TECH/OPS SEVCON, INC.
One Beacon Street
Boston, Massachusetts 02108
December 15, 1997
BY DIRECT TRANSMISSION
- -----------------------
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington D.C. 20549
Re: Tech/Ops Sevcon, Inc.
Definitive Proxy Material
Pursuant to Rule 14a-6(b) under the Securities Exchange Act of 1934
and Rule 101(a)(1)(iii) of Regulation S-T, Tech/Ops Sevcon, Inc. hereby
files by direct transmission a definitive copy of the proxy statement
and form of proxy for its 1998 Annual Meeting of Stockholders. In
accordance with Instruction 3 to Item 10 of Schedule 14A, a copy of the
Company's Director Stock Option Plan that will be acted upon at the
meeting is attached as Exhibit A to the proxy statement. In accordance
with the Note to Rule 14a-4(a)(3), the form of proxy is filed as
Appendix A to the proxy statement.
The Company intends to register the shares available for options
under the Director Stock Option Plan as soon as practicable after the
Plan is approved at the annual meeting of shareholders.
Yours very truly,
/s/ Paul B. Rosenberg
Treasurer
cc: David R. Pokross, Jr., Esq.
American Stock Exchange (3 copies)
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Check the Appropriate Box
[X] Definitive Proxy Statement
Tech/Ops Sevcon, Inc.
- ----------------------------------------------------------------
(Name of Registrant as Specified in its Charter
Payment of Filing Fee (Check the appropriate box)
[X] No fee required.
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TECH/OPS SEVCON, INC.
ONE BEACON STREET, BOSTON, MASSACHUSETTS 02108
TELEPHONE (617) 523-2030
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Notice is hereby given that the annual meeting of the stockholders
of Tech/Ops Sevcon, Inc., a Delaware corporation, will be held at the
offices of Palmer & Dodge, 24th Floor, One Beacon Street, Boston,
Massachusetts, at 5:00 p.m. on Wednesday, January 28, 1998 for the
following purposes:
1. To elect two directors to hold office for a term of three
years.
2. To vote on the proposal to approve the 1998 Director Stock
Option Plan.
3. To transact such other business as may properly come before
the meeting.
Only stockholders of record at the close of business on December
12, 1997 are entitled to notice of the meeting or to vote thereat.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING.
THEREFORE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE
COMPLETE YOUR PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE
MEETING AND WISH TO VOTE IN PERSON, YOUR PROXY WILL NOT BE USED.
By order of the Board of Directors,
DAVID R. POKROSS, JR.
Secretary
Dated December 29, 1997
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PROXY STATEMENT
APPROXIMATE DATE OF MAILING: DECEMBER 29, 1997
INFORMATION CONCERNING THE PROXY SOLICITATION
The enclosed proxy is solicited by and on behalf of the Board of
Directors of Tech/Ops Sevcon, Inc. (the "Company") for use at the annual
meeting of stockholders of the Company to be held on January 28, 1998 at
5:00 p.m. at the offices of Palmer & Dodge, 24th Floor, One Beacon
Street, Boston, Massachusetts, or any adjournments or postponements
thereof. It is subject to revocation at any time prior to the exercise
thereof by giving written notice to the Company, by submission of a
later dated proxy or by voting in person at the meeting. The costs of
solicitation, including the preparation, assembly and mailing of proxy
statements, notices and proxies, will be paid by the Company. Such
solicitation will be made by mail and in addition may be made by the
officers and employees of the Company personally or by telephone or
telegram. Forms of proxies and proxy material may also be distributed,
at the expense of the Company, through brokers, custodians and other
similar parties to the beneficial owners of the Common Stock.
On December 12, 1997, the Company had outstanding 3,093,232 shares
of Common Stock, $.10 par value, which is its only class of voting
stock, held of record by approximately 600 holders. Stockholders of
record at the close of business on December 12, 1997 will be entitled to
vote at the meeting. With respect to all matters which will come before
the meeting, each stockholder may cast one vote for each share
registered in his name on the record date. The shares represented by
every proxy received will be voted, and where a choice has been
specified, the shares will be voted in accordance with the specification
so made. If no choice has been specified on the proxy, the shares will
be voted FOR the election of the two nominees as directors and FOR ap-
proval of the 1998 Director Stock Option Plan.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table provides information as to the ownership of the
Company's Common Stock as of December 12, 1997 by (i) persons known to
the Company to be the beneficial owners of more than 5% of the Company's
outstanding Common Stock, (ii) the Chief Executive Officer of the
Company, and (iii) all current executive officers and directors of the
Company as a group. Beneficial ownership by individual directors is
shown in the table on pages 2, 3, and 4 below.
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Amount
Name and Address Beneficially Percent
of Beneficial Owner Owned (1) of Class
------------------- --------- --------
Dr. Marvin G. Schorr 354,338 11.6%
Tech/Ops Corporation
One Beacon Street
Boston, MA 02108
Bernard F. Start 236,360 (2) 7.7%
Tech/Ops Sevcon, Inc.
One Beacon Street
Boston, MA 02108
Dimensional Fund Advisors, Inc. 191,700 (3) 6.4%
1299 Ocean Avenue, Suite 650
Santa Monica, CA 90401
Matthew Boyle. . .... . . . 2,000 (4) #
Tech/Ops Sevcon, Inc.
One Beacon Street
Boston, MA 02108
All current executive officers and
directors as a group (9 persons).. 804,953 (5) 25.8%
___________
# Less than 1%
(1) Unless otherwise indicated, each owner has sole voting and
investment power with respect to the shares listed.
(2) Includes 10,000 shares subject to stock options exercisable
within sixty days.
(3) As reported on Schedule 13G filed with the Securities and Ex-
change Commission on February 5, 1997.
(4) Shares subject to stock options exercisable within sixty days.
(5) Includes 22,000 shares subject to stock options exercisable
within sixty days
ELECTION OF DIRECTORS
The Company's Board of Directors has fixed the number of directors
at seven. Members of the Board of Directors are divided into three
classes serving staggered three-year terms. The term of three of the
Company's current directors, Harold C. Mayer, Jr., Marvin G. Schorr, and
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David Steadman, expires at the annual meeting. Mr. Mayer will retire as
a director after 39 years of service with the Company and its
predecessor. Dr. Schorr and Mr. Steadman are the Board's nominees for
re-election to three-year terms by the stockholders at the annual
meeting. In addition, Milton C. Lauenstein has retired as a director
after 24 years of service with the Company and its predecessor. The
Company is not presently aware of any reason that would prevent any
nominee from serving as a director if he is elected. If a nominee
should become unavailable for election, the proxies will be voted for
another nominee selected by the Board.
On November 13, 1997, Bernard F. Start resigned as President and
Chief Executive Officer of the Company, and the Board of Directors
elected Matthew Boyle to succeed him as President and Chief Executive
Officer, and a member of the Board of Directors with a term expiring in
January 1999. Mr. Start had served in that capacity since the Company's
inception in 1988. Also on November 13, 1997, the Board elected Mr.
Start to serve as non-executive Vice-Chairman of the Board.
Pursuant to the Company's by-laws, directors will be elected by a
plurality of the votes properly cast at the annual meeting.
Abstentions, votes withheld and broker non-votes will not be treated as
votes cast and will not affect the outcome of the election. A "broker
non-vote" occurs when a broker holding a customer's shares indicates on
the proxy that the broker has not received voting instructions on a
matter from the customer and is barred by applicable rules from
exercising discretionary authority to vote on the matter.
The following table contains information on the two nominees for
election at the annual meeting and each other person whose term of
office as a director will continue after the meeting. The nominees for
election at the meeting are indicated by an asterisk.
Company Benefici-
Business or its Pre- -ally on
Experience decessor Dec. 12
During Past Tech/Ops, 1997 and
Term Five Years and Inc. Percent of
Name Expires Other Directorships Since Class (1)
- ---- ------- ------------------- ----- --------
Matthew Boyle 1999 President and Chief 1997 2,000
Age -- 35 Executive Officer of (#)
the Company since
November 1997. Vice
President and Chief
Operating Officer of
the Company from Nov-
ember 1996 to November
1997. From 1994 to
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1996, Mr. Boyle was
General Manager of GEC
Alsthom Regulateurs
Europa, Colchester,
England, an electronic
controls company and
from 1991 to 1994, Gen-
eral Manager of the IACD
Scottish division of
Honeywell Control Systems
Ltd., Aberdeen, Scotland,
an electronics and con-
trols systems company.
Paul B. 2000 Treasurer of the Company 1988 83,480
Rosenberg (3) since January 1988. Mr. (2.7%)
Age - 65 Rosenberg is President of
Tech/Ops Corporation, Bost-
on, Mass., a consulting firm,
and is a director of Land-
auer, Inc., Glenwood, Ill-
inois, a provider of personnel
dosimetry services.
Herbert 2000 Until June 1985, chief exec- 1971 31,000
Roth, Jr. (3)(4) utive officer of LFE Corp- (1.0%)
Age -- 69 oration, Waltham, Mass.,
manufacturer of equipment
and systems for traffic and
industrial process control.
Mr. Roth is a director of
Boston Edison Company, Boston,
Mass., a public utility; Phoe-
nix Life Insurance Company;
Phoenix Total Return Fund,
Inc., a mutual fund; Mark IV
Industries, Inc., a divers-
ified manufacturing concern;
Landauer, Inc., Glenwood, Ill-
inois, a provider of personnel
dosimetry services, and a
trustee of Phoenix Series Fund,
Phoenix Multi Portfolio Fund
and Big Edge Services Fund,
all mutual funds.
* Dr. Marvin. 1998 Chairman of the Company's 1951 354,338
G. Schorr (4) Board of Directors since (11.6%)
Age - 72 January 1988. Chairman of
the Board of Directors and
President of Tech/Ops, Inc.,
the Company's predecessor.
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Dr. Schorr is Chairman of
Landauer, Inc., Glenwood,
Illinois, a provider of pers-
onnel dosimetry services,
Chairman of Helix Technology
Corporation, Mansfield, Mass.,
manufacturer of cryogenic
equipment, and Chairman of
Tech/Ops Corporation, Boston,
Mass., a consulting firm.
Bernard 2000 Vice-Chairman of the Board 1988 236,360
F. Start since November 1997. Pres- (7.7%)
Age -- 59 ident and Chief Executive (5)
Officer of the Company from
January 1988 to November
1997.
David 1998 President of Atlantic Man- 1997 1,000
R. Steadman (3)(4) agement Associates, a man- (#)
Age -- 60 agement services firm. Since
1988. From 1990 to 1994, Mr.
Steadman served as President
and Chief Executive Officer
of Integra, a hotel and rest-
aurant company. Mr. Steadman
is Chairman of the Board of
Technology Service Group, Inc.,
a manufacturer of high techn-
ology pay telephone components,
Wahlco Environmental Systems,
Inc., an environmental equipment
and service company, and Telequip
Corporation, a closely-held elec-
tronics manufacturer. Mr. Stead-
man is also a director of Aavid
Thermal Technologies, Inc., a
manufacturer of thermal manage-
ment products
C. Vincent 1999 Until May 1991, Chairman 1971 8,000
Vappi (3) (4) and Chief Executive Officer (#)
Age - 71 of Vappi & Company, Inc.,
Cambridge, Mass. ., a gen-
eral building contractor.
Mr. Vappi is a director of
John Hancock Mutual Life
Insurance Company, Boston,
Mass.
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- ------------------------------------
# Less than 1%
(1) Unless otherwise indicated, each director has sole
voting and investment power with respect to the
shares listed.
(2) Shares subject to stock options exercisable within
sixty days.
(3) Member of the Audit Committee.
(4) Member of the Compensation Committee.
(5) Includes 10,000 shares subject to stock options
exercisable within sixty days.
During the fiscal year ended September 30, 1997, the Board of
Directors held a total of six meetings. During such year, all directors
attended more than 75 percent of the total number of meetings of the
Board of Directors and all committees of the Board on which the director
served.
The Board of Directors has an Audit Committee and a Compensation
Committee. The Audit Committee, which met twice during the fiscal year
ended September 30, 1997, reviews the scope and results of the external
audit, including the audited financial statements, the auditors'
compensation and the adequacy of the Company's internal financial
controls, and recommends the engagement of the Company's external
auditors. The Compensation Committee, which met once last year,
reviews and recommends to the Board the annual salary, bonus, stock
options, and other benefits of the senior executives. The Board of
Directors does not have a nominating committee.
Director Compensation
Mr. Roth, the Chairman of the Audit Committee, and Mr. Vappi, the
Chairman of the Compensation Committee, are each paid $13,500 a year for
their services as directors. The other directors (except Mr. Boyle) are
paid $12,500 each. In addition, Mr. Start will receive, commencing
January 1, 1998, compensation at an annual rate of $25,000 as Vice
Chairman and the Board of Director's representative in Europe.
In January 1997, the Company terminated its Directors' Retirement
Plan and fixed the annual retirement payment for the following directors
payable upon retirement for life in the amounts indicated, with one-half
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of the amount payable to the director's surviving spouse for life:
Messrs. Roth and Vappi - $6,250 and Mr. Rosenberg - $5,000. Messrs.
Boyle, Schorr, Start, and Steadman will receive no benefits under the
Plan.
For a period ending December 31, 1998, the Company has agreed to
pay the consulting business owned by Mr. Rosenberg and Dr. Schorr
$100,000 per year. Of this amount, $30,000 is intended to be paid to
Mr. Rosenberg as compensation and $70,000 will be applied toward the
expenses of maintaining an office and support facilities for the
Company's corporate office and for Mr. Rosenberg and Dr. Schorr. Dr.
Schorr will receive no compensation from this payment.
EXECUTIVE COMPENSATION
The following tables provide information concerning the com-
pensation of the President and Chief Executive Officer of the Company
for services during each of the last three completed fiscal years and
the Vice President and Chief Operating Officer of the Company since
November 1996, the date he joined the Company, and the value of
unexercised stock options at the end of such year. The two individuals
are the only executive officers of the Company whose total salary and
bonus in the most recent fiscal year exceeds $100,000.
Summary Compensation Table
Long-Term
Compens-
Fiscal Annual ation
Name and Principal Position Year Compensation Awards
- -------------------------- ----- ------------------- ------
Securities
Underlying
Salary Bonus Options (#)
------ ----- -----------
Bernard F. Start.......... 1997 $252,500 $ - -
President & 1996 242,500 50,000 -
Chief Executive Officer 1995 229,800 85,000 -
Matthew Boyle............. 1997 $130,800 $ 20,000 20,000
Vice President &
Chief Operating Officer
(from November 1996)
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Option Grants in Last Fiscal Year
The following table shows all stock options granted to executive
officers of the Company during the fiscal year ended September 30,
1997:
Individual Grants Potential Realiz-
able
Number of Percent Value at Assumed
Secu- of total Annual Rates
rities Options Exercise Stock Price Apprec-
Under- Granted or Base Expir- iation For Option
lying To Emp- Price ation Term
Name Options loyees ($/Sh) Date 5% 10%
Granted in Fiscal
(#) Year
Matthew
Boyle... 20,000 100% $14.31 11/6/06 $180,000 $456,000
(a)
(a) These options were granted on November 5, 1996, and become
exercisable with respect to 2,000 shares on each anniversary of the
grant date (September 5, 2006 in the case of the last 2,000 shares)
or earlier with respect to all shares upon a change in control of the
Company, as defined in the option grant.
Fiscal Year-End Option Values
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options Options
at 9/30/97 at 9/30/97
(#)
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
Bernard F. Start 10,000/0 $81,400/0
Matthew Boyle 0/20,000 $ 0/0
No executive officer of the Company exercised any stock options
during the last fiscal year.
Retirement Plan.
Mr. Start participates in the Company's U. S. Retirement Plan, a
defined benefit plan under which benefits are based upon the average of
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the annual rates of U. S. - based base salary in effect as of October 1
of each year for the period of five consecutive years which produces the
highest such average and also based upon years of service as set forth
below. U. S. tax law places limitations on the aggregate amount payable
to an individual under qualified retirement plans.
The following table sets forth information concerning the annual
benefits payable pursuant to the U. S. Retirement Plan on a straight-
life annuity basis upon retirement at age 65 for specified compensation
levels (assuming continuation of 1997 fiscal base salary) and years of
service classifications. Benefits under the Retirement Plan are
computed solely on the U. S. base salary of participants, exclusive of
bonuses, incentive and other compensation, and are reduced on account of
Social Security entitlement on the basis of the Internal Revenue Service
permitted disparity rules.
U. S. Retirement Plan Table
Average Annual Earnings Estimated Annual Pension Based on
on which Years of Service Indicated
Retirement --------------------------------
Benefits are Based 15 years 20 years 25 years 30 years
- ------------------ -------- -------- -------- --------
$ 100,000 $ 22,400 $ 31,200 $ 39,900 $ 48,700
125,000 29,000 39,900 50,900 61,800
150,000 35,600 48,700 61,800 74,900
175,000 42,100 57,400 72,800 88,100
200,000 48,700 66,200 83,700 101,200
225,000 55,300 74,900 94,600 114,300
250,000 61,800 83,700 105,600 127,400
Credited years of service at September 30, 1997 were 19 for Mr.
Start. In 1997. Mr. Start's average U. S. - based salary for the five
years producing the highest such average was approximately $103,000.
Mr. Start and Mr. Boyle participate in the Company's U. K.
Retirement plan, a defined benefit plan, under which benefits at age 65
are based upon 1/60th of final U. K. - based salary (as defined) for
each year of service, subject to a maximum of 2/3rds of final U K. -
based base salary. A spouse's pension of 50% of the employee's pension
is payable at death either before or during retirement. Pension
payments escalate by at least 3% per year, compounded, and at a higher
rate in certain circumstances. The employee contributes 4% of base
salary, with the balance of the cost being met by the Company.
The following table sets forth information concerning the annual
benefits payable to the employee pursuant to the U. K. Retirement Plan
upon retirement at age 65 for specified compensation levels and years of
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service classifications. Benefits under the Retirement Plan are
computed solely on the U. K. base salary of participants, exclusive of
bonuses, incentive and other compensation, and are not reduced on
account of U. K. Social Security entitlement.
U. K. Retirement Plan Table
Average Annual Earnings Estimated Annual Pension Based on
on which Years of Service Indicated
Retirement --------------------------------
Benefits are Based 15 years 20 years 25 years 30 years
- ------------------ -------- -------- -------- --------
$ 125,000 $ 31,300 $ 41,700 $ 52,100 $ 62,500
150,000 37,500 50,000 62,500 75,000
175,000 43,800 58,300 72,900 87,500
200,000 50,000 66,700 83,300 100,000
225,000 56,300 75,000 93,800 112,500
250,000 62,500 83,300 104,200 125,000
275,000 68,800 91,700 114,600 137,500
300,000 75,000 100,000 125,000 150,000
Credited years of service at September 30, 1997 were 19 for Mr.
Start, and less than one year for Mr. Boyle. Mr. Start's average U. K.
- - based salary for the three years producing the highest such average
was $144,000. Mr. Boyle's compensation is entirely U. K. based.
COMPENSATION COMMITTEE REPORT
The Company's compensation program is designed to motivate and
retain employees by encouraging and rewarding performance. The program
is administered by the Compensation Committee of the Board of Directors
(the "Committee"), consisting of three independent directors who are not
employees of the Company. The Committee regularly reviews and approves
generally all compensation and fringe benefit programs of the Company,
and also reviews and determines the base salary and incentive
compensation of the executive officer named above, as well as stock
option grants to all employees. All compensation actions taken by the
Committee are reported to the full Board of Directors, which, excluding
employee directors, approves the actions of the Committee. The
Committee also reviews and makes recommendations to the Board on
policies and programs for the development of management personnel, as
well as management structure and organization. The Committee
administers the Company's Equity Incentive Plan.
The Company believes that stock options are an important incentive
to motivate executive officers and other key employees for improved
long-term performance of the Company. The Company considers stock
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ownership, options currently held and options previously granted when
granting options although there are no specific levels of ownership for
such grants.
The Committee believes that the combination of salary and incentive
compensation is the best method for compensating its executive officers
and senior managers to promote uniform excellence, long-term commitment
and team performance. Management salaries are determined based upon
individual performance, level of responsibility and experience. The
Committee reviews these salaries annually and measures them against
compensation data obtained from published compensation surveys and
surveys that the Committee makes of a group of peer companies. The
Committee believes that the salaries of the Company's executive officers
are in the mid-range of these surveys. The peer companies are generally
of about the same size as the Company and are in technical, rather than
consumer or distribution fields. The peer companies may include some of
the companies included in the Industrial Controls Industry Index used in
the Performance Graph. The Company believes that its competitors for
executive talent are not necessarily companies which engage in the same
business as the Company and, therefore, the companies used for
comparative compensation purposes differ from the companies included in
the Industrial Controls Industry Index.
The recommended base salary and incentive compensation award for
the President is determined each year by the Committee based upon its
subjective assessment of the overall financial performance of the
Company and the performance of the President relative to corporate
objectives and other factors. Mr. Start's base salary during fiscal
1997 increased 4.1% to $252,500 from fiscal 1996. The increase in Mr.
Start's base salary related to the level of responsibility and
accountability of the Chief Executive Officer, as well as external
factors such as inflation and base salary levels in comparable
companies. Due to the Company's financial performance in fiscal 1997,
no bonus was awarded to Mr. Start for fiscal 1997.
During the last fiscal year, a stock option was granted for 20,000
shares to Mr. Boyle upon his joining the Company as Chief Operating
Officer, under the Company's Equity Incentive Plan.
Members of the Compensation Committee
Herbert Roth, Jr.
Harold C. Mayer, Jr.
David R. Steadman
C. Vincent Vappi, Chairman
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PERFORMANCE TABLE
The following table compares the cumulative total return (change in
stock price plus reinvested dividends) assuming $100 invested in the
Common Stock of the Company, in the American Stock Exchange ("AMEX")
Market Value Index, and in the Media General Industrial Controls Sector
Index during the period from September 30, 1992 through September 30,
1997. Prior to 1997, the Company compared its performance to the AMEX
Hi-Tech Sector Index. The AMEX discontinued calculation of this and
other sector indexes and therefore no values were available for
September 30, 1997.
Value of Investment at September 30,
-----------------------------------
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
Tech/Ops Sevcon, Inc. $ 100 $ 97 156 243 346 251
AMEX Market Value Index 100 117 120 144 150 182
Media General Industrial
Controls Sector Index 100 110 120 122 100 181
APPROVAL OF
1998 DIRECTOR STOCK OPTION PLAN
General
The Board of Directors is proposing for stockholder approval at the
annual meeting the Tech/Ops Sevcon Inc. 1998 Director Stock Option Plan
(the "Plan"). The Company historically had maintained a Director
Retirement Plan under which directors, in certain circumstances, may
have become entitled to receive an annual cash retirement benefit. The
Board of Directors terminated the Director Retirement Plan for periods
subsequent to 1996. (See Election of Directors - Director Compensation,
above). The purposes of the Plan are (I) to align the interests of the
Company's stockholders and recipients of stock options under the Plan by
increasing the proprietary interest of such recipients in the Company's
growth and success and (ii) to advance the interests of the Company by
attracting and retaining well-qualified persons who are not employees of
the Company for service as directors of the Company. Reference is made
to Exhibit A to this Proxy Statement for the complete text of the Plan
which is summarized below.
Description of the Plan
Administration.
The Plan will be administered by a committee of the Board of
Directors (the "Committee") consisting of not less than two directors.
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The Compensation Committee of the Board of Directors is expected to
serve as the Committee under the Plan. The Committee will have
authority to prescribe rules and regulations for administering the Plan
and to decide questions of interpretation or application of any
provision of the Plan.
Available Shares.
Under the Plan, 50,000 shares of Common Stock are available for the
grant of options under the Plan, subject to adjustment in the event of a
stock split, stock dividend, recapitalization, reorganization, merger,
spin-off or other similar change or event. To the extent that shares of
Common Stock subject to an outstanding option are not issued or
delivered by reason of the expiration, termination, cancellation or
forfeiture of such option or by reason of the delivery of shares of
Common Stock to pay all or a portion of the exercise price of an option,
then such shares of Common Stock shall again be available under the
Plan.
Effective Date, Termination and Amendment.
If approved by stockholders at the annual meeting, the Plan will
become effective as of the date of the annual meeting. The Plan will
terminate when no shares of Common Stock remain available for grants,
unless terminated earlier by the Board of Directors. The Board of
Directors may amend the Plan at any time, subject to such stockholder
approval as the Board determines to be necessary or desirable to comply
with any tax or regulatory requirements.
Grant and Exercisability of Stock Options.
The Plan provides that, immediately following approval of the Plan
by stockholders at the 1998 annual meeting, each member of the Board of
Directors who is then serving and who is not an employee, either full
time or part time, of the Company (a "Non-Employee Director") will be
granted an option to purchase 5,000 shares of Common Stock at a purchase
price per share equal to the fair market value (based on the average of
the high and low transaction prices of a share of Common Stock on the
American Stock Exchange) of a share of Common Stock on such date. Any
Non-Employee Director who is first elected as a member of the Board of
Directors after the 1998 annual meeting of stockholders, and a Non-
Employee Director who first begins to serve as a result of retirement
from the Company on a date approved by the Board will also be granted at
the time of such first election or service an option to purchase 5,000
shares of Common Stock at a purchase price per share equal to the fair
market value of a share of Common Stock on the date of such grant. Each
option granted will expire 90 days after the tenth anniversary of the
date of its grant and, subject to the provisions of the following sen-
tence, will become exercisable in equal 500 share amounts on each of the
first ten anniversaries of the date of its grant. All outstanding
options issued under the Plan shall immediately be exercisable in full
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in the event of a "Change in Control" of the Company (as defined in the
Plan). The acceleration of options in the event of a Change in Control
could increase the cost to a potential acquirer of the Company and,
therefore, could affect the willingness of an acquirer to propose such a
transaction with the Company.
Upon exercise of an option, the purchase price may be paid in cash
or by delivery of previously owned shares of Common Stock. The
Committee also has the discretion to permit payment by a note or in
installments under certain circumstances.
Termination of Directorship.
Subject to the provisions governing exercisability following a
Change of Control, if an optionee ceases to be a member of the Board of
Directors for any reason, each option issued under the Plan to such
optionee will be exercisable only to the extent that such option is
exercisable on the effective date of such optionee ceasing to be a
member of the Board of Directors and may thereafter be exercised by such
optionee (or such optionee's executor, administrator, legal
representative, beneficiary of similar person) until the earliest to
occur of (i) the one year anniversary of the date such optionee ceased
to be a member of the Board of Directors and (ii) the expiration date of
the term of such option (provided that if the optionee dies during the
one year period following his or her cessation of membership on the
Board of Directors, such optionee's executor, administrator, legal
representative, beneficiary or similar person, as the case may be, will
have not less than six months from the date of death to so exercise such
option).
Federal Income Tax Consequences
The following is a brief summary of certain U.S. federal income tax
consequences generally arising with respect to grants of options under
the Plan.
A participant will not recognize any income upon the grant of an
option and the Company will not be allowed a tax deduction at such time.
A participant will recognize compensation taxable as ordinary income
upon exercise of a stock option equal to the excess of the fair market
value of the shares purchased over their exercise price, and the Company
will be entitled to a corresponding deduction at the time of such
exercise.
Initial Grants
If the Plan is approved by stockholders at the annual meeting, each
of the nominees and continuing directors listed under "Election of
Directors" above, except Mr. Boyle, will be granted an option to
purchase 5,000 shares of Common Stock (a total of 30,000 shares for all
non-employee directors) under the Plan on the date of the meeting. On
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December 12, 1997, the Closing Price of the Common Stock on the American
Stock Exchange was $12.875 per share.
Vote Required
The affirmative vote of the holders of a majority of the shares of
Common Stock present or represented and entitled to vote at the meeting
is required to approve the Plan. Broker non-votes will not be counted
as present or represented for his purpose. Abstentions will be counted
as present and entitled to vote and, accordingly, will have the effect
of a negative vote.
The Board of Directors recommends a vote FOR approval of the 1998
Director Stock Option Plan.
AUDITORS
Arthur Andersen LLP, One International Place, Boston, Massa-
chusetts, has served as auditors for the Company and its predecessor
Tech/Ops, Inc. since the latter was formed, and upon recommendation of
the Audit Committee, has been appointed as auditors for the current
year. Representatives of Arthur Andersen LLP are expected to be present
at the meeting with an opportunity to make a statement if they desire to
do so and are expected to be available to respond to appropriate ques-
tions.
DEADLINE FOR STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
In order for a stockholder proposal to be considered for inclusion
in the Company's proxy materials for the 1999 annual meeting, it must be
received by the Company at One Beacon Street, Boston, Massachusetts
02108, Attention: Treasurer, no later than August 29, 1998.
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ADVANCE NOTICE PROVISIONS FOR
STOCKHOLDER PROPOSALS AND NOMINATIONS
The by-laws of the Company provide that in order for a stockholder
to bring business before or propose director nominations at an annual
meeting, the stockholder must give written notice to the Secretary or
other specified officer of the Company not less than 50 days nor more
than 75 days prior to the meeting. The notice must contain specified
information about the proposed business or each nominee and the
stockholder making the proposal or nomination. If the annual meeting is
scheduled for a date other than the fourth Wednesday in January and
notice thereof is mailed to stockholders or publicly disclosed less than
65 days in advance, the notice given by the stockholder must be received
not later than the 15th day following the day on which the notice of
such annual meeting date was mailed or public disclosure made, whichever
occurs first.
OTHER BUSINESS
The Board of Directors does not know of any business which will
come before the meeting except the matters described in the notice. If
other business is properly presented for consideration at the meeting,
the enclosed proxy authorizes the persons named therein to vote the
shares in their discretion.
Dated December 29, 1997
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EXHIBIT A
TECH/OPS SEVCON, INC.
1998 DIRECTOR STOCK OPTION PLAN
I. INTRODUCTION
1.1 Purposes. The Purposes of the 1998 Director Stock Option
Plan (the Plan) of Tech/Ops Sevcon, Inc., a Delaware corporation (The
"Company"), and its subsidiaries from time to time (individually a
"Subsidiary" and collectively the "Subsidiaries"), are to align the
interests of the Company's stockholders and the recipients of options
under this Plan by increasing the proprietary interest of such
recipients in the Company's growth and success and to advance the
interests of the Company by attracting and retaining well-qualified
persons who are not employees of the Company for service as directors of
the Company. For purposes of this Plan, references to service on behalf
of the Company shall also mean service on behalf of a Subsidiary.
1.2 Administration. This Plan shall be administered by a
committee (the "Committee") designated by the Board of Directors of the
Company (the "Board") consisting of two or more members of the Board.
The Committee shall, subject to the terms of the Plan, interpret
this Plan and the application thereof and establish rules and
regulations it deems necessary or desirable for the administration of
this Plan. All such interpretations, rules and regulations shall be
conclusive and binding on all parties. Each option hereunder shall be
evidenced by a written agreement (an "Agreement") between the Company
and the optionee setting forth the terms and conditions applicable to
such option. The Committee shall determine the form of the Agreement.
No member of the Board of Directors or the Committee shall be
liable for any act, omission, interpretation, construction or
determination made in connection with this Plan in good faith, and the
members of the Board of Directors and the Committee shall be entitled to
indemnification and reimbursement by the Company in respect of any
claim, loss, damage or expense (including attorneys' fees) arising
therefrom to the full extent permitted by law (except as otherwise may
be provided in the Company's Certificate of Incorporation and/or Bylaws)
and under any directors' and officers' liability insurance that may be
in effect from time to time.
A majority of the Committee shall constitute a quorum. The acts of
the Committee shall be either (a) acts of a majority of the members of
the Committee present at any meeting at which a quorum is present or (b)
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acts approved in writing by all of the members of the Committee without
a meeting.
1.3 Eligibility. Each member of the Board of Directors of the
Company who is not an employee, either full-time or part-time, of the
Company or a Subsidiary (a "Non-Employee Director") shall be eligible to
participate in this Plan and receive a grant of options to purchase
shares of Common Stock (as defined in Section 1.4) in accordance with
Section II.
1.4 Shares Available. Subject to adjustment as provided in
Section 3.6, 50,000 shares of the common stock, par value $ .10
per share, of the Company ("Common Stock"), shall be available
for grants of options under this Plan. To the extent that
shares of Common Stock subject to an outstanding option are not
issued or delivered by reason of the expiration, termination,
cancellation or forfeiture of such option or by reason of the
delivery of shares of Common Stock to pay all or a portion of
the exercise price of such option, then such shares of Common
Stock shall again be available under the Plan.
Shares of Common Stock to be delivered under this Plan shall be
made available from authorized and unissued shares of Common Stock, or
authorized and issued shares of Common Stock reacquired and held as
treasury shares or otherwise or a combination thereof.
II. STOCK OPTIONS
2.1 Grants of Stock Options. Each Non-Employee Director shall be
granted a non-qualified stock option to purchase 5,000 shares of Common
Stock at a purchase price per share equal to the Fair Market Value of
the Common Stock on the date of grant of such option, as follows:
(a) to each person on the date of the 1998 annual meeting of
stockholders of the Company who is a Non-Employee Director immediately
thereafter;
(b) to each person upon first election as a Non-Employee Director
after the 1998 annual meeting; and
(c) to each person upon first becoming a Non-Employee Director as
result of retirement from the Company on a date approved by the Board in
its sole discretion.
"Fair Market Value" shall mean the average of the high and low
transaction prices of a share of Common Stock as reported on The
American Stock Exchange on the date as of which such value is being
determined or, if the Common Stock is not listed on The American Stock
Exchange, the average of the high and low transaction prices of a share
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of Common Stock on the principal national stock exchange on which the
Common Stock is traded on the date as of which such value is being
determined, or, if there shall be no reported transactions on such
date, on the next preceding date for which transactions were reported;
provided, however, that if Fair Market Value for any date cannot be
determined as above provided, Fair Market Value shall be determined by
the Committee by whatever means of method as the Committee, in the good
faith exercise of its discretion, shall at such time deem appropriate.
2.2 Option Period and Exercisability. Except as otherwise
provided herein, each option granted under this Article II shall become
exercisable for up to 500 shares of Common Stock on the first
anniversary of its date of grant, and up to an additional 500 shares on
each anniversary thereafter, all on a cumulative basis. Subject to
Sections 2.4 and 2.5, each option granted under this Article II shall
expire 90 days after the tenth anniversary of its date of grant. An
option may be exercised in whole or in part only for whole shares of Com-
mon Stock.
2.3 Method of Exercise. An option may be exercised (I) by giving
written notice to the Company specifying the number of whole shares of
Common Stock to be purchased and accompanied by payment therefor in full
(or arrangement made for such payment to the Company's satisfaction)
either (A) in cash, (B) by delivery of previously owned whole shares of
Common Stock (which the optionee has held for at least six months prior
to the delivery of such shares or which the optionee purchased on the
open market and for which the optionee has good title, free and clear of
all liens and encumbrances) having a Fair Market Value, determined as of
the date of exercise, equal to the aggregate purchase price payable by
reason of such exercise, (C) in cash by a broker-dealer acceptable to
the Company to whom the optionee has submitted an irrevocable notice of
exercise or (D) a combination of (A) and (B), in each case to the extent
set forth in the Agreement relating to the option and (ii) by executing
such documents as the Company may reasonably request. The Committee
shall have sole discretion to disapprove of an election pursuant to any
clauses (B)-(D). Notwithstanding the foregoing, the Committee shall
also have discretion to permit payment to be made, in whole or in part,
by a full-recourse note or in installments at such time and upon such
terms as the Committee may approve; provided, however, that in the case
of payment by any such note or installments, certificates for any shares
of Common Stock issued in respect thereof shall contain such legend, if
any, as may be required by, and shall otherwise be subject to the
provisions of, the laws of the state of incorporation of the Company
relating to the issuance of shares on such terms. Any fraction of a
share of Common Stock which would be required to pay such purchase price
shall be disregarded and the remaining amount due shall be paid in cash
by the optionee. No certificate representing Common Stock shall be
delivered until the full purchase price therefor has been paid.
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2.4 Termination of Directorship. Subject to Section 3.6, if the
holder of an option granted under this Article II shall cease to be a
member of the Board for any reason, each such option held by such
optionee shall be exercisable only to the extent that such option is
exercisable on the effective date of such holder's ceasing to be a
member of the Board and may thereafter be exercised by such optionee (or
such optionee's executor, administrator, legal representative,
beneficiary or similar person) until and including the earliest to occur
of (i) the date which is one year after the date such optionee ceased to
be a member of the Board and (ii) the expiration date of the term of
such option.
2.5 Death Following Termination of Directorship. If the holder of
an option granted under this Article II dies during the one year period
following the date on which such optionee ceased to be a member of the
Board, each such option held by such hold shall be exercisable only to
the extent that such option is exercisable on the date of the holder's
death and may
thereafter be exercised by such holder's executor, administrator, legal
representative, beneficiary or similar person) until and including the
earliest to occur of (i) the date which is one year after the date of
death and (ii) the expiration date of the term of such option; provided,
however, that in the event that the date of death is less than six
months prior to such expiration date, such holder's executor,
administrator, legal representative, beneficiary or similar person, as
the case may be, shall have not less than six months from the date of
death to so exercise such option.
III. General
3.1 Effective Date. Subject to the approval of the stockholders
of the Company, this Plan shall be effective on January 28, 1998.
3.2 Amendment. The Board may amend, suspend, or terminate this
Plan at any time, subject to such stockholder approval as the Board
determines to be necessary or desirable to comply with any tax or regu-
latory requirements.
3.3 Non-Transferability. No option hereunder shall be
transferable other than (a) by will or the laws of descent and
distribution or pursuant to beneficiary designation procedures approved
by the Company or (b) as otherwise permitted by the Committee.
3.4 Restrictions on Shares. Each option hereunder shall be
subject to the requirement that if at any time the Company determines
that the listing, registration or qualification of the shares of Common
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Stock subject to such option upon any securities exchange or under any
law, or the consent or approval of any governmental body, or the taking
of any other action is necessary or desirable as a condition of, or in
connection with, the purchase or delivery of shares thereunder, such
shares shall not be purchased or delivered unless such listing
registration, qualification, consent, approval or other action shall
have been effected or obtained, free of any conditions not acceptable to
the Company. The Company may require that certificates evidencing
shares of Common Stock delivered pursuant to any option hereunder bear a
legend indicating that the sale, transfer or other disposition thereof
by the holder is prohibited except in compliance with the Securities Act
of 1933, as amended, and the rules and regulations thereunder.
3.5 Adjustment. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, liquidation, spin-off or other similar change in
capitalization or event, or any distribution to holders of Common Stock
other than a regular cash dividend, the number and class of securities
available under this Plan, the number and class of securities subject to
each outstanding option and the number and class of securities to vest
annually, the purchase price per security, and the number of securities
subject to each option to be granted to Non-Employee Directors pursuant
to Article II shall be appropriately adjusted by the Committee, provided
that the number of shares subject to outstanding options shall always be
a whole number.
3.6 Change in Control.
(a) Notwithstanding any provision in the Plan or any Agreement, in
the event of a Change in Control, all outstanding options shall
immediately be exercisable in full.
(b) "Change in Control" shall mean:
(i) the acquisition by any individual, entity or group (a
"Person"), including any "person" within the meaning of Section 13(d)(3)
or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), of beneficial ownership within the meaning of Rule 13d-
3 promulgated under the Exchange Act, of 50% or more of either (A) the
then outstanding shares of common stock of the Company (the "Outstanding
Company Common Stock") or (B) the combined voting power of the then
outstanding securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting Securities");
excluding, however the following: (1) any acquisition directly from the
Company (excluding any acquisition resulting from the exercise of an
exercise, conversion or exchange privilege unless the security being so
exercised, converted or exchanged was acquired directly from the
Company), (2) any acquisition by the Company, (3) any acquisition by an
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employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or (4) any
acquisition by any corporation pursuant to a transaction which complies
with clauses (A), (B) and (C) of subsection (iii) of this Section
3.6(b); provided further, that for purposes of clause (2), if any Person
(other than the Company or any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by
the Company ) shall become the beneficial owner of 50% or more of the
Outstanding Company Common Stock or 50% or more of the Outstanding
Company Voting Securities by reason of an acquisition by the Company,
and such Person shall, after such acquisition by the Company, become the
beneficial owner of any additional shares of the Outstanding Company
Common Stock or any additional Outstanding Company Voting Securities and
such beneficial ownership is publicly announced, such additional
beneficial ownership shall constitute a Change in Control;
(ii) individuals who, as of January 28, 1998, constitute the Board
of Directors (the "Incumbent Board") cease for any reason to constitute
at least a majority of such Board; provided that any individual who
becomes a director of the Company subsequent to such date whose
election, or nomination for election by the Company's stockholders, was
approved by the vote of at least a majority of the directors then
comprising the Incumbent Board shall be deemed a member of the Incumbent
Board; and provided further, that any individual who was initially
elected as a director of the Company as a result of an actual or
threatened election contest, as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act, or any other actual
or threatened solicitation of proxies or consents by or on behalf of any
Person other than the Board shall not be deemed a member of the Incum-
bent Board;
(iii) consummation by the Company of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all
of the assets of the Company (a "Corporate Transaction"); excluding,
however, a Corporate Transaction pursuant to which (A) all or
substantially all of the individuals or entities who are the beneficial
owners, respectively, of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to such
Corporate Transaction will beneficially own, directly or indirectly,
more than 50% of, respectively, the outstanding shares of common stock,
and the combined voting power of the outstanding securities of such
corporation entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from the Corporate
Transaction (including, without limitation, a corporation which as a
result of such transaction owns the Company or all or substantially all
of the Company's assets either directly or indirectly) in substantially
the same proportions relative to each other as their ownership,
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immediately prior to such Corporate Transaction, of the Outstanding
Company Common Stock and the Outstanding Company Voting Securities, as
the case may be, (B) no Person (other than: the Company; any employee
benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company; the corporation resulting
from such Corporate Transaction; and any Person which beneficially
owned, immediately prior to such Corporate Transaction, directly or
indirectly, 35% or more of the Outstanding Company Common Stock or the
Outstanding Company Voting Securities, as the case may be) will
beneficially own, directly or indirectly, 35% or more of, respectively,
the outstanding shares of common stock of the corporation resulting from
such Corporate Transaction or the combined voting power of the
outstanding securities of such corporation entitled to vote generally in
the election of directors and (C) individuals who were members of the
Incumbent Board will constitute at least a majority of the members of
the board of directors of the corporation resulting from such Corporate
Transaction; or
(iv) approval by the stockholders of the Company of a plan of
complete liquidation or dissolution of the Company.
3.7 No Right of Continued Service. Neither this Plan nor any
option granted hereunder shall confer upon any person any right to
continued services as a director of the Company, any Subsidiary or any
affiliate of the Company.
3.8 Rights as Stockholder. No person shall have any right as a
stockholder of the Company with respect to any shares of Common Stock
which are subject to an option hereunder until such person becomes a
stockholder of record with respect to such shares of Common Stock.
3.9 Designation of Beneficiary. Each optionee may file with the
Committee a written designation of one or more persons as such
optionee's beneficiary or beneficiaries (both primary and contingent) in
the event of the optionee's death. To the extent an outstanding option
granted hereunder is exercisable, such beneficiary or beneficiaries
shall be entitled to exercise such option.
Each beneficiary designation shall become effective only when filed
in writing with the Committee during the optionee's lifetime on a form
prescribed by the Committee. The spouse of a married optionee domiciled
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in a community property jurisdiction shall join in any designation of a
beneficiary other than such spouse. The filing with the Committee of a
new beneficiary designation shall cancel all previously filed
beneficiary designations.
If an optionee fails to designate a beneficiary, or if all
designated beneficiaries of an optionee predecease the optionee, then
each outstanding option hereunder held by such optionee, to the extent
exercisable, may be exercised by such optionee's executor,
administrator, legal representative or similar person.
3.10 Governing Law. This Plan and each option hereunder shall be
governed by the laws of the State of Delaware and construed in
accordance therewith without giving effect to principles of conflicts of
laws.
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(FORM OF PROXY CARD) Appendix A
TECH/OPS SEVCON, INC.
Proxy Solicited by the Board of Directors for Annual Meeting
of Stockholders to be held January 28, 1998
The undersigned appoints Marvin G. Schorr, Paul B. Rosenberg and
David R. Pokross, Jr. and each of them, the attorneys and proxies of the
undersigned, with power of substitution, to vote all the shares of
Tech/Ops Sevcon, Inc. which the undersigned is entitled to vote at the
Annual Meeting of Stockholders to be held January 28, 1998 at the
offices of Palmer & Dodge, 24th Floor, One Beacon Street, Boston,
Massachusetts at 5:00 p. m. and at any adjournments thereof.
Please complete, sign and date on reverse side
and mail in enclosed envelope
- ------------------------------------------------------------
_____
\ \ Please mark
\ X \ votes as in
\____\ this example
This proxy will be voted FOR both nominees for Director below and FOR
item 2 if no contrary instructions are given.
1. ELECTION OF DIRECTORS
Nominees for three-year terms: Schorr, Steadman
For Both Withheld from
Nominees both nominees
\__\ \__\
\__\_______________________
For both nominees except as MARK HERE FOR ADDRESS
noted above CHANGE AND NOTE AT LEFT
\___\
2. APPROVAL OF 1998 DIRECTOR STOCK OPTION PLAN
For Against Abstain
\_\ \_\ \_\
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This proxy should be signed by the
registered holder. Where stock is
registered in the names of more than
one person, all such persons should
sign. When signing as executors,
administrators, trustees, guardians,
etc. please indicate your title
as such.
Signature___________ Date________
Signature___________ Date________
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