<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
BOSTON ACOUSTICS, 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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pur-
suant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
July 21, 1998
BOSTON ACOUSTICS, INC.
300 JUBILEE DRIVE
PEABODY, MA 01960
Dear Stockholder:
It is my pleasure to invite you to attend the Annual Meeting of Stockholders
of Boston Acoustics, Inc. (the "Company"). The Meeting will be held at the
Company on Tuesday, August 11, 1998, at 3:00 p.m.
The notice of meeting and proxy statement which follow describe the business
to be transacted at the Meeting. In addition, we plan to give you a report on
the status of the Company's business. Stockholders will have an opportunity to
comment and ask questions during the Meeting.
It is important that your shares be represented at the Meeting, regardless
of the number you may hold. Therefore, whether or not you plan to attend, please
sign, date and return the proxy card as soon as possible. This will not prevent
you from voting your shares in person if you do come to the Meeting.
I look forward to seeing you on August 11th.
Sincerely yours,
ANDREW G. KOTSATOS
CHIEF EXECUTIVE OFFICER
<PAGE>
BOSTON ACOUSTICS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
AUGUST 11, 1998, 3:00 P.M.
You are hereby notified that the Annual Meeting of Stockholders of Boston
Acoustics, Inc. (the "Company") will be held on August 11, 1998 at 3:00 p.m. at
the offices of the Company, 300 Jubilee Drive, Peabody, Massachusetts, to
consider and act upon the following matters:
1. To fix the number of directors of the Company at five (5) and to
elect five (5) directors for the ensuing year.
2. To amend the Company's Articles of Organization to provide that the
Company shall have the authority to issue a total of eight million
(8,000,000) shares of common stock, $.01 per value per share.
3. To ratify the action of the Directors in appointing Arthur Andersen
LLP as auditors for the Company.
4. To act upon such other business as may properly come before the
meeting or any adjournment thereof.
Even if you plan to attend the Meeting personally, please be sure to sign,
date and return the enclosed proxy in the enclosed envelope to:
BankBoston, N.A.
c/o Boston EquiServe, LP
P. O. Box 8040
Boston, MA 02266-8040
Only stockholders of record on the books of the Company at the close of
business on June 30, 1998 are entitled to receive notice of, and to vote at, the
Meeting and at any adjournment thereof.
By order of the Board of Directors,
JOSEPH D.S. HINKLEY
CLERK
July 21, 1998
IMPORTANT: IN ORDER TO SECURE A QUORUM AND TO AVOID THE EXPENSE OF ADDITIONAL
PROXY SOLICITATION, PLEASE VOTE, DATE AND SIGN YOUR PROXY AND RETURN IT PROMPTLY
IN THE ENVELOPE PROVIDED EVEN IF YOU PLAN TO ATTEND THE MEETING PERSONALLY. IF
YOU DO ATTEND THE MEETING AND DESIRE TO WITHDRAW YOUR PROXY AND VOTE IN PERSON,
YOU MAY DO SO. YOUR COOPERATION IS GREATLY APPRECIATED.
<PAGE>
BOSTON ACOUSTICS, INC.
EXECUTIVE OFFICES
300 JUBILEE DRIVE
PEABODY, MA 01960
PROXY STATEMENT
SOLICITATION AND VOTING OF PROXIES
This Proxy Statement and the accompanying proxy form are being mailed by
Boston Acoustics, Inc. (the "Company") to the holders of record of the Company's
outstanding shares of common stock, $.01 par value ("Common Stock"), commencing
on or about July 21, 1998. The accompanying proxy is solicited by the Board of
Directors of the Company for use at the Annual Meeting of Stockholders to be
held on August 11, 1998 (the "Meeting") and any adjournments thereof. The cost
of solicitation of proxies will be borne by the Company. Directors, officers and
employees may assist in the solicitation of proxies by mail, telephone,
telegraph, and personal interview without additional compensation.
When a proxy is returned, prior to or at the Meeting, properly signed, the
shares represented thereby will be voted by the proxies named in accordance with
the stockholder's instructions indicated on the proxy card. You are urged to
specify your choices on the enclosed proxy card. If the proxy is signed and
returned without specifying choices, the shares will be voted FOR the election
of directors as set forth in this Proxy Statement, FOR proposal 2, FOR proposal
3 and in the discretion of the proxies as to other matters that may properly
come before the Meeting. SENDING IN A PROXY WILL NOT AFFECT A STOCKHOLDER'S
RIGHT TO ATTEND THE MEETING AND VOTE IN PERSON. A proxy may be revoked by notice
in writing delivered to the Clerk of the Company at any time prior to its use,
by a duly-executed proxy bearing a later date, or by voting in person by ballot
at the Meeting. A stockholder's attendance at the Meeting will not by itself
revoke a proxy.
VOTING SECURITIES AND RECORD DATE
The Company has one class of Common Stock outstanding. Each share of Common
Stock is entitled to one vote. The Board of Directors has fixed June 30, 1998 as
the record date for the Meeting. Only holders of record of the Company's Common
Stock on the record date are entitled to notice of and to vote at the Meeting.
On the record date, there were 3,318,264 shares of Common Stock issued and
outstanding.
Under Massachusetts law and the Company's By-laws, the presence of holders
of a majority in interest of the issued and outstanding Common Stock entitled to
vote at the Meeting, represented in person or by proxy, shall constitute a
quorum.
Election of directors is by plurality of the votes cast at the Meeting.
Approval of the increase in the number of authorized shares of Common Stock and
ratification of the appointment of Arthur Andersen LLP as the Company's auditors
requires a vote of the majority of the Common Stock represented in person or by
proxy at the Meeting and voting thereon. With regard to the election of
directors, votes may be left blank, cast in favor or withheld; votes that are
left blank will be excluded entirely from the vote and will have no effect.
Votes that are withheld will have the effect of a negative vote. Abstentions may
be specified on all proposals (other than the election of directors) and will be
counted as present for purposes of the proposal on which the abstention is
noted. Because the proposals to increase the number of authorized shares of
Common Stock and to ratify the appointment of Arthur Andersen LLP as the
Company's auditors requires the approval of a majority of the votes properly
cast at the Meeting, either in person or by proxy, abstentions will have the
effect of a negative vote. Broker non-votes (i.e., shares held by a broker or
nominee which are represented at the Meeting, but with respect to which the
broker or nominee is not empowered to vote on a particular proposal) will be
counted in determining a quorum for each proposal. However, broker non-votes
will be treated as unvoted shares and, accordingly, will not be
<PAGE>
counted in determining the outcome of any proposal which requires the
affirmative vote of a majority of the votes cast.
The Company's Annual Report to Stockholders, including financial statements
for the fiscal year ended March 28, 1998, is being mailed to stockholders of
record of the Company concurrently with this Proxy Statement. The Annual Report
to Stockholders is not, however, a part of the proxy soliciting materials.
PROPOSAL NO. 1--ELECTION OF DIRECTORS
One of the purposes of the Meeting is to fix the number of directors of the
Company at five (5) and to elect five (5) directors to serve until the next
annual meeting of stockholders and until their successors shall have been duly
elected and qualified. It is intended that the proxies solicited by the Board of
Directors will be voted in favor of the five (5) nominees named below, unless
otherwise specified on the proxy card. All of the nominees have consented to be
named and to serve if elected. Andrew G. Kotsatos, Fred E. Faulkner, Jr., George
J. Markos, Lisa M. Mooney, and Gerald Walle were previously elected by the
stockholders.
The Board knows of no reason why any of the nominees will be unavailable or
unable to serve as a director, but in such event, proxies solicited hereby will
be voted for the election of another person or persons to be designated by the
Board of Directors.
Lisa M. Mooney is the sister of Paul F. Reed, an executive officer.
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE NOMINEES LISTED
BELOW.
The following are summaries of the background and business experience and
descriptions of the principal occupations of the nominees:
Andrew G. Kotsatos (age 58) has been a Director and Assistant Clerk since
co-founding the Company in February 1979. He served as Executive Vice President
of the Company from its inception until April 1986 and as President until
November 1996, when he became Chief Executive Officer and Treasurer. Mr.
Kotsatos previously held positions with two other audio manufacturers, KLH
Research and Development Corporation and Advent Corporation. His last position
at Advent was Audio Products Manager and Chief Speaker Designer.
Fred E. Faulkner, Jr. (age 51) has been a Director of the Company since
December 1986 and has served as President and Chief Operating Officer of the
Company since March 1997. Mr. Faulkner was previously employed by the Millipore
Corporation, a leader in separation technology, for 28 years working in a
variety of positions. His last position at Millipore was Vice President of
Technical Operations of Millipore's Microelectronics Division.
George J. Markos (age 49) has been a Director of the Company since August
1996. Mr. Markos has been Senior Vice President and General Counsel of
Yell-O-Glow Corporation, a produce distributor, since 1991. Between 1988 and
1991, Mr. Markos was Senior Counsel and Assistant Secretary of Norton Company,
Inc., a manufacturer of abrasive products and industrial ceramics.
Lisa M. Mooney, formerly Lisa M. Reed, (age 32) has been a Director of the
Company since May 1996. She was Director of Corporate Planning of the Company
from January 1994 to June 1996. Previously, Mrs. Mooney was a lending officer in
the Global Banking unit of the Bank of Boston.
2
<PAGE>
Mrs. Mooney holds an undergraduate degree from the University of Pennsylvania
and a MBA from Boston University.
Gerald Walle (age 45) has been a Director of the Company since August 1997.
Mr. Walle has been employed by the Millipore Corporation, a leader in separation
technology, for the past ten years. Since 1988 he has been Vice President and
General Manager of Millipore's Microelectronics Division. Previously, Mr. Walle
was in internatonal marketing and business development for Bendix Corporation
and Instrumentation Laboratory and strategic planning for Mars & Company. He is
a graduate of the Harvard Business School and Ecole Polytechnique, Paris,
France.
BOARD OF DIRECTORS
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors met four times during the fiscal year ended March 28,
1998. The Board of Directors has standing Audit and Compensation Committees. The
Board has no nominating committee. All of the directors attended all of the
meetings of the Board and of the Board committees on which they served during
the fiscal year ended March 28, 1998.
The Compensation Committee is responsible for evaluating compensation plans
for employees, management and directors, and making recommendations on
compensation to the Board. It currently consists of George J. Markos, Lisa M.
Mooney, and Gerald Walle. The Compensation Committee met once during the fiscal
year ended March 28, 1998. The Audit Committee, which consists of George J.
Markos, Lisa M. Mooney, and Gerald Walle, oversees the accounting and audit
functions of the Company, including matters relating to the appointment and
activities of the Company's auditors. The Audit Committee met once during the
fiscal year ended March 28, 1998.
COMPENSATION OF DIRECTORS
Each director who is not an officer of the Company is entitled to an annual
fee of $6,000, and an additional annual fee of $1,500 for service on the Audit
Committee and an additional annual fee of $1,000 for service on the Compensation
Committee on which he or she serves.
PRINCIPAL AND MANAGEMENT STOCKHOLDERS
The following table reflects the number of shares of the Company's Common
Stock beneficially owned as of June 30, 1998 (i) by each person who is known by
the Company to own beneficially more than 5% of the Company's Common Stock, (ii)
by each of the directors and nominees for director, (iii) by each of the
executive officers named in the Summary Compensation Table in this Proxy
Statement and (iv) by all directors, nominees for director and executive
officers as a group. In accordance with Rule 13d-3 under the Securities Exchange
Act of 1934, as amended, a person is deemed to be the beneficial owner, for
purposes of this table, of any shares of Common Stock if he or she has or shares
voting power or investment power with respect to such security or has the right
to acquire beneficial ownership at any time within sixty days of June 30, 1998.
As used herein "voting power" is the power to vote or direct the voting of
shares, and "investment power" is the power to dispose of or direct the
disposition of shares. Except as indicated in the
3
<PAGE>
notes following the table below, each individual named has sole voting and
investment power with respect to the shares listed as being beneficially owned
by such individual.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENT OF
NAME OF BENEFICIAL OWNER OWNED COMMON STOCK
- ------------------------------------------------------------------------------ ----------------- -----------------
<S> <C> <C>
Andrew G. Kotsatos............................................................ 964,575(1) 29.0%
T. Rowe Price Associates, Inc................................................. 393,600(2) 11.9%
100 East Pratt Street
Baltimore, MD 21202
Wellington Management Company, LLP............................................ 212,000(3) 6.4%
75 State Street
Boston, MA 02109
Dimensional Fund Advisors, Inc................................................ 167,700(4) 5.1%
1299 Ocean Avenue
Santa Monica, CA 90401
Lisa M. Mooney................................................................ 107,174 3.2%
Fred E. Faulkner, Jr.......................................................... 61,662(5) 1.8%
Moses A. Gabbay............................................................... 40,787(6) 1.2%
Debra A. Ricker-Rosato........................................................ 16,076(7) *
Robert L. Spaner.............................................................. 15,939(8) *
George J. Markos.............................................................. 0 *
Gerald Walle.................................................................. 0 *
All Directors and Executive Officers as a group (9 persons)................... 1,213,946(9) 35.7%
</TABLE>
- ------------------------
* Indicates less than 1% ownership.
(1) Includes (a) 246,486 shares owned by Mr. Kotsatos' wife, individually and as
trustee for the benefit of their children, as to which beneficial ownership
is disclaimed and (b) 8,000 shares issuable upon exercise of certain options
which are currently exercisable or become exercisable within 60 days of June
30, 1998 ("Currently Exercisable Options").
(2) According to a report filed with the SEC on Amendment No. 4 to Schdeule 13G,
dated February 12, 1998, T. Rowe Price Cap Value Fund exercises sole voting
power with respect to 210,000 shares and T. Rowe Price Associates, Inc.,
("Price Associates") exercises sole voting power with respect to 21,400
shares and sole dispositive power with respect to 393,600 shares. These
securities are owned by various individual and institutional investors which
Price Associates serves as investment adviser with power to direct
investments and/or sole power to vote the securities. For purposes of the
reporting requirements of the Securities Exchange Act of 1934, as amended,
Price Associates is deemed to be a beneficial owner of such securities;
however, Price Associates expressly disclaims that it is, in fact, the
beneficial owner of such securities.
(3) According to a report filed with the SEC on Schedule 13G, dated January 13,
1998, Wellington Management Company, LLP ("Wellington Management") has
shared voting power for 131,000 shares and shared dispositive power for
212,000 shares.
4
<PAGE>
(4) According to a report filed with the SEC on Schedule 13G dated February 9,
1998, Dimensional Fund Advisors, Inc. ("Dimensional") has sole voting power
for 128,200 shares and sole dispositive power for 167,700 shares. These
securities are held in portfolios of DFA Investment Dimensions Group, Inc.,
a registered open-end investment company, or in series of the DFA Investment
Trust Company, a Delaware business trust, or the DFA Group Trust and DFA
Participation Group Trust, investment vehicles for qualified employee
benefit plans, all of which Dimensional Fund Advisors, Inc. serves as
investment manager. Dimensional disclaims beneficial ownership of all such
shares.
(5) Includes (a) 400 shares held by Mr. Faulkner's wife as custodian for their
children as to which beneficial ownership is disclaimed and (b) 56,062
shares issuable upon exercise of Currently Exercisable Options.
(6) Includes (a) 7,545 shares jointly owned by Mr. Gabbay and his son and 7,546
shares jointly owned by Mr. Gabbay and his daughter and (b) 5,000 shares
issuable upon exercise of Currently Exercisable Options.
(7) Includes (a) 11,910 shares jointly owned by Ms. Ricker-Rosato and her
husband and (b) 4,166 shares issuable upon exercise of Currently Exercisable
Options.
(8) Includes 11,666 shares issuable upon exercise of Currently Exercisable
Options.
(9) Includes (a) 246,886 shares as to which the Directors and named executive
officers disclaimed beneficial ownership as described above and (b) 85,227
shares issuable upon exercise of Currently Exercisable Options. See
footnotes 1 and 5 through 8.
5
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following tables and notes present the compensation received by the
Company's Chief Executive Officer and the four most highly paid executive
officers other than the Chief Executive Officer for each of the last three
fiscal years.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------- -------------
OTHER ANNUAL SECURITIES ALL OTHER
FISCAL SALARY BONUS COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR(1) ($) ($) ($)(2) OPTIONS (#) ($)
- ---------------------------------------------- ----------- --------- --------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Andrew G. Kotsatos............................ 1998 250,000 91,875 16,436 12,000 36,858(3)
(Chief Executive Officer & 1997 250,000 85,000 17,533 40,000 36,629
Treasurer) 1996 190,375 66,164 18,352 -- 35,439
Fred E. Faulkner, Jr.......................... 1998 250,000 175,688 -- 112,000 105,000(4)
(Chief Operating Officer & 1997 5,208 1,146 -- -- --
President) 1996 -- -- -- -- --
Moses A. Gabbay............................... 1998 195,000 48,379 -- 12,000 2,203(5)
(Vice President-Engineering) 1997 158,750 32,305 -- 25,000 1,870
1996 148,750 31,680 -- -- 2,240
Robert L. Spaner.............................. 1998 131,154 48,454 -- 10,000 1,582(5)
(Vice President-Sales) 1997 110,577 22,040 -- 20,000 1,524
1996 101,538 20,836 -- 10,000 1,429
Debra A. Ricker-Rosato........................ 1998 102,180 22,710 -- 1,500 1,328(5)
(Vice President-Finance) 1997 94,609 18,726 -- 2,500 1,111
1996 84,167 17,563 -- 5,000 1,066
</TABLE>
- ------------------------
(1) The Company's fiscal year ends on the last Saturday of March.
(2) Reflects car allowances provided by the Company.
(3) Includes $34,483 paid in premiums for two life insurance policies, each with
split dollar arrangements, one covering the life of Mr. Kotsatos and the
other covering the survivor of Mr. Kotsatos and his spouse. The Company, Mr.
Kotsatos and Mr. Kotsatos' spouse entered into agreements concerning the
life insurance policies pursuant to which the Company will receive, in the
event of the insureds' deaths, an amount equal to the aggregate amount of
its premium payments under the respective policies and the beneficiary of
the policies will receive the excess. Also includes $2,375 contributed by
the Company under a defined contribution plan established under Section
401(k) of the Internal Revenue Code, as amended (the "Code").
(4) Includes $105,000, the fair market value of 5,000 shares of restricted stock
issued to Mr. Faulkner on July 25, 1997.
(5) Reflects Company contributions under a defined contribution plan established
under Section 401(k) of the Code.
6
<PAGE>
OPTION GRANTS IN THE LAST FISCAL YEAR
The following table sets forth certain information concerning grants of
stock options made during the fiscal year ended March 28, 1998 to the named
executive officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------- POTENTIAL REALIZABLE
PERCENT VALUE AT ASSUMED
NUMBER OF OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS EXERCISE STOCK PRICE
UNDERLYING GRANTED TO OR BASE APPRECIATION FOR
OPTIONS EMPLOYEES PRICE PER OPTION TERM (2)
GRANTED IN FISCAL SHARE EXPIRATION ----------------------------
NAME (#) 1998 ($/SH)(1) DATE 5% ($) 10% ($)
- -------------------------------------------- ----------- ------------- ----------- ----------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Andrew G. Kotsatos.......................... 12,000(3) 5.9 29.84 02/18/07 98,922.61 218,593.11
Fred E. Faulkner, Jr........................ 112,000(4) 55.3 22.55 02/18/07 697,749.09 1,541,843.01
Moses A. Gabbay............................. 12,000(5) 5.9 27.13 02/18/07 89,929.65 198,721.01
Robert L. Spaner............................ 10,000(6) 4.9 27.13 02/18/07 74,941.37 165,600.84
Debra A. Ricker-Rosato...................... 1,500(7) 0.7 27.13 02/18/07 11,241.21 24,840.13
</TABLE>
- ------------------------
(1) All options, except the options granted to Mr. Kotsatos, were granted at an
exercise price equal to market value of the Company's Common Stock on the
date of grant as determined by the closing price of the Common Stock on the
Nasdaq National Market. The options granted to Mr. Kotsatos were granted at
an exercise price equal to 110% of market value of the Company's Common
Stock on the date of grant as determined by the closing price of the Common
Stock on the NASDAQ National Market.
(2) The 5% and 10% assumed annual compound rates of stock price appreciation are
mandated by rules of the Securities and Exchange Commission and do not
represent the Company's estimate or projection of future Common Stock
prices.
(3) So long as Mr. Kotsatos remains an employee of the Company, options for the
purchase of shares of Common Stock are exercisable in annual installments
equal to one fifth of the total number of shares underlying such options on
each of February 18, 1999, 2000, 2001, 2002, and 2003.
(4) So long as Mr. Faulkner remains an employee of the Company, option grants
for the purchase of 77,275 shares of Common Stock are exercisable in annual
installments equal to one third of the total number of shares underlying
such options on each of April 30, 1997, 1998 and 1999, option grants for the
purchase of 22,725 shares of Common Stock are exercisable in annual
installments equal to one fifth of the total number of shares underlying
such options on each of April 30, 1998, 1999, 2000, 2001, and 2002 and
option grants for the purchase of 12,000 shares of Common Stock are
exercisable in annual installments equal to one ninth of the total number of
shares underlying such options on each February 18, 1999, 2000, 2001, 2002,
2003, 2004, 2005, 2006, and 2007.
(5) So long as Mr. Gabbay remains an employee of the Company, options for the
purchase of shares of Common Stock are exercisable in annual installments
equal to one ninth of the total number of shares underlying such options on
each of February 18, 1999, 2000, 2001, 2002, 2003, 2004, 2005, 2006, and
2007.
(6) So long as Mr. Spaner remains an employee of the Company, options for the
purchase of shares of Common Stock are exercisable in annual installments
equal to one ninth of the total number of shares
7
<PAGE>
underlying such options on each of February 18, 1999, 2000, 2001, 2002,
2003, 2004, 2005, 2006 and 2007.
(7) So long as Ms. Ricker-Rosato remains an employee of the Company, options for
the purchase of shares of Common Stock are exercisable in annual
installments equal to one third of the total number of shares underlying
such options on each of February 18, 1999, 2000, and 2001.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
The following table sets forth information with respect to the named
executive officers concerning the exercise of options during the last fiscal
year and unexercised options held as of the end of the fiscal year.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FY-END (#) AT FY-END ($)(2)
ACQUIRED VALUE -------------------------- --------------------------
NAME ON EXERCISE REALIZED ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------------- ------------- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Andrew G. Kotsatos.................... 8,000 22,000 8,000 36,000(3) 94,504 298,218
Fred. E. Faulkner, Jr................. -- -- 56,062 55,938(4) 508,087 445,469
Moses A. Gabbay....................... -- -- 5,000 32,000(5) 67,815 318,516
Robert L. Spaner...................... -- -- 11,666 28,334(6) 144,894 281,376
Debra A. Ricker-Rosato................ -- -- 4,166 4,834(6) 49,837 47,792
</TABLE>
- ------------------------
(1) Value realized equals fair market value on the date of exercise, less the
exercise price, times the number of shares acquired without deducting taxes
or commissions paid by employee.
(2) Value of unexercised options equals fair market value of the shares
underlying in-the-money options on March 27, 1998 ($31.063 per share), which
was the last trading day of the Company's fiscal year, less exercise price,
times the number of options outstanding.
(3) The exercise prices of these options are $19.25 and $29.8375 per share.
(4) The exercise prices of these options are $22.00 and $27.125 per share.
(5) The exercise prices of these options are $17.50 and $27.125 per share.
(6) The exercise prices of these options are $17.50, $19.50 and $27.125 per
share.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Lisa M. Mooney, a member of the Compensation Committee of the Board of
Directors during the fiscal year ended March 28, 1998, is the sister of Paul F.
Reed, an executive officer. Lisa M. Mooney and Paul F. Reed were the daughter
and son of Francis L. Reed, the former Chief Executive Officer and Treasurer of
the Company, who died on November 16, 1996, and Dorothea T. Reed, a former
director of the Company, who died on January 5, 1997.
8
<PAGE>
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, THAT MIGHT INCORPORATE FUTURE FILINGS,
INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART, THE FOLLOWING REPORT AND
THE STOCK PERFORMANCE GRAPH CONTAINED ELSEWHERE HEREIN SHALL NOT BE INCORPORATED
BY REFERENCE INTO ANY SUCH FILINGS NOR SHALL THEY BE DEEMED TO BE SOLICITING
MATERIAL OR DEEMED FILED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.
REPORT OF THE COMPENSATION COMMITTEE
During the fiscal year ended March 28, 1998, the Compensation Committee of
the Board of Directors was responsible for establishing and administering the
compensation policies which govern annual salary, bonuses, and stock-based
incentives (currently stock options) for directors and officers.
OVERVIEW
The Company has historically established levels of executive compensation
that provide for a base salary intended to allow the Company to hire and retain
qualified management. The Company has also provided annual cash incentive
bonuses based on the Company's performance during the fiscal year to reward
executives for their contributions to the Company's achievements. From time to
time the Company has also granted stock options to executives and key employees
to keep the management focused on the stockholders' interests. The Compensation
Committee believes that the Company's past and present executive compensation
practices provide an overall level of compensation that is competitive with
companies of similar size, complexity and financial performance and that its
executive compensation practices have allowed it to retain key personnel whose
contribution has maintained and increased the Company's profitability.
The Compensation Committee determines the compensation of the executive
officers of the Company and sets policies for and reviews the compensation
awarded to the other officers of the Company. This is designed to ensure
consistency throughout the officer compensation programs. In reviewing the
individual performances of the executive officers (other than the Chief
Executive Officer and President) the Compensation Committee takes into account
the views of the Chief Executive Officer and the President. In fiscal 1998, the
Compensation Committee determined the base salary and bonus for executive
officers, other than for the Chief Executive Officer and the President, based
largely on recommendations by the Company's Chief Executive Officer and
President.
The Compensation Committee expects to review annually the annual and
long-term compensation of all the Company's executives and employees to assure
that all of the Company's executives and employees continue to be properly
motivated to serve the interests of the Company's stockholders.
EXECUTIVE OFFICER COMPENSATION
BASE SALARY. Base salary is generally set within the ranges of salaries of
executive officers with comparable qualifications, experience and
responsibilities at other companies of similar size, complexity and
profitability taking into account the position involved and the level of the
executive's experience. In addition, consideration is given to other factors,
including an officer's contribution to the Company as a whole. Since fiscal year
1997, the base salary for the named executive officers, other than the Chief
Executive Officer and the President, increased on average approximately $21,466.
The Compensation
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Committee awarded such increases to keep the Company a competitive employer and
to allow for increases in the cost of living.
ANNUAL BONUS COMPENSATION. Over the past six fiscal years, the Company has
awarded cash bonuses to its executive officers on a discretionary basis. In
determining bonus awards, the Compensation Committee considers the financial and
nonfinancial achievements of the Company, including revenue growth,
profitability, expansion of the Company's markets and new product introductions.
In fiscal 1998, the Compensation Committee increased the cash bonuses of the
executive officers, including the person serving as Chief Executive Officer,
generally in proportion to increases in base compensation. The Compensation
Committee believes that bonuses are necessary to keep total compensation of the
Company's executives comptetitve with executive compensation at similarly
situated companies. It is expected that bonus compensation will continue to move
in parallel with increases in base salary until such time as the Company's
financial results, the individual performance of the executive or the job market
for key executives, warrants a change in the percentage of total compensation
which is comprised of bonuses.
LONG TERM INCENTIVES. Currently, stock options are the Company's primary
long-term incentive vehicle. Stock option awards have been made from time to
time to persons who currently serve as middle and upper level managers,
including the Chief Executive Officer and other executive officers named in the
Summary Compensation Table. The size of awards has historically been based on
position, responsibilities, and individual performance. The Compensation
Committee believes that the long-term incentives awarded by the Company in
fiscal 1994, 1995 and 1996 were generally below the levels found at the
comparable companies. In fiscal 1997 and 1998, the Company made awards to middle
and upper level managers in an effort to improve this aspect of the Company's
compensation program and will continue to monitor this aspect of compensation.
The Compensation Committee is aware that the Company's grants of stock
options are less frequent and smaller in size than the grants of many comparable
companies, although the Board believes that the overall mix of compensation
components has been adequate. The Compensation Committee believes that this
aspect of compensation must receive more emphasis in the future to assure that
all of the Company's key employees continue to focus on the profitability of the
Company and, thus, the interests of the Company's stockholders. Accordingly, the
Compensation Committee has recommended to the Board of Directors the
authorization of additional stock options for employees.
CHIEF EXECUTIVE OFFICER COMPENSATION. In determining the compensation of
the Company's Chief Executive Officer, the Compensation Committee considered the
demonstrated leadership he has brought to the Company and the excellent
performance of the Company during fiscal 1997 and 1998. Mr. Kotsatos' salary did
not increase during fiscal 1997 as a result of his assuming the role of Chief
Executive Officer and Treasurer. However, Mr. Kotsatos was awarded options to
purchase 40,000 shares of Common Stock in 1997 and 12,000 shares in 1998 in
recognition of his additional responsibilities. On April 1, 1998 the
Compensation Committee approved an increased in Mr. Kotsatos' salary to $350,000
annually.
The Compensation Committee
George J. Markos
Lisa M. Mooney
Gerald Walle
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STOCK PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total return of the
Company's Common Stock against the cumulative total return on the CRSP Total
Return Index for the NASDAQ Stock Market (U.S. Companies) and a Company-selected
peer group index that includes: Harmon Industries, Inc., Polk Audio, Inc. and
Recoton Corp., over a five-year period beginning March 31, 1993 and ending March
28, 1998. The peer group index was formed on a weighted average basis based on
market capitalizations, adjusted at the end of each year. Cumulative total
return is measured assuming an initial investment of $100 on March 31, 1992 and
reinvestment of dividends. On December 4, 1997 Cambridge SoundWorks, Inc., a
former member of the peer group index, was acquired by Creative Technology Ltd.
and is no longer operated as a public entity. Accordingly, the Company has
replaced Cambridge SoundWorks, Inc. with Recoton Corporation as a member of the
Company's peer group index.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL
RETURN AMONG BOSTON ACOUSTICS, INC.,
THE NASDAQ MARKET-US INDEX AND A PEER GROUP INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
<S> <C> <C> <C>
BOSTON PEER NASDAQ
ACOUSTICS, INC. GROUP STOCK MARKET (U.S.)
4/97 $100 $100 $100
4/98 $104 $170 $108
4/99 $105 $201 $120
4/00 $108 $217 $163
4/01 $151 $184 $181
4/02 $191 $266 $275
</TABLE>
11
<PAGE>
PROPOSAL NO. 2--AMENDMENT OF ARTICLES
OF ORGANIZATION TO INCREASE AUTHORIZED CAPITAL STOCK
In connection with the stock split of the Company described below, it is
proposed to increase the number of authorized shares of Common Stock of the
Company. By Unanimous Written Consent dated as of July 8, 1998, the Board of
Directors of the Company adopted a resolution deeming it advisable and in the
best interest of the Company, and recommended, that the Articles of Organization
of the Company be amended to provide that the Company shall have authority to
issue a total of eight million (8,000,000) shares of common stock, $.01 par
value per share, up from the present authorized capital of six million
(6,000,000) shares of the Company's Common Stock.
By Unanimous Written Consent dated as of July 8, 1998, the Board of
Directors of the Company approved a 3-for-2 stock split payable to shareholders
of record as of the close of business on July 31, 1998. The split will be
effected in the form of a stock dividend of one-half of one share of Boston
Acoustics Common Stock for each share of Common Stock outstanding on the record
date, which is payable on August 17, 1998. Each stockholder of record on July
31, 1998 shall receive a stock certificate in an amount equal to one-half of one
share of Boston Acoustics Common Stock for each share of Common Stock owned of
record on July 31, 1998, on or about August 17, 1998. The Company believes that
the issuance of the stock dividend may have a beneficial impact on the volume of
trading as it will increase the number of shares outstanding.
Under Massachusetts General Laws, Chapter 156B, Section 70, an amendment to
a corporation's Articles of Organization increasing a class of its authorized
capital stock requires a vote of a majority of each class of stock outstanding
and entitled to vote thereon. Upon the approval of the stockholders of a
majority of the Company's Common Stock, the Company will file Articles of
Amendment to its Articles of Organization, in accordance with the provisions of
Massachusetts General Laws, thereby effecting the increase in the authorized
Common Stock of the Company.
INCREASE IN COMMON STOCK
As of June 30, 1998 there were 3,318,264 shares of Common Stock issued and
outstanding. In addition, the Company has reserved 631,102 shares of Common
Stock for issuance pursuant to warrant agreements and employee and director
stock options. Therefore, the total of outstanding shares of Common Stock plus
shares of Common Stock reserved for issuance pursuant to warrants and employee
and director stock options is currently 3,949,366, leaving a balance of
2,050,634 shares available to be issued. After the issuance of the stock
dividend, the total of outstanding shares of Common Stock plus Common Stock
reserved for warrants and employee and director options will be 5,924,049,
leaving a balance of 75,951 shares available to be issued. While such amount may
satisfy the Company's capital raising needs for the near term, depletion of the
Company's authorized but unissued shares of Common Stock increasingly will limit
the Company's financial flexibility and may cause the Company unnecessary delay
and expense if it were required to call a special meeting of stockholders in
order to increase the authorized capital to satisfy its needs in a pending
transaction.
If this proposed amendment is adopted, the Company will have 2,075,951
shares available for future issuance after the issuance of the stock dividend.
The Board of Directors believes that it is in the best interests of the Company
and its stockholders to increase the number of authorized shares of Common
Stock. The proposed amendment would provide the Company with flexibility by
ensuring it an adequate number of authorized by unissued shares available for
corporate purposes. These corporate purposes may include, without limitation,
possible acquisitions, financings, employee benefits plans, and stock dividends
12
<PAGE>
or splits. The additional shares of Common Stock to be authorized would be of
the same class of shares as the Company's outstanding Common Stock.
FUTURE ISSUANCES OF CAPITAL STOCK
Authorized but unissued capital stock of the Company, including the
additional shares of Common Stock which would result from the proposed amendment
of the Company's Articles of Organization, may generally be issued for any
proper corporate purpose approved by the Board of Directors and may be upon such
terms and for such consideration as they determine, without further action by
the stockholders, unless stockholder approval is required by applicable law or
by the rules of any exchange upon which such capital stock is then listed.
Except for 631,102 shares of Common Stock that have been reserved for issuance
upon exercise of rights to acquire Common Stock as described above, the Company
has no present agreements, plans or understandings to issue any additional
shares of Common Stock. However, the issuance of additional shares of Common
Stock may have dilutive effect on the equity and voting rights of the Company's
stockholders. In addition, the sale or distribution of a substantial number of
additional shares of Common Stock or rights to purchase the same could have the
effect of discouraging unsolicited attempts to take over or otherwise gain
control of the Company. The Board of Directors is not presently aware of any
specific efforts to accumulate the Company's securities or to obtain control of
the Company. Additional shares of Common Stock could be issued in the discretion
of the Board of Directors as an anti-takover device even if a proposed takeover
bid would otherwise be in the best interests of the Company's stockholders.
The adoption of the proposal to amend the Articles of Organization will
require the affirmative approval of a majority of the votes which may be cast at
the meeting by the holders of the outstanding shares of Common Stock.
THIS PROPOSAL HAS BEEN UNANIMOUSLY APPROVED BY THE BOARD OF DIRECTORS, WHICH
RECOMMENDS THAT STOCKHOLDERS VOTE FOR ITS ADOPTION.
PROPOSAL NO. 3--RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors of the Company has appointed Arthur Andersen LLP as
auditors of the Company for the fiscal year ending March 27, 1999 and further
directed that management submit the selection of auditors for ratification by
the stockholders. Arthur Andersen LLP were the Company's auditors for the fiscal
year ended March 28, 1998.
Representatives of Arthur Andersen LLP are expected to be present at the
Meeting, with the opportunity to make a statement if they desire to do so, and
are expected to be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO RATIFY
THE CHOICE OF ARTHUR ANDERSEN LLP AS THE COMPANY'S AUDITORS.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
On June 13, 1997, the company redeemed an aggregate of 898,201 shares of its
Common Stock from the estates of its co-founder, Francis L. Reed, and his wife,
Dorothea T. Reed. The shares were purchased at $26 5/8 per share.
13
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COMPLIANCE WITH SECTION 16(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
directors, executive officers and persons who own more than 10% of the
outstanding shares of Common Stock of the Company to file with the Securities
and Exchange Commission and The Nasdaq Stock Market reports of ownership and
changes in ownership of voting securities of the Company and to furnish copies
of such reports to the Company. Based solely on a review of copies of such
reports furnished to the Company or written representations from certain persons
that no reports were required for those persons, the Company believes that all
Section 16(a) filing requirements were complied with during the fiscal year
ended March 28, 1998, except that, through inadvertence: Andrew G. Kotsatos and
Fred E. Faulkner, Jr., executive officers and Directors, made one late filing
each, reporting one late transaction each, Moses A. Gabbay, Robert L. Spaner,
and Debra A. Ricker-Rosato, executive officers, made one late filing each,
reporting one late transaction each.
STOCKHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING
Any stockholder proposal intended to be presented for consideration at the
Company's 1999 annual meeting of stockholders, and included in the Company's
proxy statement must be received by the Company not later than March 11, 1999.
Any stockholder desiring to submit a proposal should consult applicable
regulations of the Securities and Exchange Commission.
OTHER MATTERS
As of the date of this Proxy Statement, management of the Company knows of
no matter not specifically referred to above as to which any action is expected
to be taken at the Meeting of Stockholders. It is intended, however, that the
persons named as proxies will vote the proxies, insofar as the same are not
limited to the contrary, in regard to such other matters and the transaction of
such other business as may properly be brought before the Meeting, as seems to
them to be in the best interests of the Company and its stockholders.
14
<PAGE>
DETACH HERE
- -------------------------------------------------------------------------------
PROXY
BOSTON ACOUSTICS, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY FOR THE
ANNUAL MEETING OF STOCKHOLDERS - AUGUST 11, 1998
The undersigned hereby appoints Andrew G. Kotsatos and Fred E. Faulkner, Jr.,
or either of them, with full power of substitution, as proxies of the
undersigned to represent and vote all shares of stock of BOSTON ACOUSTICS,
INC. which the undersigned would be entitled to vote, if personally present,
at the Annual Meeting of Stockholders of said Corporation, to be held at the
Company's offices at 300 Jubilee Drive, Peabody, Massachusetts on August 11,
1998 at 3:00 P.M., and at any adjournments thereof, as directed below, on all
matters coming before said meeting.
This proxy when properly executed will be voted as directed on the reverse
side. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ELECTION AS
DIRECTORS OF THE NOMINEES LISTED ON THE REVERSE SIDE, FOR PROPOSAL 2, FOR
PROPOSAL 3 AND IN THE DISCRETION OF THE PROXIES ON ITEM 4.
The undersigned hereby revokes all proxies heretofore given by the
undersigned to vote at said meeting or any adjournments thereof.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
<PAGE>
DETACH HERE
- -------------------------------------------------------------------------------
/X/ PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
<TABLE>
<S> <C>
1. To fix the number of directors
of the Company at five and to
elect five directors for the
ensuing year.
NOMINEES: Andrew G. Kotsatos, 2. To amend the Company's FOR AGAINST ABSTAIN
Fred E. Faulkner, Jr. Articles of Organization / / / / / /
George J. Markos, to provide that the
Lisa M. Mooney, Company shall have the
Gerald Walle authority to issue a total
of eight million (8,000,000)
FOR WITHHELD shares of common stock, $.01
/ / / / par value per share.
3. To ratify the action of the FOR AGAINST ABSTAIN
/ / ___________________________ Directors in selecting / / / / / /
For all nominees except as Arthur Andersen LLP as
noted above auditors for the Company.
4. To transact such other business as may properly come
before the meeting.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
MARK HERE FOR COMMENTS / /
NOTE: If shares are registered in more than one name,
signatures of all such persons are required. When
signing as attorney, executor, administrator, trustee
or guardian, please give full title as such.
Signature: ____________________ Date: _____________ Signature: ___________________ Date: _____________
</TABLE>
