PARLEX CORPORATION 145 Milk Street, Methuen, Massachusetts 01844
October 31, 1997
Dear Stockholder,
I am pleased to invite you to attend Parlex Corporation's annual
meeting. The meeting will be held on Tuesday, December 2, 1997, at 9:30 a.m.
at the Fleet Bank Building, eighth floor, One Federal Street, Boston,
Massachusetts.
As the accompanying notice and proxy statement describe, the only
action scheduled for this year's meeting is the election of two directors
each for a term of three years.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING.
ACCORDINGLY, PLEASE SIGN, DATE, AND RETURN THE ENCLOSED PROXY AT YOUR
EARLIEST CONVENIENCE.
I look forward to meeting as many of our stockholders as possible and
hope you can be present on December 2nd.
Sincerely,
/s/ HERBERT W. POLLACK
HERBERT W. POLLACK
Chairman of the Board
Parlex Corporation
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of Parlex Corporation:
The Annual Meeting of Stockholders of Parlex Corporation will be held
on the eighth floor of the Fleet Bank Building, One Federal Street, Boston,
Massachusetts, on Tuesday, December 2, 1997, at 9:30 a.m. for the following
purposes:
1. to elect two Class III members of the Board of Directors to serve
for a period of three years and until their successors are elected
and qualified; and
2. to consider and act upon any other matter that properly comes
before the meeting or any adjournment thereof.
By Order of the Board of Directors
JILL POLLACK KUTCHIN
Clerk
Methuen, Massachusetts
October 31, 1997
PARLEX CORPORATION
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
DECEMBER 2, 1997
This statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of Parlex Corporation (the
"Company") for use at the Company's Annual Meeting of Stockholders to be
held on Tuesday, December 2, 1997, at the time and place set forth in the
notice of the meeting, and at any adjournment(s) thereof. The approximate
date on which this Proxy Statement and form of proxy are first being sent to
stockholders is October 31, 1997.
If the enclosed proxy is properly executed and returned, it will be
voted in the manner directed by the stockholder. If the stockholder does
not specify how the shares are to be voted, the individuals named in the
enclosed proxy will vote the shares in favor of electing as Class III
Directors the persons named below under the caption Class III Director
Nominees to serve until their successors are elected and qualified. Any
person giving the enclosed form of proxy has the power to revoke it by
voting in person at the meeting, or by giving written notice of revocation
to the Clerk of the Company at any time before the proxy is exercised.
The holders of a majority of the number of shares of common stock
issued, outstanding, and entitled to vote are required to be present in
person or be represented by proxy at the meeting in order to constitute a
quorum for the transaction of business. If a quorum is present, the election
of directors will be determined by a plurality of the votes cast.
The Company will bear the cost of this solicitation. It is expected
that the solicitation will be made primarily by mail, but regular employees
of the Company (none of whom will receive any extra compensation for their
activities) may also solicit proxies by telephone, facsimile and in person
and arrange for brokerage houses and other custodians, nominees and
fiduciaries to send proxies and proxy materials to their principals at the
expense of the Company.
As of the current date, the management of the Company is not aware of
any other matter to be presented for action at the meeting. If any matter
other than that described above does properly come before the meeting, the
individuals named in the enclosed proxy will vote the shares represented
thereby in accordance with their best judgment.
The Company's principal executive offices are located at 145 Milk
Street, Methuen, Massachusetts 01844, telephone number (978) 685-4341.
RECORD DATE AND VOTING SECURITIES
Only stockholders of record at the close of business on October 17,
1997, are entitled to notice of and to vote at the meeting. At the close of
business on that date, the Company had outstanding and entitled to vote
3,594,059 shares of Common Stock, par value $.10 per share ("Common Stock").
Each outstanding share of the Company's Common Stock entitles the record
holder to one vote.
ELECTION OF DIRECTORS
The Company's Restated Articles of Organization provide for a Board of
Directors consisting of seven members divided into three classes and elected
by stockholders for staggered terms of three years each. Of the current
total of seven directors, two Class III Directors have terms expiring at the
1997 Annual Meeting, three Class I Directors have terms expiring at the 1998
Annual Meeting and two Class II Directors have terms expiring at the 1999
Annual Meeting. The two directors whose terms expire at the 1997 Annual
Meeting have been nominated by the Board of Directors for election at such
meeting. All of the nominees for director are now Class III members of the
Board of Directors. Each Class III Director elected at the 1997 Annual
Meeting will serve until the 2000 Annual Meeting of Stockholders or Special
Meeting in lieu thereof, and until that director's successor is elected and
qualified.
The individuals named in the enclosed form of proxy will, if so
authorized, vote to elect as Class III Directors the persons named below
under the caption Class III Director Nominees. The management of the Company
is not aware of any reason why the nominees for director would not be able
to serve. If any of the nominees are unable to serve, the individuals named
in the enclosed form of proxy will vote in favor of such other person as the
Board of Directors may at the time recommend. Information regarding these
nominees is set forth below.
Class III Director Nominees
Herbert W. Pollack (age 70).
Mr. Pollack has served as Chairman of the Board and Treasurer of the
Company since it was founded in 1970. He was President of the Company from
1970 to July 1, 1995, and Chief Executive Officer from 1970 to June 1997.
Mr. Pollack is the brother of Lester Pollack and the father of Jill Pollack
Kutchin. Mr. Pollack is a director of Watson Technologies, Inc.
Sheldon Buckler (age 66).
Dr. Buckler has been Chairman of the Board of Commonwealth Energy
System Services, a supplier of energy products, since May 1995. He was
employed by Polaroid Corporation from 1964 until his retirement as Vice
Chairman of the Board of Directors in May 1994. Dr. Buckler is a Director of
Aseco Corporation, Cerion Technology Corporation, Nashua Corporation and
Spectrum Information Technologies Corporation. He has been a Director of the
Company since February 1995.
The following persons will continue to be Directors of the Company:
Class I Directors
(term of office to expire with the annual meeting of stockholders to be
held in December 1998)
Lester Pollack (age 64).
Mr. Pollack is a Managing Director of Centre Partners Management LLC,
a private investment firm, and has been Senior Managing Director of
Corporate Advisors, L.P. since 1988, Managing Director of Lazard Freres &
Co. LLC since 1986 and Chief Executive Officer of Centre Partners L.P.
since 1986. He is also a Director of Firearms Training Systems, Inc., Sphere
Drake Holdings, Ltd., SunAmerica, Inc., LaSalle Re Holdings Limited and
Tidewater Inc. Lester Pollack is the brother of Herbert W. Pollack. He has
been a Director of the Company since 1970.
Benjamin M. Rabinovici (age 75).
Dr. Rabinovici was President of Tympanium Corporation, a manufacturer
of electronic products, from 1980 to March 1996. He has been a Director of
the Company since 1970.
Richard W. Hale (age 59).
Mr. Hale has been President and Chief Executive Officer of Watson
Technologies, Inc., a manufacturer of electronic products for the cable
industry, since May 1996. In addition, he has been Chairman and Chief
Executive Officer of Hale Industries, Inc., a private investment firm, since
August 1993. From 1988 to July 1993, he was Executive Vice President and
Chief Operating Officer and a member of the Board of Directors of M/A-Com,
Inc. He has been a Director of the Company since February 1995.
Class II Directors
(term of office to expire with the annual meeting of stockholders to be
held in December 1999)
M. Joel Kosheff (age 59).
Mr. Kosheff has been Principal of M.J. Kosheff Associates, a financial
consulting firm, since January 1989. He has been a Director of the Company
since 1989.
Peter J. Murphy (age 48).
Mr. Murphy has been President of the Company since July 1, 1995, and
on July 1, 1997, was elected to the office of Chief Executive Officer. He
was Chief Operating Officer and Executive Vice President from May 1994 to
July 1995 and Vice President and General Manager of Flexible Circuit
Products from February 1993 to May 1994. Mr. Murphy initially served as
Assistant to the President from December 1992 to February 1993. From 1989 to
December 1992, he was President of Teledyne Electo-Mechanisms, a
manufacturer of flexible circuits. Mr. Murphy is a Director of Nashua
Corporation. He has been a Director of the Company since 1994.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors held four meetings during fiscal year 1997.
Each outside director received a $10,000 annual retainer for his services,
plus $1,500 for each directors' meeting he attended.
The Board has an Audit Committee and a Compensation Committee but does
not have a nominating committee. All Directors attended at least 75% of all
meetings of the Board. All Directors, except Lester Pollack, attended at
least 75% of all meetings of the committees of the Board on which they
served.
During fiscal year 1997, the Audit Committee, of which Messrs.
Buckler, Kosheff and Lester Pollack were members, held two meetings. The
Audit Committee reviews the internal controls of the Company. It meets with
appropriate Company financial personnel as well as the Company's independent
auditors. The Committee reviews the scope and results of the professional
services provided by the Company's independent auditors and the fees charged
for such services and makes such recommendations to the Board as it deems
appropriate, including recommendations as to the appointment of independent
auditors. The Committee is composed entirely of independent outside
directors.
During fiscal year 1997, the Compensation Committee, of which Messrs.
Hale, Kosheff and Rabinovici were members, held two meetings. This is the
committee of the Board responsible for establishing the compensation of the
Chief Executive Officer and setting policy for compensation at the senior
levels of the Company, as well as administering various employee stock
option plans. The Committee is composed entirely of independent outside
directors.
In order to continue to attract and retain outside directors of
exceptional ability, the Company maintains the 1989 Outside Directors' Stock
Option Plan (the "1989 Director Plan") covering 112,500 shares of Common
Stock and the 1996 Outside Directors' Stock Option Plan (the "1996 Director
Plan") covering 150,000 shares of Common Stock. Options are granted pursuant
to the 1989 Director Plan only to non-employee members of the Board of
Directors of the Company. Each member of the Company's Board of Directors
who is neither an employee nor an officer of the Company who becomes a
member of the Board of Directors for the first time on or after August 22,
1989, will be automatically granted on the date such membership on the Board
of Directors commences, without further action by the Board, an option to
purchase 7,500 shares of the Company's Common Stock. In addition, each
incumbent member of the Company's Board of Directors who is neither an
employee nor an officer of the Company and who has been a member of the
Board of Directors for at least five years shall receive an automatic grant
on the first business day following his fifth year in office, without
further action by the Board, of an option to purchase 7,500 shares of the
Company's Common Stock. Options granted under the 1989 Director Plan become
exercisable in equal installments on each of the first five anniversaries of
the date of the option grant. The exercise price per share of options
granted under the 1989 Director Plan shall be the closing sale price of a
share of the Company's Common Stock on the date the option is granted as
listed on the Nasdaq National Market.
Options are granted pursuant to the 1996 Director Plan only to non-
employee members of the Board of Directors of the Company. Commencing on
August 20, 1996, and on the date of each annual meeting of stockholders
thereafter beginning with the 1997 annual meeting of stockholders, each
member of the Company's Board of Directors who is not an employee of the
Company will be automatically granted an option to purchase 1,500 shares of
the Company's Common Stock. In addition to the formula option referred to
above, the Board of Directors may award options on an annual basis to
purchase up to 2,250 shares of the Company's Common Stock to non-employee
members of the Board of Directors in recognition of extraordinary efforts
and contributions to the Board. Except for the specific options referred to
above, no other options shall be granted under the 1996 Director Plan. The
exercise price per share of options granted under the 1996 Director Plan
shall be the closing sale price of a share of the Company's Common Stock on
the date the option is granted as listed on the Nasdaq National Market.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of October 17, 1997,
by: (i) each person who is known by the Company to own beneficially more
than 5% of the outstanding Common Stock; (ii) each of the Company's
directors and nominees for director; (iii) each of the executive officers
named in the Summary Compensation Table on page 8; and (iv) all directors
and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Shares of
Common Stock % of Outstanding
Owned Common Stock
Stockholder Beneficially(1) Owned Beneficially
----------- --------------- ------------------
<S> <C> <C>
Herbert W. Pollack(2)(3)(4) 943,889 26.3
c/o Parlex Corporation
145 Milk Street
Methuen, MA 01844
Sandra Pollack 307,600 8.6
c/o Parlex Corporation
145 Milk Street
Methuen, MA 01844
Walter A. Winshall(5) 457,624 12.7
3 Ferndale Road
Weston, MA 02193
Benjamin M. Rabinovici(2)(6) 257,400 7.2
c/o Parlex Corporation
145 Milk Street
Methuen, MA 01844
Peter J. Murphy(2)(3)(7) 60,375 1.7
c/o Parlex Corporation
145 Milk Street
Methuen, MA 01844
Lester Pollack(2)(8) 46,620 1.3
c/o Centre Partners L.P.
One Rockefeller Plaza
New York, NY 10020
M. Joel Kosheff(2)(9) 21,000 *
31 Pier 7
Charlestown, MA 02129
Alfred R. Calvetti(3)(10) 11,250 *
c/o Parlex Corporation
145 Milk Street
Methuen, MA 01844
Steven M. Millstein(3)(11) 8,700 *
c/o Parlex Corporation
145 Milk Street
Methuen, MA 01844
Sheldon Buckler(2)(12) 4,500 *
200 Dudley Road
Newton Centre, MA 02159
Richard W. Hale(2)(13) 3,000 *
c/o Watson Technologies, Inc.
5 Milk Street
Portland, ME 04101
All directors and officers
as a group (10 persons)(14) 1,499,508 41.7
- --------------------
<F*> Less than one percent.
<F1> For purposes of this table, any person who directly or indirectly has
or shares voting or investment power with respect to shares of Common
Stock is deemed a beneficial owner of those shares. Thus, more than
one person may be the beneficial owner of particular shares. Each
person listed above is deemed to have sole voting and investment power
with respect to the shares shown, unless otherwise indicated.
<F2> Denotes a director or a director nominee of the Company.
<F3> Denotes an executive officer of the Company.
<F4> The shares shown as owned by Herbert W. Pollack include 307,600
shares, of which he disclaims beneficial ownership, owned directly by
his wife, Sandra Pollack. The shares shown as owned by Mr. Pollack
include 56,250 shares which he has the right to acquire within 60 days
of October 17, 1997, by the exercise of stock options granted under
the Company's 1989 Employees' Stock Option Plan (the "1989 Option
Plan").
<F5> The shares shown as owned by Walter A. Winshall are as reported in a
Statement on Form 4 filed by him with respect to his holdings of
Common Stock as of August, 1997.
<F6> The shares shown as owned by Dr. Rabinovici include 101,400 shares, of
which he disclaims beneficial ownership, owned directly by his wife.
The shares shown as owned by Dr. Rabinovici also include 13,500 shares
which he has the right to acquire within 60 days of October 17, 1997,
by the exercise of stock options granted under the Company's 1989
Director Plan and the Company's 1996 Director Plan.
<F7> The shares shown as owned by Mr. Murphy are shares which he has the
right to acquire within 60 days of October 17, 1997, by the exercise
of stock options granted under the Company's 1989 Option Plan.
<F8> The shares shown as owned by Lester Pollack include 13,500 shares
which he has the right to acquire within 60 days of October 17, 1997,
by the exercise of stock options granted under the Company's 1989
Director Plan and the Company's 1996 Director Plan.
<F9> The shares shown as owned by Mr. Kosheff include 13,500 shares which
he has the right to acquire within 60 days of October 17, 1997, by the
exercise of stock options granted under the Company's 1989 Director
Plan and the Company's 1996 Director Plan.
<F10> The shares shown as owned by Mr. Calvetti are shares which he has the
right to acquire within 60 days of October 17, 1997, by the exercise
of stock options granted under the Company's 1985 Employees' Non-
Qualified Stock Option Plan (the "1985 Option Plan").
<F11> The shares shown as owned by Mr. Millstein include 3,750 shares which
he has the right to acquire within 60 days of October 17, 1997, by the
exercise of stock options granted under the Company's 1989 Option
Plan.
<F12> The shares shown as owned by Dr. Buckler include 3,000 shares which he
has the right to acquire within 60 days of October 17, 1997, by the
exercise of stock options granted under the Company's 1989 Director
Plan and the Company's 1996 Director Plan.
<F13> The shares shown as owned by Mr. Hale are shares which he has the
right to acquire within 60 days of October 17, 1997, by the exercise
of stock options granted under the Company's 1989 Director Plan and
the Company's 1996 Director Plan.
<F14> The number of shares shown as beneficially owned by officers and
directors include 180,375 shares which they have the right to acquire
within 60 days of October 17, 1997, by the exercise of stock options.
</TABLE>
--------------------
EXECUTIVE OFFICERS
The executive officers of the Company, together with a description of
the business experience backgrounds of all of them except Herbert W. Pollack
and Peter J. Murphy (whose backgrounds are described under the caption
Election of Directors) are as follows:
<TABLE>
<CAPTION>
Name Age Position with the Company
---- --- -------------------------
<S> <C> <S>
Herbert W. Pollack(1) 70 Chairman of the Board of Directors and
Treasurer
Peter J. Murphy(2) 48 President, Chief Executive Officer and
Director
Alfred R. Calvetti 54 Vice President and General Manager--
Laminated Cable Products
Jill Pollack Kutchin 45 Vice President--Corporate Affairs and
Clerk
Steven M. Millstein 53 Vice President--Finance
- --------------------
<F1> Mr. Pollack relinquished his duties as Chief Executive Officer,
effective July 1, 1997, and remains as Chairman of the Board of
Directors and Treasurer of the Company.
<F2> Mr. Murphy became Chief Executive Officer as of July 1, 1997.
</TABLE>
Mr. Calvetti joined the Company in July 1971 and has served in a
variety of technical and managerial roles. From December 1988 to February
1993, he was Divisional Vice President and General Manager of Laminated
Cable Products. In February 1993, he became a Corporate Vice President and
General Manager of Laminated Cable Products.
Ms. Kutchin joined the Company in January 1977 and served as Manager--
Marketing Administration until December 1983, when she became Vice
President--Corporate Affairs. Since November 1980, she has also been Clerk
of the Company. Ms. Kutchin is the daughter of Herbert W. Pollack.
Mr. Millstein joined the Company in March 1977, serving initially as
Controller and from February 1979 to February 1988 as Vice President--
Controller. In February 1988, he became Vice President--Finance.
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows, for the fiscal years ending June 30, 1997,
1996, and 1995, all compensation earned or paid to the Company's Chief
Executive Officer and each of the Company's most highly compensated
executive officers whose total annual salary and bonus exceeded $100,000 in
each year for all services rendered in all capacities to the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
----------------------- ------------
Awards
------
Securities Underlying
Name and Stock Options All Other
Principal Position Year Salary($) Bonus($)(1) (Number of Shares) Compensation($)
------------------ ---- --------- ----------- --------------------- ---------------
<S> <C> <C> <C> <C> <C>
Herbert W. Pollack(2)(3) 1997 $218,640 -- -- --
Chairman and Treasurer 1996 218,640 -- -- --
1995 218,640 -- -- --
Peter J. Murphy(4) 1997 $192,504 $50,000 -- --
President and Chief 1996 175,008 25,000 -- --
Executive Officer 1995 150,000 25,000 -- --
Alfred R. Calvetti 1997 $110,016 $54,000 -- --
Vice President and General 1996 105,936 46,375 -- --
Manager--Laminated Cable 1995 100,860 32,118 -- --
Products
Steven M. Millstein(5) 1997 $ 96,224 $ 5,000 -- --
Vice President--Finance
- --------------------
<F1> Amounts shown were earned in the years indicated. Bonuses are
generally paid in the first quarter of the following fiscal year.
<F2> For a description of the employment agreement between the Company and
Mr. Pollack, see EMPLOYMENT AGREEMENTS below.
<F3> The amounts shown for Mr. Pollack for fiscal years 1996 and 1995
include a fee as Chairman of the Board of Directors in the amount of
$1,800 per month.
<F4> For a description of the employment agreement between the Company and
Mr. Murphy, see EMPLOYMENT AGREEMENTS below.
<F5> Mr. Millstein became an executive officer for reporting purposes for
the first time in fiscal 1997 and, therefore, no information is
provided for earlier years.
</TABLE>
EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with Mr. Pollack in
July 1997, for a period of three years ending June 30, 2000, which provides
for current compensation of $8,210 twice a month. The agreement provides for
a death benefit payment equal to 75% of his current compensation for a
period of 24 months after his death. The agreement also provides that the
employee will not own, operate, or manage any business in competition with
that of the Company so long as he is employed by the Company and, in certain
instances, for a one-year period thereafter.
The Company entered into an employment agreement with Mr. Murphy in
June 1996, for a period of three years ending June 30, 1999, which provides
for current compensation of $8,021 twice a month. The agreement provides for
a death benefit payment equal to 75% of his current compensation for a
period of 24 months after his death. The agreement also provides that the
employee will not own, operate, or manage any business in competition with
that of the Company so long as he is employed by the Company and, in certain
instances, for a one-year period thereafter.
The table entitled OPTION GRANTS IN LAST FISCAL YEAR has been
eliminated as a result of there being no option grants in fiscal 1997 to the
named executive officers.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1997
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information relating to the aggregate
exercised and unexercised stock options held by the named executive officers
during fiscal year 1997 and the value of their unexercised stock options as
of June 30, 1997.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-The-Money
Acquired Options at 6/30/97(#) Options at 6/30/97($)(1)
on Value ---------------------------- ----------------------------
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Herbert W. Pollack -- -- 56,250(2) 18,750(2) $571,500 $190,500
Chairman and Treasurer
Peter J. Murphy 3,500 $54,250 60,375(2) 9,375(2) $687,143 $ 99,188
President and Chief
Executive Officer
Alfred R. Calvetti 3,250 $58,500 11,250(3) 3,750(3) $120,938 $ 40,313
Vice President and General
Manager--Laminated Cable
Products
Steven M. Millstein -- -- 3,750(2) -- $ 45,300 --
Vice President--Finance
- --------------------
<F1> The "value of unexercised in-the-money options at June 30, 1997" was
calculated by determining the difference between the fair market value
of the underlying Common Stock at June 30, 1997, (closing price of the
Company's Common Stock on the Nasdaq National Market on June 30, 1997,
was $14.75. per share) and the exercise prices of the stock options.
An option is "in-the-money" when the fair market value of the
underlying Common Stock exceeds the exercise price of the option.
<F2> These shares were granted under the 1989 Option Plan.
<F3> These shares were granted under the 1985 Option Plan.
</TABLE>
Notwithstanding anything to the contrary set forth in any of the
Company's filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate other
filings with the Securities and Exchange Commission, including this Proxy
Statement, in whole or in part, the following report and the Stock
Performance Graph on page 12 shall not be incorporated by reference into any
such filings.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Committee
The Compensation Committee (the "Committee") is comprised of Messrs.
Hale, Kosheff and Rabinovici. This is the committee of the Board responsible
for establishing the compensation of the Chief Executive Officer and setting
policy for compensation at the senior levels of the Company, as well as
administering various employee stock option plans. The Committee is composed
entirely of independent outside directors.
Compensation Philosophy
The Committee maintains a philosophy that executive compensation
levels should be competitive and consistent with flexible interconnect
industry standards to enable the Company to attract, motivate and retain
executive officers of outstanding ability who are capable of making
significant contributions which are critical to the Company's success. The
Committee believes that such compensation also should be meaningfully
related to both an individual's job performance, as measured by the
achievement of qualitative objectives, and the performance of the Company,
as measured by its profitability, the value created for stockholders and the
realization of the Company's short- and long-term strategic goals. The
Company's compensation policies are designed to attract and retain talented
managers and motivate such managers to enhance the Company's performance,
thereby building value into the Company's business. The Company also seeks
to align the interests of its executives with the long-term interests of
stockholders in the enhancement of stockholder value through stock option
awards that can result in the ownership of the Company's common stock.
At present, compensation of the Company's executive officers is
composed of the following elements: annual base salary, annual performance
incentives in the form of cash bonuses and long-term performance incentives
in the form of stock option awards under the 1985 Option Plan and the 1989
Option Plan.
Base Salary
The Committee's general approach to compensating executive officers is
to pay cash salaries competitive with industry standards based upon the
individual's experience and past and potential contribution to the success
of the Company. In determining industry standards, the Committee compares
compensation levels paid by a self-selected group of flexible interconnect
industry companies that compete in the Company's line of business. Such
compensation information is obtained from various publicly available
sources.
The Committee also believes that compensation should be meaningfully
related to the value created by individual executive officers for the
stockholders. Accordingly, the Committee considers the quality of an
individual executive's contribution to the Company's overall profitability
and success in determining the executive's salary. The Committee reviews on
an annual basis the salaries of its executive officers in light of the
foregoing factors. The Company believes that the base salaries of its
executive officers have been at or below the median of the base salaries for
executive officers in the flexible interconnect industry.
In fiscal year 1997, Mr. Murphy's annual base salary was increased to
$192,504 in order to bring his salary in line with the competitive salary
range for his position.
Annual Incentives
The Company has traditionally paid employee performance bonuses once a
year, usually during the first quarter of the following fiscal year for
which the bonus is earned. Bonuses are traditionally based on both
individual performance and Company performance. Except for a particular
incentive bonus arrangement entered into with Mr. Calvetti, the Board has
not utilized any specific formula for determination of bonus amounts. For
fiscal year 1997, Mr. Calvetti received a bonus based upon the achievement
of financial and operating performance objectives as provided in his
incentive bonus arrangement and both Mr. Murphy and Mr. Millstein received
bonuses in recognition of their individual performance and the Committee's
assessment of their role in promoting the long-term strategic growth of the
Company.
Stock Options
Stock options are used as the primary long-term incentive vehicle. The
Committee believes that reliance upon such incentives is advantageous to the
Company because they foster a long-term commitment by the recipient to the
Company and motivate the employees to seek to improve the long-term market
performance of the Company's stock. Thus, stock option grants provide an
incentive for the executive to manage the Company from the perspective of an
owner with an equity stake in the business. During fiscal year 1997, the
Board did not authorize the grant of stock options to any executive
officers. Stock option grants to executive officers are discretionary and
reflect the relative value of the individual's position as well as the
current performance and continuing contribution of that individual to the
Company. The Board does not utilize any specific formula for determination
of option grants.
Compensation of the Chief Executive Officer
Mr. Pollack has served as Chairman of the Board and Chief Executive
Officer of the Company since it was founded in 1970. On July 1, 1997, Mr.
Pollack relinquished his position as Chief Executive Officer of the Company
but still remains the Chairman of the Board of Directors and Treasurer. On
that date, Peter J. Murphy was elected to the office of Chief Executive
Officer. As described in the section above entitled EMPLOYMENT AGREEMENTS,
Mr. Pollack entered into a new employment agreement in July 1997. Mr.
Pollack did not receive a salary increase or a bonus payment in fiscal year
1997.
Benefits
The Company provides medical, life insurance and profit sharing
benefits to the executive officers that generally are available to all
Company employees.
Section 162(m) of the Internal Revenue Code
Section 162(m) of the Internal Revenue Code of 1986 (the "Code")
limits a company's ability to take a deduction for federal tax purposes for
certain compensation paid to its executives. The Company currently expects
that all compensation payable to executive officers during fiscal year 1997
will be deductible by the Company for federal income tax purposes. The
Committee's policy with respect to compensation to be paid to executive
officers is to structure compensation payments to executive officers so as
to be deductible under Section 162(m).
COMPENSATION COMMITTEE
Benjamin M. Rabinovici, Chairman
Richard W. Hale
M. Joel Kosheff
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In fiscal year 1997, the Compensation Committee members were Benjamin
M. Rabinovici, Richard W. Hale and M. Joel Kosheff, none of whom has ever
been employed by the Company. Further, the Board of Directors is unaware of
any relationship of any member of the Compensation Committee required to be
disclosed under Item 402(j)(3) or 404 of Regulation S-K promulgated by the
Securities and Exchange Commission.
STOCK PERFORMANCE GRAPH
The following Stock Performance Graph compares the cumulative total
shareholder return on the Company's Common Stock for a five year period
(July 1, 1992 to June 30, 1997) with the cumulative total return of the CRSP
Total Return Index for the Nasdaq National Market and a group of peer
companies. The companies included in the peer group are Adflex Solutions,
Inc., Altron Incorporated, Hadco Corporation, Merix Corporation and
Sheldahl, Inc. The Performance Graph assumes the investment of $100 on July
1, 1992, in the Company's Common Stock, in the Nasdaq National Market
companies and in the peer group and also assumes the reinvestment of all
dividends. The returns for each company in the peer group have been weighted
to reflect stock market capitalization.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
PARLEX CORPORATION, NASDAQ NATIONAL MARKET INDEX, AND PEER GROUP
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Parlex $100 $217 $213 $357 $452 $770
Nasdaq $100 $126 $127 $170 $218 $265
Peer Group $100 $139 $143 $368 $338 $478
</TABLE>
INDEPENDENT AUDITORS
The Board of Directors has selected Deloitte & Touche LLP to be the
independent auditors to audit the consolidated financial statements of the
Company for the fiscal year ending June 30, 1998. Deloitte & Touche LLP has
been regularly employed by the Company for audit of consolidated financial
statements and other purposes since the Company's organization in 1970.
Representatives of Deloitte & Touche LLP expect to be present at the
meeting, and, while they do not plan to make a statement at the meeting,
such representatives will be available to respond to appropriate questions
from stockholders in attendance.
FUTURE STOCKHOLDER PROPOSALS
Any stockholder proposal intended for inclusion in next year's proxy
statement must be sent to the Clerk of the Company at 145 Milk Street,
Methuen, Massachusetts 01844, and received by August 7, 1998.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
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 (the "Commission") initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company. Officers, directors and greater than
ten percent shareholders are required by the Commission's regulations to
furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and written representations that no
other reports were required during the fiscal year ended June 30, 1997, all
Section 16(a) filing requirements applicable to its executive officers,
directors and greater than ten percent beneficial owners were complied with
except that, through inadvertence, Richard W. Hale did not timely file a
Form 5.
AVAILABILITY OF FORM 10-K
Copies of the Company's Annual Report on Form 10-K with respect to the
fiscal year ended June 30, 1997 (without exhibits), as filed with the
Securities and Exchange Commission, are available to stockholders free of
charge by writing to: Investor Relations Department, Parlex Corporation, 145
Milk Street, Methuen, Massachusetts 01844.
By Order of the Board of Directors
JILL POLLACK KUTCHIN
Clerk
October 31, 1997
PARLEX CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder of Common Stock hereby constitutes and appoints
Herbert W. Pollack, Peter J. Murphy and Jill Pollack Kutchin, and each of
them proxies with full power of substitution to each, to represent and vote
all shares of Common Stock of Parlex Corporation (the "Company") standing in
the name of the undersigned at the Annual Meeting of Stockholders to be held
on the eighth floor of the Fleet Bank Building, One Federal Street, Boston,
Massachusetts, on Tuesday, December 2, 1997, at 9:30 a.m., by any
adjournment(s) thereof, hereby granting full power and authority to act on
behalf of the undersigned at said meeting or any adjournment(s) thereof.
THE SHARES REPRESENTED BY THIS PROXY SHALL BE VOTED AS SPECIFIED ABOVE. IF
NO DIRECTION IS GIVEN AND THE PROXY IS VALIDLY EXECUTED, THE SHARES SHALL BE
VOTED "FOR" THE NOMINEES PROPOSED FOR ELECTION AS DIRECTORS AS INDICATED IN
THE PROXY STATEMENT.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR THE NOMINEES PROPOSED FOR
ELECTION AS DIRECTORS AS INDICATED IN THE PROXY STATEMENT.
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PLEASE VOTE AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE.
- ----------------------------------------------------------------------------
Please sign this proxy exactly as your name(s) appear(s) on this card. Joint
owners should each sign personally. Trustees and other fiduciaries should
indicate the capacity in which they sign, and where more than one name
appears, a majority must sign. If a corporation, this signature should be
that of an authorized officer who should state his or her title.
HAS YOUR ADDRESS CHANGED?
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
[x] PLEASE MARK VOTES
AS IN THIS EXAMPLE
- --------------------------------------------
PARLEX CORPORATION
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Mark box at right if an address change has been noted on the
reverse side of this card. [ ]
RECORD DATE SHARES:
Please be sure to sign and date this Proxy. Date___________________
___________________________________________________________________________
Stockholder sign here Co-owner sign here
For All With For All
Nominees held Except
1. To elect two Class III directors to hold [ ] [ ] [ ]
office for a term expiring with the annual
stockholders' meeting to be held in 2000
or until their successors are elected
and qualified.
Sheldon Buckler
Herbert W. Pollack
INSTRUCTIONS: To withhold authority to vote for a nominee mark the "All
Except" box and strike a line through that nominee's name.
2. In their discretion, to vote upon such other business as may properly
come before the meeting.
The undersigned hereby revokes any proxy previously given and acknowledges
receipt of written notice of, and the statement for the 1997 Annual Meeting
of Stockholders and the 1997 Annual Report of the Company.
DETACH HERE DETACH HERE
PARLEX CORPORATION
Dear Stockholders,
Please take note of the important information enclosed with this Proxy
Ballot. The issue related to the management and operation of the Company
requires your immediate attention and approval. This is discussed in detail
in the enclosed proxy materials.
Your vote counts and you are strongly encouraged to exercise your right to
vote your shares.
Please mark the boxes on this proxy card to indicate how your shares will be
voted. Then sign the card, detach it and return your proxy vote in the
enclosed postage paid envelope.
Your vote must be received prior to the Annual Meeting of Stockholders on
December 2, 1997.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Parlex Corporation
