($)(2)
---------------------
Name Granted(#) Fiscal Year(1) Price($/Sh) Date 5% 10%
---- ---------- -------------- ----------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Ralph R. Papitto 143,750(3) 25.8% $15.40 3/4/07 $1,392,218 $3,528,200
Robert R. Wheeler 100,000(4) 17.9% $15.40 3/4/07 $ 968,500 $2,454,400
Raymond H. Keller 18,750(5) 3.4% $15.40 3/4/07 $ 181,594 $ 460,200
- ----------
<FN>
(1) During fiscal 1997, the Company granted to its employees options covering
557,500 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. A 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 on October 15, 1997 with respect to 18,750 shares
and in annual increments of 31,250 shares each commencing March 4, 1998
with respect to the remaining shares.
(4) The option is exercisable in annual increments of 25,000 shares each
commencing March 4, 1998.
(5) The option is exercisable in two annual increments of 4,687 shares each
commencing March 4, 1998 and two annual increments of 4,688 shares each
commencing March 4, 2000.
</FN>
</TABLE>
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>
Ralph R. Papitto - - 0 143,750 0 2,062,813
Robert R. Wheeler - - 18,750 18,750 377,813 377,813
- - 6,250 18,750 123,438 370,313
- - 5,000 20,000 85,750 343,000
- - 0 100,000 0 1,435,000
Raymond H. Keller - - 25,000 6,250 543,750 135,938
- - 18,750 12,500 332,813 221,875
- - 0 18,750 0 269,062
- ----------
<FN>
(1) The closing bid price for the Company's Common Stock on the Nasdaq National
Market on December 31, 1997, the last trading day of the fiscal year, was
$29.75 per share.
</FN>
</TABLE>
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 $184,942 and $81,808, 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. No options were awarded under the Plan during the
year ended December 31, 1997.
12
<PAGE>
Change in Control Severance Benefit Plan
The Company has entered into severance agreements (the "Severance
Agreements") with Robert R. Wheeler and Raymond H. Keller (collectively the
"Employees" and each an "Employee"). The Severance Agreements provide that if
within twenty-four months following a Change in Control, the Employee's
employment is terminated for any reason, or if there is a material adverse
change (as defined therein) that entitles Employee to treat such change as a
termination, Employee shall be entitled to receive severance pay at an annual
rate equal to (i) his basic salary at the annual rate in effect immediately
prior to any such Change in Control (or, if higher, immediately prior to such
termination), plus (ii) the highest amount of bonus or incentive compensation
paid or payable in cash or stock (valued as of the date of such bonus) to
Employee (irrespective of any decision to defer any payment with respect
thereto) for any one of the three calendar years prior to such Change in Control
(or, if higher, immediately prior to such termination), such severance pay to be
paid for the twenty-four month period following such termination in the same
manner as Employee's basic salary was paid immediately prior to such termination
and to be subject to appropriate tax withholding. The Company is obligated to
provide the Employee with coverage under the Company's group health plans or
substantially similar plans for a period of twenty-four months from the date of
termination, unless Employee elects to be paid the value of such benefits in
cash.
Within thirty (30) days following a Change in Control, regardless of
whether an Employee's employment has been terminated, the Employee will be paid
20% of his basic salary immediately prior to the Change in Control. Payment of
such amount shall be considered severance pay in consideration of past services
during a period while any such Change in Control is pending and thereafter and
is not to be reduced by compensation or income received by Employee from any
other employment or other source.
A Change in Control is generally defined to include (i) certain changes
in the majority membership of the Board of Directors; (ii) the Company ceasing
to be a publicly-owned corporation having at least 500 stockholders; (iii) an
event required to be reported as a Change in Control in certain filings with the
Securities and Exchange Commission; (iv) certain situations in which the Company
executes an agreement of acquisition, merger or consolidation with respect to
substantially all of the business and/or assets of the Company; and (v) certain
acquisitions of securities representing 25% or more of votes that could be cast
for election of the Company's Board of Directors.
Certain Relationships and Related Transactions
During fiscal 1997, the Company paid fees of 50,000 shares of its
Common Stock to an entity affiliated with Mr. Papitto in connection with
acquisitions completed by the Company.
13
<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, 1997, the last trading day of fiscal 1997. 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 12/31/97
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AFC CABLE SYSTEMS, INC. 100 94 145 138 239 372
NASDAQ STOCK MARKET - US INDEX 100 103 101 142 175 215
S&P ELECTRICAL EQUIPMENT INDEX 100 101 100 136 181 250
- --------------------------------------------------------------------------------------------
</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.
14
<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 1997, 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.
Item No. 2
APPROVAL OF 1998 EQUITY INCENTIVE PLAN
On April 1, 1998, the Board of Directors approved, subject to
stockholder approval, the 1998 Equity Incentive Plan (the "Plan"), and the
issuance of 600,000 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 600,000 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 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
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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 250,000, 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 2004 and thereafter is conditioned
upon re-approval by the stockholders of the Company no later than the first
meeting of stockholders in 2003.
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
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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 (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
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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.
Item No. 3
APPROVAL OF AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION TO
INCREASE THE AUTHORIZED COMMON STOCK FROM 15,000,000 TO 50,000,000
On April 1, 1998 the Board of Directors voted, subject to approval by
the stockholders, to amend Article IV of the Company's Restated Certificate of
Incorporation to increase the authorized number of shares of Common Stock, par
value $.01 per share, from 15,000,000 to 50,000,000 (the "Amendment").
On April 6, 1998, the Company had 11,463,972 shares of Common Stock
outstanding and 1,590,869 shares and 625,000 shares, respectively, reserved for
issuance upon exercise of stock options and under qualified employee savings
plans. The Board of Directors believes that it is desirable to have available a
substantial number of authorized but unissued shares of Common Stock which may
be issued from time to time, without further action by the stockholders, to
provide for stock splits or stock dividends, stock options and other equity
incentives, to be able to take advantage of acquisition opportunities, to meet
future capital needs, and for other general corporate purposes.
Any issuance of additional shares of Common Stock would have the effect
of reducing the percentage voting interests of previously outstanding Common
Stock. Shares of authorized but unissued Common Stock may be issued from time to
time by the Board of Directors without further stockholder action unless such
action is required by the law of the State of Delaware, under which the Company
is incorporated, the Company's Certificate of Incorporation, or the rules of the
Nasdaq National Market System ("Nasdaq"). Nasdaq currently has a qualification
requirement, the effect of which is to require that a listed company obtain
prior stockholder approval when issuing shares of authorized but unissued Common
Stock in certain transactions in an amount greater than 20% of its then
outstanding Common Stock.
In addition to the foregoing uses for authorized but unissued stock,
additional authorized but unissued shares of Common Stock might be used in the
context of a defense against or response to possible or threatened hostile
takeovers.
The holders of Common Stock do not have preemptive rights to subscribe
to shares of Common Stock or other securities issued by the Company. The
issuance of additional authorized shares of Common Stock may dilute the voting
power and equity interest of present stockholders. It is not possible to predict
in advance whether the issuance of additional shares will have a dilutive effect
on earnings per share as it depends on the specific events associated with a
particular transaction.
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If the stockholders approve the Amendment, it will become effective
upon the filing of a Certificate of Amendment with the Secretary of State of
Delaware, which is expected to take place promptly after the stockholders'
meeting. The Amendment does not alter or change the powers, preferences, or
special rights of the holders of shares of Common Stock or any other class of
stock.
AUDIT MATTERS
Ernst & Young LLP has been selected to audit the financial statements
of the Company for the fiscal year ending December 31, 1998, 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 1999 must be received by the Company no later than
December 1, 1998.
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 (Telephone (401) 453-2000).
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DETACH HERE
PROXY
ANNUAL MEETING OF AFC CABLE SYSTEMS, INC.
MAY 27, 1998
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 27, 1998 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 respect 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
1998 Equity Incentive Plan, IN FAVOR of the Amendment to the Restated
Certificate of Incorporation to increase the authorized Common Stock, and in
the discretion of the named proxies as to any other matter that may come
before this meeting or any adjournments thereof.
/ SEE REVERSE SIDE /
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
/ SEE REVERSE SIDE/
<PAGE>
DETACH HERE
/ 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: Robert R. Wheeler and Anthony J. Santoro
FOR / / Withheld / /
/ / _____________________________________
For all nominees except as noted above
FOR AGAINST ABSTAIN
2. Adoption of the 1998 Equity Incentive Plan / / / / / /
3. Amendment to the Restated Certificate of
Incorporation to increase the authorized
Common Stock / / / / / /
4. In their discretion, the proxies are
authorized to vote upon such other business
as may properly come before the Meeting. / / / / / /
MARK HERE FOR ADDRESS CHANGE 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:_______ Signature:________________ Date:_______
