<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Aerovox Incorporated
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Aerovox Incorporated
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] No fee required
[_] 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:
________________________________________________________________________
<PAGE>
AEROVOX INCORPORATED
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 13, 1997
----------------
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 13, 1997 for the following purposes:
1. To elect three Class II directors to serve until the Annual Meeting in
the year 2000.
2. 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 18, 1997 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
LOGO
RONALD F. MURPHY, Secretary
Boston, Massachusetts
March 25, 1997
<PAGE>
AEROVOX INCORPORATED
740 BELLEVILLE AVENUE
NEW BEDFORD, MA 02745
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 13, 1997 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 4, 1997 to all shareholders entitled to
vote at the meeting. The Annual Report to Shareholders for the Company's
fiscal year ended December 28, 1996 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.
ELECTION OF DIRECTORS
The persons named in the enclosed proxy intend to vote in favor of the
election of the three nominees named below, two of whom are now directors of
the Company, as Class II 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 II directors will serve until the Annual
Meeting of Shareholders in the year 2000 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 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.
1
<PAGE>
James B. Hangstefer, who has served on the Company's Board of Directors
since 1989, will be retiring from the Board at the time of the Annual Meeting.
Sherel D. Horsley has been nominated as a Class II director, replacing Mr.
Hangstefer. The Company thanks Mr. Hangstefer for his years of service.
In view of the expected retirement of Mr. Tuttle from the Board of Directors
at the 1998 Annual Meeting, and to keep the classes of directors as even as
possible, effective March 4, 1997, Mr. Rosen resigned as a Class III Director
and Mr. Tuttle resigned as a Class II Director. Mr. Rosen was elected by the
Board as a Class II Director (to stand for re-election at the 1997 Annual
Meeting) to fill the vacancy created by Mr. Tuttle's resignation and Mr.
Tuttle was elected by the Board as a Class III Director (for a term expiring
at the 1998 Annual Meeting) to fill the vacancy created by Mr. Rosen's
resignation.
The names of the nominees as Class II directors and incumbent Class I 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
- ---- --- -----------
<S> <C> <C>
NOMINEES AS CLASS II DIRECTORS--TERMS EXPIRING 2000
John F. Brennan............ 64 Mr. Brennan is Dean, School of Management,
Director since 1989 Suffolk University (since 1992). 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.
Sherel D. Horsley.......... 54 Mr. Horsley is Senior Vice President and General
Manager of Digital Printing Systems Business
Unit for Texas Instruments Incorporated, an
electronics company whose products include
semiconductor components, defense electronics
systems, computers, printers, and calculators.
Mr. Horsley joined Texas Instruments in 1965
and prior to his most recent position, which he
assumed in August 1996, was manager of Business
Development for the Systems and Software
Businesses and manager of Corporate Marketing.
Prior to holding that position he was Senior
Vice President and manager of Business
Development for the Defense Systems and
Electronics Group of Texas Instruments.
Benedict P. Rosen ......... 61 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 Director of Kyocera
Corporation, AVX's parent company, and as
President of Kyocera subsidiary Elco
Corporation, a supplier of electronic
connectors.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
NAME AGE INFORMATION
- ---- --- -----------
<S> <C> <C>
INCUMBENT CLASS I DIRECTORS--TERMS EXPIRING 1999
Robert D. Elliott........... 46 Mr. Elliott was named President of Aerovox in
Diretor since 1996 March 1996, and was appointed Chief Executive
Officer in September 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 1993, 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 .......... 55 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 Vice Chairman of the United
States Chamber of Commerce.
John L. Sprague ............ 66 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.
INCUMBENT CLASS III DIRECTORS--TERMS EXPIRING 1998
Dennis Horowitz ............ 51 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 ........... 67 Mr. Murphy is Secretary of the corporation
Director since 1989 (since 1989). He joined Aerovox in 1976 as
Senior Vice President, and Treasurer (until
August 1996), and served in this office until
retiring at the end of 1996. Mr. Murphy has
been a director of Aerovox and its predecessors
since 1976.
Clifford H. Tuttle ......... 66 Mr. Tuttle, Chairman of the Board of Aerovox
Director since 1989 since 1989, retired at the end of 1996, having
served the Company as President and Chief
Executive Officer since 1973. 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 1996, one Director, Mr. Little, received an additional fee of
$2,500 for special services he provided related to a committee assignment.
The Board has established an Executive Committee, an Audit Committee, a
Finance Committee (to be discontinued after the Annual Meeting), 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 1996.
After the Annual Meeting, the Executive Committee will consist of Messrs.
Brennan, Horowitz, Rosen, Tuttle and Elliott (Chairman).
The Audit Committee, consisting of Messrs. Hangstefer, Sprague and Brennan
(Chairman), held 4 meetings during fiscal 1996. After the Annual Meeting, the
Committee will consist of Messrs. Horsley, Sprague and Brennan (Chairman). 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 1996. 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 3 meetings during fiscal 1996. After the Annual Meeting, the
Committee will consist of Messrs. Horowitz, Rosen and Little (Chairman). 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, Little,
Tuttle and Sprague (Chairman), held 1 meeting in 1996. After the Annual
Meeting, the Committee will consist of Messrs. Elliott, Little, Murphy and
Sprague (Chairman). 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 6 meetings during fiscal 1996. Each of the
directors attended at least 75% of all the directors' meetings and the
relevant committee meetings during 1996, 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.
4
<PAGE>
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 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,
Horowitz, Little, Rosen, and Sprague, all in 1996, was $6.50. 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 a director of the Company who is not eligible to receive
awards under the Plan (Mr. Elliott).
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 28, 1996 to
the Chief Executive Officer and the other four most highly compensated
executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS(1)
------------------------------- ------------
OTHER
ANNUAL SECURITIES ALL OTHER
COMPEN- UNDERLYING COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS SATION(2) OPTIONS SATION(3)
- --------------------------- ---- -------- ------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Clifford H. Tuttle...... 1996 $306,599 -- -- -- $14,718
Chairman of the Board & 1995 302,669 -- -- -- 14,511
CEO (until 9/96) 1994 287,558 $52,807 -- -- 18,737
Robert D. Elliott....... 1996 198,462 54,000 -- 100,000 9,840
President & CEO (begin- 1995 -- -- -- -- --
ning 9/96) 1994 -- -- -- -- --
Ronald F. Murphy........ 1996 183,664 -- -- -- 9,769
Senior Vice President, 1995 181,762 -- -- --
and Treasurer 10,192
(until 8/96) 1994 174,385 25,962 -- -- 11,873
John A. Chmura Jr. ..... 1996 158,234 -- -- 5,000 9,210
Senior Vice President, 1995 143,598 -- -- 10,000
Sales 7,568
1994 138,434 18,026 -- -- 9,879
Philip J. Fox........... 1996 166,047 25,000 -- -- 9,508
Senior Vice President, 1995 150,824 -- -- --
Operations 8,344
Support (until 2/97) 1994 145,264 33,913 -- -- 10,864
Martin Hudis............ 1996 147,420 -- -- 5,000 6,086
Senior Vice President, 1995 164,023 -- -- --
Business and 6,501
Technology Development 1994 138,668 36,602 -- 15,000 8,598
</TABLE>
5
<PAGE>
- --------
(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.
(3) The amounts shown for each named officer for fiscal 1996 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, $3,749, $8,569; Mr. Elliott: $462 (insurance) and $9,378 (Deferred
Supplemental Plan); Mr. Murphy: $2,400, $3,602, $3,767; Mr. Chmura:
$2,400, $3,369, $2,441; Mr. Fox: $2,400, $3,749, $3,359; Mr. Hudis:
$2,400, $2,400, $3,531, $155.
OPTION GRANT TABLE
Stock options granted during the fiscal year ended December 28, l996 to
named officers set forth below.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
-------------------------------------------------- ----------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES PRICE EXPIRATION
NAME GRANTED (#) (1) IN FISCAL YEAR ($/SH) DATE 5%($)(2) 10%($)(2)
---- --------------- -------------- -------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Clifford H. Tuttle...... -- -- -- -- -- --
Robert D. Elliott....... 50,000 25.51% $6.25 3/04/2006 $ 176,167 $ 465,622
50,000 25.51% 6.00 8/31/2006 188,667 478,122
Ronald F. Murphy........ -- -- -- -- -- --
John A. Chmura Jr....... 5,000 2.55% 6.375 5/07/2006 19,536 49,989
Philip A. Fox........... -- -- -- -- -- --
Martin Hudis............ 5,000 2.55% 6.375 5/07/2006 19,536 49,989
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
- --------
(1) Options were granted to Mr. Elliott on March 4, l996 and September 1,
l996, and to Mr. Chmura and Mr. Hudis on May 7, 1996. Each grant becomes
exercisable 20% per year and expires ten years from the date of grant.
(2) Amounts are hypothetical. Actual increases in value upon the exercise of
stock options will depend upon performance of the Company's stock and
overall stock market conditions.
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 28, l996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF SECURITIES
UNDERLYING UNEXERCISED UNDERLYING IN-THE MONEY
OPTIONS AT FISCAL YEAR END 1996 OPTIONS AT FISCAL YEAR END 1996(1)
----------------------------------- ----------------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------- ---------------- ------------------- ------------------
<S> <C> <C> <C> <C>
Clifford H. Tuttle...... -0- -0- $ -0- -0-
Robert D. Elliott....... -0- 100,000 -0- -0-
Ronald F. Murphy........ 40,000 -0- 72,500 -0-
John A. Chmura Jr....... 27,000 13,000 42,187 -0-
Philip J. Fox........... 40,000 -0- 72,500 -0-
Martin Hudis............ 22,000 18,000 -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 $4.8125 which was the closing price for a
share of the Company's common stock on December 28, 1996.
6
<PAGE>
Change of Control Severance Benefits
The Company has Severance Agreements with certain key employees, including
Mr. Elliott and Mr. Hudis. 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 in the case of Mr. Hudis, (or twice such base salary and bonus, or three
times such base salary and bonus in the case of Mr. Elliott). 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. Elliott and one other
executive, 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 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 one other executive, 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 a Consulting, Non-Competition and Confidentiality Agreement
with each of Mr. Tuttle and Mr. Murphy which became effective upon their
retirement from active management of the Company at year-end 1996. Under the
Agreement, Messrs. Tuttle and Murphy will provide consulting services to the
Company for ten years commencing on the date of their retirement (December 28,
l996). 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 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
7
<PAGE>
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.
PERFORMANCE COMPARISON
The graph below compares cumulative total shareholder return on the Company's
Common Stock, for the five-year period shown, with the NASDAQ Market Index and
a peer group.
<TABLE>
<CAPTION>
- ----------------------------- FISCAL YEAR ENDING -------------------------------
COMPANY 1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
AEROVOX INC 100 117.86 150.00 145.24 111.90 90.48
PEER GROUP 100 175.92 187.73 236.03 307.58 289.78
BROAD MARKET 100 100.98 121.13 127.17 164.96 204.98
</TABLE>
Assumes $100 invested on January 1, 1992. 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.
8
<PAGE>
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.
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.
While the Company does not formally weigh these factors, decisions on annual
increases are based on three criteria. First, the Committee makes a subjective
appraisal of how well the Company has done within its own industry,
considering competitive and economic situations. Secondly, the outcome of the
formal annual review conducted by the Company to evaluate each officer's
performance is considered by the Committee. Finally, if there has been a
significant change in responsibility, this is recognized in salary decisions.
Executive Incentive Bonus Plan
Under the Company's Executive Incentive Bonus Plan, which was in effect
until year end 1996, officers and other members of management were eligible to
receive cash incentive awards based on a pre-established percentage of the
participant's base compensation and a targeted Return on Net Assets which was
set annually by the Compensation Committee. No bonuses were paid under this
Plan in 1996.
A new plan, the Incentive Compensation Plan, was adopted in 1997 to motivate
participating employees to do the best possible job improving the Company's
financial performance. Under this new Plan, the measurements and the weighted
values established for 1997 are Net Income After Taxes (weighted at 75% ) and
the Working Capital to Sales Ratio (weighted at 25%). Each participant has a
Target Participation level which is a percentage of their base salary. While
performance will be measured monthly and cumulatively throughout the year,
payments to participating officers and management, if warranted, will be
determined and paid only after the Company's annual audited financial
statements have been approved by the auditors and the Audit Committee.
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 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 different
levels of responsibility range from options for 100,000 shares for the CEO to
2,500 for 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.
9
<PAGE>
Chief Executive Officer Compensation
In 1996, Clifford H. Tuttle Jr., Chairman of the Board and, until September
1, 1996, Chief Executive Officer ("CEO"), was paid a base salary of $306,599,
equal, on an annualized basis, to his 1995 base salary. Because the RONA
established for the Company was not achieved, Mr. Tuttle did not earn an
incentive bonus award in 1996.
Robert D. Elliott, who joined the Company as President on March 4, l996, and
succeeded Mr. Tuttle as CEO on September 1, l996, was paid a base salary of
$198,462 in 1996, and a bonus of $54,000 guaranteed as an element of his offer
of employment with Aerovox. Going forward, Mr. Elliott will participate in the
Incentive Compensation Plan at a Target Participation level of 60%.
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
10
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 18, 1997, 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 BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER OWNERSHIP(1) OF CLASS
------------------------ -------------------- --------
<S> <C> <C>
Clifford H. Tuttle.............................. 131,362 2.5%
Robert D. Elliott............................... 20,000 *
Ronald F. Murphy................................ 48,859 *
John F. Brennan................................. 15,000 *
John A. Chmura Jr............................... 43,297 *
Philip J. Fox................................... 60,607 1.1%
James B. Hangstefer............................. 53,000 1%
Dennis Horowitz................................. 4,300 *
Martin Hudis.................................... 30,000 *
William G. Little............................... 20,750 *
Benedict P. Rosen............................... 8,500 *
John L. Sprague................................. 10,625 *
All directors and executive officers as a group
(17 persons)................................... 519,580(2) 9.8%
</TABLE>
- --------
* Less than 1%.
(1) Includes the following number of shares issuable pursuant to options
currently exercisable or exercisable within sixty days: Messrs. Elliott:
10,000; Murphy: 40,000; Brennan: 8,000; Chmura: 30,000; Fox: 40,000;
Hangstefer: 8,000; Horowitz: 3,500; Hudis: 30,000; Little: 3,750; Rosen:
3,500; and Sprague: 7,625.
(2) Includes 251,875 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 BENEFICIAL
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1) PERCENT CLASS
------------------------------------ -------------------- -------------
<S> <C> <C>
Dimensional Fund Advisors Inc................ 276,100(a) 5.2%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Kennedy Capital Management, Inc.............. 291,500(b) 5.5%
10829 Olive Blvd.
St. Louis, MO 63141
Charles E. Sheedy............................ 345,800(c) 6.5%
Two Houston Center, Suite 2907
Houston, TX 77010
William D. Witter, Inc....................... 467,428(e) 8.8%
One Citicorp Center
153 East 53rd Street
New York, NY 10022
Texas Art Supply Co.......................... 508,934(d) 9.6%
910 Travis Street, Suite 2030
Houston, TX 77002
</TABLE>
- --------
(a) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 276,100 shares of
Aerovox Inc. stock as of December 31, 1996, all of which shares
11
<PAGE>
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) Sole voting power: 211,500 shares; sole dispositive power: 291,500
(c) Currently, Charles E. Sheedy is the beneficial owner (with sole voting and
dispositive power) of 345,800 shares of Common Stock of Aerovox
Incorporated, including 43,000 shares owned by him as custodian for his
children under the Texas Uniform Gifts to Minors Act.
(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: 467,428 shares.
OTHER INFORMATION
OUTSTANDING SHARES
Only shareholders of record at the close of business on March 18, 1997, are
entitled to notice of and to vote at the meeting. There were 5,319,800 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 II 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.
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.
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.
12
<PAGE>
SHAREHOLDER PROPOSALS
In order for any proposal that a shareholder intends to present at the 1998
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 6, l997.
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.
13
<PAGE>
AEROVOX INCORPORATED
MAY 13, 1997
ANNUAL MEETING OF AEROVOX INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Robert D. Elliott and Jeffrey A.
Templer or either of them with power of substitution to each, proxies to vote
and act at the Annual Meeting of Shareholders on Tuesday, May 13, 1997 at the
offices of Ropes and Gray, One International Place, 36th Floor, Boston,
Massachusetts 02110, and at any adjournments thereof, upon and with respect to
the number of shares of Common Stock of the Company as to which the undersigned
may be entitled to vote or act. The undersigned instructs such proxies, or
their substitutes, to vote in such manner as they may determine on any matters
which may come before the meeting, and to vote on the following as specified by
the undersigned, all as indicated in the accompanying Notice of Meeting and
Proxy Statement, receipt of which is acknowledged, and proxies heretofore given
by the undersigned in respect of said meeting are hereby revoked.
UNLESS OTHERWISE SPECIFIED IN THE SPACES PROVIDED ON THE REVERSE SIDE, THE PROXY
WILL BE VOTED IN FAVOR OF ALL NOMINEES AS CLASS II DIRECTORS, AND IN THE
DISCRETION OF THE NAMED PROXIES TO ANY OTHER MATTER NOT KNOWN A REASONABLE
TIME BEFORE THIS SOLICITATION THAT MAY COME BEFORE THIS MEETING OR ANY
ADJOURNMENT THEREOF.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY USING THE ENCLOSED ENVELOPE
------------------------------------------------------------------------
(SEE REVERSE SIDE)
A [X] Please mark your
votes as in this
example.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FOR WITHHELD
1. Election of [_] [_] NOMINEES: John F. Brennan PLEASE MARK, SIGN DATE AND RETURN THE PROXY CARD USING THE
Class II Sherel D. Horsley ENCLOSED ENVELOPE.
Directors: Benedict P. Rosen
For, except vote withheld from the
following nominee(s):
- ----------------------------------
Signature Date Signature Date
----------------------------------- ------------ ----------------------------------- ------------
IF HELD JOINTLY
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator
trustee or guardian, please give full title as such.
</TABLE>
