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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
[X] Definitive Proxy Statement RULE 14C-5(D)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
AEROVOX INCORPORATED
------------------------------------------------------------------------
(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] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
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AEROVOX INCORPORATED
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 7, 1996
----------------
To the Shareholders of Aerovox Incorporated
Notice is hereby given that the Annual Meeting of Shareholders of Aerovox
Incorporated (the "Company") will be held at the offices of Ropes & Gray, One
International Place, Room 36/1, Boston, Massachusetts 02110, at 10:00 a.m. on
Tuesday, May 7, 1996 for the following purposes:
1. To elect three Class I directors to serve until the 1999 Annual
Meeting.
2. To approve an amendment to the 1989 Stock Incentive Plan to: (i)
increase the number of shares reserved for issuance under the Plan by
250,000 to 950,000, and (ii) limit to 50,000 the number of shares for which
options and stock appreciation rights may be awarded to any individual in
any calendar year pursuant to awards granted under the Plan.
3. To transact any other business that may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1996 as
the record date for the determination of shareholders entitled to notice of
and to vote at this meeting and at any adjourned session thereof.
TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED TO SIGN AND DATE
THE ENCLOSED PROXY AND RETURN IT AS PROMPTLY AS POSSIBLE IN THE ENCLOSED
ENVELOPE.
By order of the Board of Directors
/s/ Ronald F. Murphy
RONALD F. MURPHY, Secretary
Boston, Massachusetts
March 25, 1996
<PAGE>
AEROVOX INCORPORATED
370 FAUNCE CORNER RD.
NORTH DARTMOUTH, MA 02747
ANNUAL MEETING OF SHAREHOLDERS
PROXY STATEMENT
----------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Aerovox Incorporated (the "Company") to be voted at the Annual Meeting of
Shareholders to be held on May 7, 1996 and at any adjourned session thereof.
You can ensure that your shares will be voted by signing and returning the
enclosed proxy in the envelope provided. Sending in a proxy will not affect
your right to attend the meeting and vote in person. You may revoke your proxy
at any time before it is voted by a written revocation received by the
Secretary, by a subsequently dated proxy or by oral revocation in person to
the Secretary at the meeting. This Proxy Statement and accompanying proxy will
be mailed commencing on or about April 5, 1996 to all shareholders entitled to
vote at the meeting. The Annual Report to Shareholders for the Company's
fiscal year ended December 30, 1995 is being mailed with this Proxy Statement.
The cost of solicitation of proxies will be borne by the Company. Directors,
officers and employees of the Company may solicit proxies by telephone,
facsimile or personal interview, but will not be specially compensated for
such service. The Company will reimburse banks, brokerage firms and other
custodians, nominees and fiduciaries for reasonable expenses incurred by them
in sending proxy materials to the beneficial owners of shares. In addition,
the Company has retained Beacon Hill Partners, Inc. to assist in the
solicitation of proxies for a fee of $2,000.
PROPOSAL 1
ELECTION OF DIRECTORS
The persons named in the enclosed proxy intend to vote in favor of the
election of the three nominees named below, all of whom are now directors of
the Company, as Class I directors unless authority to vote for the election of
all of such nominees is withheld by marking the box entitled "WITHHOLD
AUTHORITY TO VOTE FOR ALL NOMINEES" on the enclosed proxy. Authority to vote
for any individual nominee may be withheld by writing the name of the nominee
in the space provided on the enclosed proxy.
The Company's By-laws provide for not more than fifteen nor less than three
members of the Board of Directors, as determined by the Board of Directors.
The Board of Directors has fixed the number of directors for the ensuing year
at nine members. As provided in the Company's Amended and Restated Certificate
of Incorporation and By-Laws, the Board of Directors is divided into three
classes. Directors of each class are considered for re-election at the Annual
Meeting of Shareholders held in the year in which the term of such class
expires and serve thereafter for three years.
The persons elected as Class I directors will serve until the 1999 Annual
Meeting of Shareholders and until their successors are elected and shall
qualify. The remaining six incumbent directors will continue to serve as set
forth below. Each of the nominees is expected to be able to serve, but if any
nominee is unable to serve, or should any vacancy arise for whatever reason,
the proxies intend to vote the shares to which this proxy relates for the
election of such other person or persons as may be designated by the Board of
Directors or, in the absence of such designation, in such other manner as they
may in their discretion determine. Alternatively, in any such situation, the
Board of Directors may take action to fix the number of directors for the
ensuing year at the number
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of nominees named herein who are then able to serve. Proxies will then be
voted for the election of such nominees, except to the extent the authority to
so vote is withheld.
In order to assure that the classes of directors are as balanced as
possible, both in terms of numbers, as well as employee and non-employee
directors, effective March 4, 1996, Mr. Brennan resigned as a Class I director
and was elected by the Board of Directors as a Class II director with a term
expiring at the 1997 Annual Meeting. Mr. Elliott was elected by the Board to
fill Mr. Brennan's unexpired term as a Class I director. Accordingly, Mr.
Elliott will stand for election at the 1996 Annual Meeting as a Class I
director.
The names of the nominees as Class I directors and incumbent Class II and
Class III directors, their ages, and certain other information regarding the
nominees and incumbent directors are set forth in the following table.
<TABLE>
<CAPTION>
NAME AGE INFORMATION
- ---- --- -----------
NOMINEES AS CLASS I DIRECTORS--TERMS EXPIRING 1999
<S> <C> <C>
Robert D. Elliott....... 45 Mr. Elliott was named President and Chief
Director since March 4, Operating Officer of Aerovox in March 1996.
1996 From 1993 to 1996, Mr. Elliott was Group
Executive of the Electrical Products Division
of Eagle Industries, a diversified
manufacturing company. From 1991 to 1995, he
served as President of Hendrix Wire & Cable, a
manufacturer of cable and accessories for the
electric utility market, and a unit of Eagle's
Electrical Products Division.
William G. Little....... 54 Mr. Little is President and Chief Executive
Director since 1994 Officer of Quam Nichols Co., a manufacturer of
commercial audio products, which he joined in
1970. Mr. Little is a director of the United
States Chamber of Commerce.
John L. Sprague......... 65 Dr. Sprague is President of John L. Sprague
Director since 1989 Associates, a private management and business
consulting firm. From 1981 through 1987 Dr.
Sprague served as President and Chief Executive
Officer of Sprague Electric Co., a manufacturer
of electronic components, which he joined in
1959. Dr. Sprague is a director of Allmerica
Financial Corporation, California Micro Devices
Corporation, and Sipex Corporation.
</TABLE>
2
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<TABLE>
<CAPTION>
NAME AGE INFORMATION
- ---- --- -----------
INCUMBENT CLASS III DIRECTORS--TERMS EXPIRING 1998
<S> <C> <C>
Dennis Horowitz......... 50 Mr. Horowitz is President of the Americas, AMP
Director since 1995 Incorporated, a manufacturer of electronic
components. Mr. Horowitz was President and
Chief Executive Officer of Philips
Technologies, a manufacturer of electrical and
electronic equipment and components, from 1993
to 1994; and of Philips Components, a
manufacturer of electrical and electronic
components and photonic products, from 1990 to
1993; and of Magnavox CATV Systems (now called
Philips Broadband), a manufacturer of cable
television equipment, from 1986 to 1990-all
divisions of Philips Electronics North America
Corporation. Mr. Horowitz is a director of
Superconductor Technologies, Inc.
Ronald F. Murphy........ 66 Mr. Murphy is the Senior Vice President and
Director since 1989 Treasurer (since 1976) and Secretary (since
April, 1989) of Aerovox. Mr. Murphy has been a
director of Aerovox and its predecessors since
1976.
Benedict P. Rosen....... 60 Mr. Rosen is President and Chief Executive
Director since 1995 Officer of AVX Corporation, a manufacturer of
passive electronic components, which he joined in
1972. From 1990 to 1993, Mr. Rosen was President
and Chief Operating Officer of AVX Corporation,
and was Executive Vice President of the company
from 1985 to 1990. He serves as a Senior Managing
and Representative Director of Kyocera
Corporation, AVX's parent company, and as
President of Elco Corporation, a supplier of
electronic connectors.
INCUMBENT CLASS II DIRECTORS--TERMS EXPIRING 1997
John F. Brennan......... 63 Mr. Brennan is Dean, School of Management,
Director since 1989 Suffolk University. He was F. William Harder
Professor of Management at Skidmore College
from 1984 to 1992, Chairman and Chief Executive
Officer of the H. T. Hackney Company from 1981
to 1983, and President and Chief Executive
Officer of Chemical Separations Corporation
from 1972 to 1981. Mr. Brennan serves as a
director of The Timberland Company and Data
Storage Corp.
James B. Hangstefer..... 69 Mr. Hangstefer is President of Cordel
Director since 1989 Associates, Inc., a management consulting firm.
From September 1972 to November 1990, Mr.
Hangstefer was President of Silenus Wines
Incorporated, an importer, wholesaler and
retailer of fine wines. Mr. Hangstefer is a
director of Dynatech Corporation.
Clifford H. Tuttle...... 65 Mr. Tuttle is the Chairman of the Board (since
Director since 1989 1989), and Chief Executive Officer (since 1973)
of Aerovox and served as President of the
Company from 1973 until Robert Elliott assumed
that position in March 1996. Mr. Tuttle has
been a director of Aerovox and its predecessors
since 1973.
</TABLE>
3
<PAGE>
Directors who are not employees of the Company receive annual fees in the
amount of $12,000, plus $1,500 for each Board meeting attended and $500 for
each meeting of a Committee of the Board attended in conjunction with a Board
meeting, and $1,000 for committee meetings held separately from a Board
meeting. Members of the Executive Committee and Committee Chairmen receive an
additional $1,000 per year. All Directors are reimbursed for out-of-pocket
expenses incurred in attending such meetings.
During fiscal 1995, two Directors received additional fees for special
services they provided related to committe assignments. Mr. Brennan received
$3,250 and Mr. Little received $750.
The Board has established an Executive Committee, an Audit Committee, a
Finance Committee, a Compensation Committee and a Nominating Committee. The
Executive Committee, consisting of Messrs. Horowitz, Rosen, Sprague and Tuttle
(Chairman), has the authority to act for the Board of Directors between
meetings of the full Board. The Executive Committee did not hold any meetings
during fiscal 1995.
The Audit Committee, consisting of Messrs. Hangstefer, Sprague and Brennan
(Chairman), held 2 meetings during fiscal 1995. The Audit Committee is
responsible for recommending to the full Board the selection of independent
auditors for the Company, reviewing the scope of the audit, reviewing the non-
audit services provided by such auditors prior to the performance thereof,
review of the audit reports and annual financial statements, review of
financial and accounting controls and procedures and review of all related
party transactions.
The Finance Committee, consisting of Messrs. Horowitz, Little and Hangstefer
(Chairman), held 2 meetings during fiscal 1995. The Finance Committee reviews
the financial and capital plans of the Company and recommends to the Board an
operating budget.
The Compensation Committee, consisting of Messrs. Brennan, Rosen and Little
(Chairman), held 5 meetings during fiscal 1995. The Compensation Committee is
responsible for reviewing officer, certain senior manager and director
compensation arrangements and certain benefit programs.
The Nominating Committee, consisting of Messrs. Brennan, Hangstefer, Tuttle
and Sprague (Chairman), held 1 meeting in 1995. The Nominating Committee
recommends potential Board members and the re-election of the Directors at the
expiration of their respective terms, presents annually a slate of officers
for the Board and makes nominations as vacancies occur, recommends to the
Board appointments to standing committees and evaluates the effectiveness and
performance of all Board committees.
The Board of Directors held 5 meetings during fiscal 1995. Each of the
directors attended at least 75% of all the directors' meetings and the
relevant committee meetings during 1995, except Mr. Rosen who attended two of
three relevant committee meetings.
The Company's By-Laws establish an advance notice procedure with respect to
stockholder nomination of candidates for election as directors. In general,
notice regarding stockholder nominations for director or other stockholder
proposals must be received by the Secretary of the Company not less than 45
days prior to the anniversary of the date of the immediately preceding annual
meeting and must contain certain specified information concerning the persons
to be nominated and the stockholder submitting the nomination or proposal. The
presiding officer of the meeting may refuse to acknowledge any director
nomination not made in compliance with such advance notice requirements.
Stock Option Plan for Directors
The Company has established the 1989 Stock Option Plan for Directors (the
"Plan") pursuant to which each of the current directors who is not an employee
of the Company (each an "Eligible Director") was awarded options to purchase
2,500 shares of Common Stock upon adoption of the Plan or upon his election as
a director, and each newly elected Eligible Director will be awarded options
to purchase 2,500 shares of Common Stock on
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<PAGE>
the date of his first election. Following the initial grant, each person who
is an Eligible Director on the day immediately succeeding the day of each
annual meeting of shareholders of the Company will receive options covering
1,000 shares (subject to the maximum number of shares available under the
Plan) of Common Stock on such date, provided that if less than one year
elapses between an initial grant and an annual grant, the Eligible Director
will receive options covering 250 shares for each quarter of service. The
exercise price of each option is 100% of fair market value (as defined in the
Plan) on the date of award. The exercise price of the options for 1,000 shares
awarded to each Messrs. Brennan, Hangstefer, and Sprague and the 250 shares
awarded to Mr. Little, all in 1995, was $7.50. The exercise price of the
Initial Award to Mr. Horowitz and Mr. Rosen in 1995 was $7.75. Options become
exercisable on the first anniversary of the date of grant. 80,000 shares have
been authorized for delivery upon exercise of options under the Plan. The Plan
is administered by directors of the Company who are not eligible to receive
awards under the Plan (Messrs. Tuttle and Murphy).
PROPOSAL 2
APPROVAL OF THE INCREASE IN THE NUMBER OF SHARES RESERVED
FOR THE COMPANY'S 1989 STOCK INCENTIVE PLAN.
As of March 1, 1996 there were options for 441,000 shares of Common Stock
outstanding under the Company's 1989 Stock Incentive Plan (the "Plan") under
which a total of 700,000 shares are currently reserved, subject to adjustment
for stock splits and similar events. The Board believes that it is important
to continue to have options available for grant in order to attract and retain
key employees who contribute to and are responsible for the continued long-
term growth of the Company. As a result, the Board on March 4, 1996 approved,
and is submitting for stockholder approval, a proposal to increase the number
of shares of Common Stock reserved under the Plan by 250,000 shares for a
total of 950,000 shares subject to the capital adjustments described below and
to limit to 50,000 the number of shares for which options and stock
appreciation rights may be granted to any individual in any calendar year
pursuant to awards granted under the Plan.
The board approved an amendment limiting to 50,000 the number of shares for
which options and stock appreciation rights may be awarded to an individual in
any calendar year during the remaining term of the Plan. Recently enacted
Section 162(m) of the Internal Revenue Code places limitations on the
deductibility of compensation in excess of $1 million paid to the chief
executive officer and the four other most highly compensated executive
officers unless the compensation is performance based. For compensation
attributable to stock options and stock appreciation rights to qualify as
performance based, the plan under which they are granted must state a maximum
number of shares with respect to which options and rights may be granted
during a specified period. The Board believes that the Company will benefit
from this amendment by being able to deduct for income tax purposes any income
realized by one of the designated executive officers in excess of $1 million
upon the exercise of a non-qualified stock option or appreciation right.
GENERAL
The Compensation Committee (excluding any member who would not be considered
an "outside director" for purposes of Section 162(m) and the regulations,
including proposed regulations, thereunder) currently administers the Plan
which permits a variety of stock and stock-based awards, including: stock
options (both incentive stock options and nonstatutory options); the granting
of rights to receive cash or shares in respect of increases in the value of
the Common Stock; the award of restricted and unrestricted shares; the
granting of rights to receive cash or shares on a deferred basis or based on
performance; cash payments sufficient to offset the federal ordinary income
taxes of participants resulting from transactions under the Plan; loans to
participants in connection with awards; and other stock-based awards,
including the sale or award of convertible securities, that meet the
requirements of the Plan, all as more fully described below. The Plan also
provides that option holders may, unless otherwise provided at the time of the
grant, surrender outstanding options in exchange for a cash payment during the
60-day period following a Change of Control of Aerovox (described below).
5
<PAGE>
The Compensation Committee (or another committee of "disinterested persons"
appointed by the Board, the "Committee") has full power to select, from among
the employees eligible for awards, the individuals to whom awards will be
granted, to make any combination of awards to any participants and to
determine the specific terms of each grant, subject to the provisions of the
Plan. Persons eligible to participate in the Plan are those full or part-time
officers and other key employees of Aerovox or its subsidiaries (not including
directors who are not full-time employees) who are responsible for or
contribute to the management, growth or profitability of the business of
Aerovox, as selected from time to time by the Committee. Approximately
45 employees are currently eligible to participate in the Plan. The Plan
limits the terms of awards to 10 years and prohibits the granting of awards
more than 10 years after the effective date of the plan.
STOCK OPTIONS
The exercise price of each option is determined by the Committee, but may
not be less than 100% of the fair market value (110% in the case of a person
holding 10% or more of the outstanding voting power of all classes of stock of
Aerovox or any subsidiary or parent corporation (a "ten percent shareholder"))
of the shares on the date of grant in the case of incentive stock options and
not less than 50% of such value in the case of non-statutory options. As of
March 1, 1996 the highest closing bid quotation for the Common Stock on the
National Association of Securities Dealers, Inc. Automated Quotation System
was $12. The Committee may provide that upon exercise of any option, instead
of receiving shares free from restrictions under the Plan, the participant
will receive shares of Restricted Stock or Deferred Stock awards (see below).
The Committee sets the term of each option but may not exceed 10 years from
the date of grant (five years from grant in the case of an incentive option
granted to a ten percent shareholder). The Committee determines at what time
or times each option may be exercised, and the exercisability of options may
be accelerated by the Committee. In the event of termination of employment by
reason of disability or death, an option may thereafter be exercised (to the
extent it was then exercisable) for a period of three years, or such shorter
period as may be specified by the Committee at the time of grant, subject to
the stated term of the option. In the event of termination of employment for
any reason other than disability or death, an option may thereafter be
exercised, to the extent then exercisable, for three months (or such longer
period of up to three years as the Committee determines at or after the grant
date) following termination, subject to the stated term of the option.
The exercise price of options granted under the Plan must be paid in full by
certified or bank check, bank draft or money order or, if the Committee so
determines, by delivery of shares of Common Stock, valued at their fair market
value on the last business day preceding the exercise date or delivery of a
promissory note, or by a combination of cash, Common Stock and the option
holder's promissory note. The Plan authorizes the Committee to permit the
exercise of an option in successive stages using as the payment at each stage
shares which have been acquired under the option in preceding stages.
STOCK APPRECIATION RIGHTS
The Committee may grant non-transferable stock appreciation rights entitling
the holder upon exercise to receive an amount, in any combination of cash or
shares of unrestricted Common Stock, Restricted Stock or Deferred Stock
awards, not greater in value than the increase since the date of grant in the
value of the shares covered by such right. Stock appreciation rights may be
granted separately from or in tandem with the grant of an option. In addition,
the Committee may determine, if so requested by an option holder, that Aerovox
will pay the optionee, in cancellation of an option not accompanied by a
related stock appreciation right, any combination of cash, unrestricted Common
Stock, Restricted Stock or Deferred Stock awards not greater in value than the
increase since the date of grant of the option in the value of the shares
covered by the option.
RESTRICTED STOCK AND UNRESTRICTED STOCK
The Committee may award shares of Aerovox Common Stock subject to such
conditions and restrictions (including vesting) as the Committee may determine
("Restricted Stock"). The purchase price, if any, of shares
6
<PAGE>
of Restricted Stock shall be determined by the Committee, but if any purchase
price is payable in an amount which exceeds the lesser of the par value of the
shares or 10% of the fair market value of the Common Stock on the award date,
it shall be equal to at least 50% of the fair market value of the Common Stock
on the award date.
The Committee may at any time waive such restrictions, including through
accelerated vesting. Shares of Restricted Stock are non-transferable and if a
participant who holds shares of Restricted Stock terminates employment for any
reason (including death) prior to the lapse or waiver of the restrictions,
Aerovox may require the forfeiture or repurchase of the shares in exchange for
the amount, if any, which the participant paid for them. A holder of
Restricted Stock has all rights of a stockholder with respect to such stock,
subject only to conditions and restrictions generally applicable to Restricted
Stock or specifically set forth in the Restricted Stock award agreement.
The Committee may grant shares (at no cost or for a purchase price not to
exceed par value or 10% of the fair market value of the shares at the time of
sale) which are free from any restrictions under the Plan ("Unrestricted
Stock").
DEFERRED STOCK
The Committee may make Deferred Stock awards under the Plan. These are non-
transferable awards entitling the recipient to receive shares of Common Stock
without any payment in one or more installments at a future date or dates, as
determined by the Committee. Receipt of Deferred Stock may be conditioned on
such matters as the Committee shall determine, including continued employment
or attainment of performance goals. Except as otherwise determined by the
Committee at the time of grant, all such rights terminate upon the
participant's termination of employment (including death).
PERFORMANCE UNITS
The Committee may award non-transferable Performance Units entitling the
recipient to receive shares of Common Stock or cash in such combinations as
the Committee may determine upon the achievement of specified performance
goals over a fixed or determinable period and such other conditions as the
Committee may determine. Except as otherwise determined by the Committee prior
to termination of employment, rights under a Performance Unit award shall
terminate upon a participant's termination of employment (including death).
Performance Units may be awarded independently or in connection with stock
options or other awards under the Plan. Unless otherwise determined by the
Committee, exercise of Performance Units issued in tandem with another award
reduces the number of shares subject to the other award on such basis as is
specified in the award agreement.
OTHER STOCK-BASED AWARDS
The Committee may grant other types of awards of, or based on, Common Stock
("Other Stock-Based Awards"). Such awards may include debt securities
convertible into or exchangeable for shares of Common Stock upon such
conditions, including attainment of performance goals, as the Committee may
determine.
The Committee may determine the amount and form of consideration, if any,
payable upon the issuance or exercise of Other Stock-Based Awards. However,
the Common Stock must be issued (including upon conversion, exchange or
otherwise) either at no cost to the recipient or for a price not to exceed the
lesser of the par value of the shares or 10% of the fair market value of the
shares, or securities convertible into the Common Stock must be sold,
exchanged or converted by the Company, and the Company shall have received
payment for such shares equal to at least 50% of their fair market value on
the grant or effective date, or the exchange or conversion date, as specified
by the Committee. The Committee may prescribe limitations or conditions
requiring forfeiture by the participant, or permitting repurchase by Aerovox,
of Other Stock-Based Awards or related Common Stock
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<PAGE>
or securities, and may at any time accelerate or waive any such limitations or
conditions. The recipient of an Other Stock-Based Award will have the rights
of a Stockholder only to the extent, if any, specified by the Committee in the
Other Stock-Based Award agreement. The Committee may require or permit the
immediate payment or the waiver, deferral or investment of dividends paid on
Other Stock-Based Awards.
SUPPLEMENTAL GRANTS
The Committee may authorize loans from Aerovox in connection with awards
granted or exercised under the Plan. Loans may be for up to 10 years and may
be secured or unsecured. Each loan shall be subject to such additional terms
and conditions and shall bear such rate of interest, if any, as the Committee
shall determine. However, the amount of any loan may not exceed the total
exercise or purchase price plus an amount equal to the cash payment which
could have been paid to the borrower in respect of taxes as described in the
next paragraph.
The Committee may at any time grant to a participant the right to receive a
cash payment in connection with taxable events (including the lapse of
restrictions) under grants or awards. The amount of such payment may not
exceed the amount which would be required in order to pay in full the federal
income tax due as a result of income recognized by the recipient in respect of
such grant or award plus such cash payments based on the maximum marginal
federal tax rate (or such lower rate as the Committee may determine) in effect
at the time such taxable income is recognized.
ADJUSTMENTS
The Committee is required to make appropriate adjustments in connection with
outstanding awards to reflect stock dividends, stock splits and similar
events. In the event of a merger, liquidation or similar event, the Committee
in its discretion may provide for substitution or adjustments or may
accelerate or, upon payment or other consideration for the vested portion of
any awards as the Committee deems equitable in the circumstances, terminate
such awards (subject to the provisions described under "Change of Control"
below).
AMENDMENT AND TERMINATION
The Board of Directors may at any time amend or discontinue the Plan and the
Committee may at any time amend or cancel awards (or provide substitute awards
or reduced exercise or purchase prices, including lower-priced awards upon the
termination of any then outstanding awards) for the purpose of satisfying
changes in the law or for any other lawful purpose. However, no such action
may adversely affect any rights under outstanding awards without the holder's
consent. Moreover, any amendment that would cause the Plan to fail to satisfy
any then applicable incentive stock option rules under the Code or any
stockholder approval requirements of Rule 16B-3 under the Exchange Act, as
such Rule is in effect at the time of such amendment, shall be ineffective
unless approved by the stockholders.
CHANGE OF CONTROL
The Plan provides that, in the event of a Change of Control of Aerovox, all
stock options and stock appreciation rights will automatically become fully
exercisable (unless the Committee shall otherwise expressly provide at the
time of grant). Restrictions and conditions on Restricted Stock, Deferred
Stock Performance Units and Other Stock-Based Awards will automatically be
deemed waived (but only if and to the extent specified by the Committee at or
after the time of grant).
Also in the event of a Change of Control, during the 60-day period following
such Change of Control each option holder may, upon notice to Aerovox,
surrender all or part of outstanding options to Aerovox in exchange for a cash
payment equal to the excess of the aggregate Value (as defined below) on the
date of surrender of the shares subject to the option over the aggregate
exercise price. Subject to certain exceptions, persons subject to Section
16(b) of the Exchange Act must have held such options for at least six months
prior to surrender. For
8
<PAGE>
purposes of the surrender of non-statutory options, "Value" means the highest
closing bid quotation for a share of Aerovox Common Stock on the NASDAQ System
during the 60-day period prior to the Change of Control or, if higher (in the
case of a Change of Control occurring by reason of certain acquisitions), the
highest per share price paid or reported in connection with such acquisition.
A "Change in Control" under the Plan generally includes the following
events: (i) a person or group becomes the beneficial owner of more than 30% of
the voting power of the Company's securities; (ii) "change in control"
required to be reported under certain provisions of the Securities Exchange
Act of 1934; (iii) a merger, consolidation or other reorganization (other than
such a reorganization (a) that would result in the voting power immediately
before to continue to represent more than 50% of the voting power thereafter
or (b) in which no person or group would acquire more than 20% of the voting
power), a sale of all or substantially all assets or a plan of liquidation; or
(iv) continuing directors cease to be a majority of the Board.
FEDERAL TAX EFFECTS
The following discussion summarizes certain federal income tax consequences
of the issuance and receipt of options under the Incentive Plan. The summary
does not purport to cover federal employment tax or other federal tax
consequences that may be associated with the Plan, nor does it cover state,
local or non-U.S. taxes.
Incentive Stock Options. In general, an optionee realizes no taxable income
upon the grant or exercise of an incentive stock option (ISO). However, the
exercise of an ISO may result in an alternative minimum tax liability to the
optionee. With certain exceptions, a disposition of shares purchased under an
ISO within two years from the date of grant or within one year after exercise
produces ordinary income to the optionee (and a deduction to the Company)
equal to the value of the shares at the time of exercise less the exercise
price. Any additional gain recognized in the disposition is treated as a
capital gain for which the Company is not entitled to a deduction. If the
optionee does not dispose of the shares until after the expiration of these
one- and two-year holding periods, any gain or loss recognized upon a
subsequent sale is treated as a long-term capital gain or loss for which the
Company is not entitled to a deduction.
Nonstatutory Options. In general, in the case of a nonstatutory option, the
optionee has no taxable income at the time of grant but realizes income in
connection with exercise of the option in an amount equal to the excess (at
time of exercise) of the fair market value of the shares acquired upon
exercise over the exercise price; a corresponding deduction is available to
the Company; and upon a subsequent sale or exchange of the shares,
appreciation or depreciation after the date of exercise is treated as capital
gain or loss for which the Company is not entitled to a deduction.
In general, an ISO that is exercised more than three months after
termination of employment (other than termination by reason of death) is
treated as a nonstatutory option. ISOs granted after 1986 are also treated as
nonstatutory options to the extent they first become exercisable by an
individual in any calendar year for shares having a fair market value
(determined as of the date of grant) in excess of $100,000.
Under the so-called "golden parachute" provisions of the Internal Revenue
Code, the vesting or accelerated exercisability of awards in connection with a
change in control of the Company may be required to be valued and taken into
account in determining whether participants have received compensatory
payments, contingent on the change in control, in excess of certain limits. If
these limits are exceeded, a substantial portion of amounts payable to the
participant, including income recognized by reason of the grant, vesting, or
exercise of awards under the Plan, may be subject to an additional 20% federal
tax and may be nondeductible to the Company.
Section 162(m). Section(m) of the Internal Revenue Code of 1986 limits to $1
million the deduction a public corporation may claim in any year for
compensation to any of certain key officers. There are a number of exceptions
to this deduction limitation, including an exception for qualifying
performance-base compensation. It is intended that stock options and stock
appreciation rights granted under the Plan will be eligible for this
performance-based exception.
9
<PAGE>
RECOMMENDATION OF THE BOARD OF DIRECTORS FOR THIS PROPOSAL
The Board of Directors has approved an increase in the number of shares of
Common Stock reserved for issuance under the Plan by 250,000 shares for a
total of 950,000 and recommends that the stockholders vote "FOR" Proposal 2.
Proxies solicited by the Board of Directors will be so voted unless
stockholders specify otherwise.
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION TABLES
Set forth below is certain information with respect to compensation paid by
the Company or its subsidiaries for the fiscal year ended December 30, 1995 to
the Chief Executive Officer and the other four most highly compensated
executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------- ------------
AWARDS(1)
------------
OTHER
ANNUAL SECURITIES ALL OTHER
NAME AND COMPEN- UNDERLYING COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS SATION(2) OPTIONS SATION(3)
------------------ ---- -------- -------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Clifford H. Tuttle...... 1995 $302,669 -- -- -- $14,511
Chairman of the Board &
CEO 1994 287,558 $ 52,807 -- -- 18,737
1993 244,352 121,292 -- -- 14,067
Ronald F. Murphy........ 1995 181,762 -- -- -- 10,192
Senior Vice President &
Treasurer 1994 174,385 25,962 -- -- 11,873
1993 156,041 61,197 -- -- 7,586
Richard D. Capra........ 1995 169,846 26,250 $34,350 -- 831
Senior Vice President,
Electrolytics 1994 12,788 -- -- $16,000 --
1993 -- -- -- -- --
Martin Hudis............ 1995 164,023 -- -- -- 6,501
Senior Vice President,
Technology 1993 138,668 36,602 -- 15,000 8,598
1993 127,308 49,928 -- -- 8,557
Peter B. Kirschmann..... 1995 172,602 8,081 -- -- 11,236
Senior Vice President
and General Manager, 1994 168,885 60,930 21,600 -- 12,080
Aerovox Group 1993 144,615 84,600 33,459 40,000 8,573
</TABLE>
- --------
(1) The Company has not issued restricted stock awards or SARs. In addition,
the Company does not maintain a "Long Term Incentive Plan" as that term is
defined in the applicable rules.
(2) Does not exceed the lesser of $50,000 or 10% of salary and bonus, except
for Mr. Capra who received relocation compensation of $34,350.
(3) The amounts shown for each named officer for fiscal 1995 include matching
Company payments for (i) life insurance premiums, and contributions to
(ii) the Aerovox Profit Sharing Savings Plan and (iii) the Aerovox
Deferred Supplemental Savings Plan, respectively, as follows: Mr. Tuttle:
$2,400, $3,754, $8,357; Mr. Murphy: $2,400, $3,752, $3,520; Mr. Capra:
$831 (insurance only); Mr. Hudis: $2,400, $3,749, $352; Mr. Kirschmann:
$2,400; $3,862, $4,926.
OPTION GRANT TABLE
No stock options were granted during the fiscal year ended December 30, 1995
to the Chief Executive Officer and the other officers named in the summary
compensation table.
10
<PAGE>
YEAR-END OPTION VALUE TABLE
The following table shows as to the individuals named in the compensation
table certain information with respect to options held on December 30, 1995.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END 1995 FY-END 1995(1)
------------- --------------
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE VALUE REALIZED ($) UNEXERCISABLE UNEXERCISABLE
---- --------------- ------------------ ------------- --------------
<S> <C> <C> <C> <C>
Clifford H. Tuttle............... 50,000 $206,250 -0-/ -0- $ -0-/-0-
Ronald F. Murphy................. -- 40,000/ -0- 115,000/-0-
Richard D. Capra................. -- 11,290/ 8,000 7,813/-0-
Martin Hudis..................... -- 15,000/20,000 -0-/-0-
Peter B. Kirschmann.............. -- 8,000/32,000 -0-/-0-
</TABLE>
In each case options were granted at fair market value on the date of grant
and are non-statutory options. Each option becomes exercisable 20% per year
(or earlier upon termination of employment at age 65) and expires ten years
from date of grant.
- --------
(1) Based on the share price of $5.875 which was the closing price for a share
of the Company's common stock on December 29, 1995.
Change of Control Severance Benefits
The Company has Severance Agreements with certain key employees, including
Messrs. Tuttle, Murphy, Capra, Hudis, and Kirschmann. Such Severance
Agreements provide that if, within 24 months following a "change in control"
(as defined in the Severance Agreements), the Company were to terminate the
employee's employment other than for cause (as defined) or the employee were
to terminate his employment for reasons specified in the agreements, the
employee would receive severance pay in an amount equal to the sum of his
annual base salary (at the rate in effect immediately before the change of
control) plus his target bonus for such year, without deduction for any
amounts previously paid under the bonus plan (or twice such base salary and
bonus in the case of Mr. Murphy, Mr. Capra and Mr. Kirschmann and three times
such base salary and bonus in the case of Mr. Tuttle). In addition, the
Severance Agreements provide for the immediate vesting of bonus awards, stock
options etc. and immediate payment of deferred compensation amounts upon such
termination. For one year following any such termination of employment, the
employee would be entitled to continue participation in all accident and
health plans provided by the Company. In the case of Mr. Tuttle, Mr. Murphy,
Mr. Capra and Mr. Kirschmann, the Severance Agreements further provide for a
"gross-up" under which, if amounts paid under such Agreements would be subject
to a federal excise tax on "excess parachute payments," the Company will pay
Mr. Tuttle and the above named, as the case may be, an additional amount of
cash so that, after payment of all such taxes by the employee, the employee
will have received the amount he would have received in the absence of any
such tax. For all other executives, the foregoing benefits would be payable
whether or not they gave rise to a federal excise tax on so-called "excess
parachute payments" or were nondeductible, except to the extent a reduction in
amounts paid would maximize the employee's after-tax benefits. The Company
would also be obligated to pay all legal fees and expenses reasonably incurred
by the employee in seeking enforcement of contractual rights following a
change of control.
Agreement With Mr. Tuttle and Mr. Murphy
The company has entered into a Consulting, Non-Competition and
Confidentiality Agreement with each of Mr. Tuttle and Mr. Murphy in order to
assure the Company that the experience and advice of such officers will
11
<PAGE>
be available to the Company at the time they retire from active management of
the Company. Provided that Messrs. Tuttle and Murphy continue to serve as
executive officers of the Company until attainment of age 65, from and after
their retirement, such officers have agreed to provide consulting services to
the Company for a period of ten years commencing on the date of such
retirement. Pursuant to the agreements, the Company has agreed to pay such
officers a fee in the amount of $5,000 per month, in the case of Mr. Tuttle
and $3,000 per month in the case of Mr. Murphy, and to pay $1,600 per day in
the case of Mr. Tuttle, and $960 per day in the case of Mr. Murphy, for each
day of consulting services rendered. The Company has agreed to pay for a
minimum of 25 days consulting services. In the event that such officers'
employment with the Company is terminated at any time for a reason other than
cause (as defined in the agreements) or with or without cause on or after two
years of a change of Control (as defined in the agreements) the Company has
agreed to pay the monthly fees and 25 day minimum per diem fees for the full
term of the agreements.
Indemnification Agreements
The Company has entered into Indemnification Agreements with each director
and certain officers of the Company including the officers named in the
Summary Compensation Table. The Indemnification Agreements provide a number of
procedures, presumptions and remedies used in the determination of the right
of the director or officer to indemnification. These procedures, presumptions
and remedies substantially broaden the indemnity rights of directors and
officers beyond that provided by the Company's Amended and Restated
Certificate of Incorporation. If an action against an indemnified party is
dismissed with or without prejudice, the defense is deemed to have been
successful and the indemnification is required to be made. The Indemnification
Agreements provide that expenses must be paid within twenty days of the
indemnification request (otherwise a determination in favor of the indemnified
party is deemed to have been made). If there is a change in control of the
Company (as defined in the Indemnification Agreement), the indemnified party
is presumed to be entitled to indemnification (although the Company may
overcome this presumption). The indemnified party may require that independent
counsel make the determination of entitlement and may choose such counsel,
subject to objection by the Company on limited grounds. If a determination of
entitlement is made, the Company is bound, but if the indemnified party has
previously been denied indemnification pursuant to the terms of the
Indemnification Agreement he or she is entitled to seek a de novo
determination from a court. The Company is precluded from challenging the
validity of the procedures and presumptions contained in the Indemnification
Agreement in any court proceeding. The Indemnification Agreement covers
proceedings brought on or after the date of the execution of the particular
Indemnification Agreement, including proceedings based on acts prior to the
date of that Agreement.
12
<PAGE>
PERFORMANCE COMPARISON
The graph below compares five-year cumulative total shareholder returns for
the Company with the NASDAQ Market Index and a peer group.
[GRAPH]
<TABLE>
<CAPTION>
- ---------------------------- FISCAL YEAR ENDING --------------------------------
COMPANY 1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
AEROVOX INC 100 182.61 215.22 273.91 265.22 204.35
PEER GROUP 100 132.97 234.30 249.76 314.42 409.50
BROAD MARKET 100 128.38 129.64 155.50 163.26 211.77
</TABLE>
Assumes $100 invested on January 1, 1991. The Peer Group consists of
American Technical Ceramics Corp., Bel Fuse Inc., CTS Corp., Corcom Inc.,
Dallas Semiconductor Corp., Del Global Technology Corp., Robinson Nugent Inc.,
The Cherry Corp. and Vishay Intertechnology Inc.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's Compensation Committee consists of three non-employee members
of the Board of Directors. The Committee is responsible for reviewing officer
compensation arrangements and certain benefit programs.
For the purpose of comparison, the Committee reviewed survey information on
officer salaries outlined by Wyatt Data Services, focusing generally on the
"durable goods manufacturing" sector for the Northeast region (New England).
Information from this source, rather than salary data from the peer group, was
selected for comparison because it is readily available.
There are three elements of the executive compensation program at Aerovox:
base salary, annual incentive bonuses, and stock based awards. The program is
designed to attract competent executives, and to motivate them to achieve both
the short and long term goals of the Company. The Company believes its
compensation program links executive achievement with shareholder interests.
13
<PAGE>
Section 162(m) of the Internal Revenue Code of 1986 limits to $1 million the
deductible portion a public company may claim in any year for compensation to
the chief executive officer and the four other most highly compensated
executive officers unless the compensation is performance based. The Company
is proposing an amendment to its 1989 Stock Incentive Plan in order to assure
that options and stock appreciation rights granted under the plan will
continue to be eligible for this performance based exception. See Proposal 2--
Approval of Amendments to the Company's 1989 Stock Incentive Plan--General.
Executive officer compensation in 1995 was not impacted by new section 162(m)
of the Internal Revenue Code because compensation levels were below the
threshold established by that statute, and the Committee does not expect
162(m) to impact executive compensation in the foreseeable future. While the
Company expects that action will be taken to qualify most compensation
approaches to ensure deductibility, tax considerations do not automatically
cause the Committee to modify its executive compensation program.
Base Salary
Base salaries of executives who have been with the Company for some time are
generally in line with the median compensation for comparable positions as
outlined in the survey by Wyatt Data Services. Occasionally the Committee has
found, however, that higher salaries are required to attract new executives
with the requisite technical expertise.
Decisions on annual increases are based on three factors. First, the
Committee makes a subjective appraisal of how well the Company has done within
its own industry, considering competitive and economic situations. Secondly, a
formal annual review is conducted to evaluate each officer's performance.
Finally, if there has been a significant increase in responsibility, this is
recognized in salary increase decisions.
Executive Incentive Bonus Plan
Under the Company's Executive Incentive Bonus Plan, officers and other
members of management may receive cash incentive awards based on a pre-
established percentage of the participant's base compensation (with rates
ranging from 20% to 60% depending on the individual's level of responsibility)
and a targeted Return on Net Assets ("RONA") which is set annually by the
Compensation Committee. RONA is calculated by dividing net after tax income by
the Company's average net assets (as defined). Payment to any participant is
triggered by achievement of at least 75% of this RONA target, and failure to
achieve this level of RONA results in no bonus whatsoever. Actual awards may
be up to 1.5 times the pre-established rate if RONA exceeds the targeted
level.
Profit alone, however, does not determine the total bonus payout. Fifty
percent of the amount earned is discretionary and heavily based on the
achievement of specific pre-established individual goals, most of which will
have a marked effect on the Company's performance two to three years after the
goal is completed. Thus, the score an individual achieves in the Company's
formal Goals and Objectives Program, a program under which goals are
formulated and achievement evaluated, is an important determinant in the bonus
actually paid. The Company believes this Program assures a balance between
short term financial performance and long term objectives in an incentive
program. The Compensation Committee may also award a supplemental bonus for
exceptional achievement.
In 1995, only one of the Company's four operating groups triggered annual
bonus payments. BHC Aerovox exceeded the RONA established for the group and
consequently individuals in the group were eligible for bonus awards, in
accordance with the individual's level of participation and the score achieved
in the Goals and Objectives Program. Aerovox Group performance triggered a
bonus in the first quarter only. The only bonuses paid to Aero M employees
were the minimum guaranteed portion to two new employees.
Stock Incentive Plan
The third element of the Company's executive compensation program is the
Stock Incentive Plan. Under this Plan, employees who contribute to the
management, growth and profitability of the Company are eligible to
14
<PAGE>
receive stock options which vest over a five year period. The Compensation
Committee considers that ownership of securities encourages management to have
a propriety interest in the long-term success of the Company, which ultimately
enhances shareholder value. In order to encourage significant ownership of the
Company's stock in connection with its Stock Incentive Plan, the Board of
Directors has determined that with respect to options granted after March 2,
l993, options will not become exercisable unless an employee owns, at the time
of exercise, a number of shares equal to at least 40% of the aggregate number
of shares acquired by previously exercised options granted after March 2,
l993.
Guidelines for option awards were established at the inception of the
program in 1989. The awards are commensurate with the participant's ability to
effect the profitability of the Company. Awards established for each level of
responsibility are as follows: options for 100,000 shares for the CEO; 50,000
for the COO; 40,000 for the CFO and subsidiary presidents; 10,000 to 35,000
for other officers; and 2,500 to 10,000 for key engineering, marketing,
administrative and manufacturing personnel. The exercise price of each option
is determined by the Compensation Committee, but may not be less than 100% of
the fair market value of the shares on the date of grant.
Chief Executive Officer Compensation
In 1995, Clifford H. Tuttle Jr., Chairman of the Board and Chief Executive
Officer ("CEO") was paid a base salary of $302,669, reflecting a 5.3%
(annualized) increase over his 1994 base salary. The committee awarded Mr.
Tuttle this increase to keep his salary in line with the median CEO salary
levels reported by companies of comparable size based on Wyatt Data Service
information. Because the RONA established for the Company was not achieved,
Mr. Tuttle did not earn an incentive bonus award in 1995.
The foregoing chart and textual and tabular descriptions provide details of
the payments and programs referenced in this report. The industry peer group
selected for the five year cumulative return comparison is a broad group which
covers electronic and electrical equipment component companies with markets
similar to Aerovox's.
William G. Little, Chairman
John F. Brennan
Benedict P. Rosen
15
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 15, 1996, certain information
regarding the Common Stock ownership of the Company's current directors and
nominees, the named executive officers and of all directors and executive
officers of the Company as a group. Except as indicated below, all of the
shares listed are held by the persons named with both sole voting and
investment power.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME OF BENEFICIAL PERCENT
BENEFICIAL OWNER OWNERSHIP(1) OF CLASS
---------------- ------------ --------
<S> <C> <C>
Clifford H. Tuttle................................................ 131,362 2.5%
Ronald F. Murphy.................................................. 48,361 *
John F. Brennan................................................... 10,999 *
Richard D. Capra.................................................. 17,590 *
Robert D. Elliott................................................. 3,900 *
James B. Hangstefer............................................... 49,999 *
Dennis Horowitz................................................... --
Martin Hudis...................................................... 15,000 *
Peter B. Kirschmann............................................... 22,320 *
William G. Little................................................. 12,833 *
Benedict P. Rosen................................................. 2,000 *
John L. Sprague................................................... 7,124 *
All directors and executive officers as a group (18 persons)...... 502,298(2) 9.5%
</TABLE>
- --------
*Less than 1%.
(1) Includes the following number of shares issuable pursuant to options
currently exercisable or exercisable within sixty days: Messrs. Murphy:
40,000; Brennan: 4,999; Capra: 11,290; Hangstefer: 4,999; Hudis: 15,000;
Kirschmann: 22,000; Little: 833; and Sprague: 4,624.
(2) Includes 243,745 shares issuable pursuant to options currently exercisable
or exercisable within sixty days.
The only persons or entities known to the Company to be the beneficial owner
of more than five percent of the Company's Common Stock are as follows:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP(1) CLASS
------------------- ------------ -------
<S> <C> <C>
Dimensional Fund Advisors Inc. ..................................... 276,700(a) 5.2%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Kennedy Capital Management, Inc. ................................... 293,600(b) 5.6%
425 N. New Ballas Rd., Suite 181
St. Louis, MO 63141
Charles E. Sheedy................................................... 293,800(c) 5.6%
Two Houston Center, Suite 2907
Houston, TX 77010
Texas Art Supply Co. ............................................... 508,934(d) 9.6%
910 Travis Street, Suite 2030
Houston, TX 77002
William D. Witter, Inc. ............................................ 569,729(e) 10.7%
One Citicorp Center
153 East 53rd Street
New York, NY 10022
</TABLE>
16
<PAGE>
- --------
(a) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 276,700 shares (with
sole voting power for 192,800; shared voting power for 83,900; and sole
dispositive power for all) of Aerovox Inc. stock as of December 31, 1995,
all of which shares 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.
(b) Shared voting power: 293,600 shares.
(c) Sole voting and dispositive power: 293,800.
(d) Texas Art Supply Co., Louis K. Adler, Gail F. Adler, Marc F. Adler, and
the Adler Foundation beneficially own, with sole voting and dispositive
power, 475,300 shares, 18,500 shares, 5,000 shares, 10,000 and 134 shares,
respectively. Texas Art Supply Co. is a wholly owned subsidiary of
Westlane Corporation. Louis K. Adler is President of both Texas Art Supply
Co. and Westlane Corporation. Gail F. Adler, the wife of Louis K. Adler,
is Vice President of both Texas Art Supply Co. and Westlane Corporation.
Louis K. Adler and Gail F. Adler are the only directors of both Texas Art
Supply Co. and Westlane Corporation. Louis K. Adler, Gail F. Adler and
Marc F. Adler are three of the four Trustees of the Adler Foundation. Marc
F. Adler is the son of Louis and Gail Adler. Westlane Corporation may be
deemed to be the indirect beneficial owner of shares of Aerovox Common
Stock owned by Texas Art Supply Co. and, as such, could be regarded as
sharing with Texas Art Supply Co. investment and dispositive power with
respect to such shares. Westlane Corporation disclaims beneficial
ownership of any of the shares of Aerovox Common Stock held by Texas Art
Supply Co.
(e) Sole voting power and dispositive power: 569,729 shares.
OTHER INFORMATION
OUTSTANDING SHARES
Only shareholders of record at the close of business on March 12, 1996, are
entitled to notice of and to vote at the meeting. There were 5,306,195 shares
of Aerovox Common Stock ("Common Stock"), $1.00 par value, outstanding on that
date, each of which is entitled to one vote.
QUORUM, REQUIRED VOTES AND METHOD OF TABULATION
Consistent with state law and under the Company's Bylaws, a majority of the
shares entitled to be cast on a particular matter, present in person or
represented by proxy, constitutes a quorum as to such matter. Votes cast by
proxy or in person at the Annual Meeting will be counted by persons appointed
by the Company to act as election inspectors for the meeting.
The three nominees for election as Class I directors at the Annual Meeting
who receive the greatest number of votes present and entitled to vote for the
election of such directors shall be elected. A majority of the votes present
and entitled to vote on the matter is necessary to approve Proposal 2.
The election inspectors will count the total number of votes cast "for"
approval of the increase in reserved shares for purposes of determining
whether sufficient affirmative votes have been cast. The election inspectors
will count shares represented by proxies that withhold authority to vote for a
nominee for election as a director or that reflect abstentions and "broker
non-votes" (i.e., shares represented at the meeting held by brokers or
nominees as to which (i) instructions have not been received from the
beneficial owners or persons entitled to vote and (ii) the broker or nominee
does not have the discretionary voting power on a particular matter) only as
shares that are present and entitled to vote on the matter for purposes of
determining the presence of a quorum, but neither abstentions nor broker non-
votes have any effect on the outcome of voting on the matter.
17
<PAGE>
AUDIT MATTERS
A representative of Coopers & Lybrand L.L.P. is expected to be present at
the Annual Meeting and will be afforded the opportunity to make a statement if
he desires to do so and to respond to appropriate questions from shareholders.
SHAREHOLDER PROPOSALS
In order for any proposal that a shareholder intends to present at the next
Annual Meeting of Shareholders to be eligible for inclusion in the Company's
proxy material for that meeting, it must be received by the Company no later
than December 4, 1996.
OTHER BUSINESS
The Board of Directors knows of no business that will come before the
meeting for action except as described in the accompanying Notice of Meeting.
However, as to any such business, the persons designated as proxies will have
discretionary authority to act in their best judgment.
The Board of Directors encourages you to have your shares voted by signing
and returning the enclosed form of proxy. The fact that you will have returned
your proxy in advance will in no way affect your right to vote in person
should you find it possible to attend. However, by signing and returning the
proxy you have assured your representation at the meeting. Thank you for your
cooperation.
18
