<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 11, 1998
----------------
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 11:00 a.m. on
Monday, May 11, 1998 for the following purposes:
1. To elect two Class III directors to serve until the Annual Meeting in
the year 2001.
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 23, 1998 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/ Jeffrey A. Templer
Jeffrey A. Templer
Assistant Secretary
New Bedford, Massachusetts
March 23, 1998
<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 11, 1998 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 6, 1998 to all shareholders entitled to
vote at the meeting. The Annual Report to Shareholders for the Company's
fiscal year ended December 27, 1997 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.
ELECTION OF DIRECTORS
The persons named in the enclosed proxy intend to vote in favor of the
election of the two nominees named below, both of whom are now directors of
the Company, as Class III directors unless authority to vote for the election
of the nominees is withheld by marking the box entitled "WITHHELD" 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 seven 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 III directors will serve until the Annual
Meeting of Shareholders in the year 2001 and until their successors are
elected and shall qualify. The remaining five 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>
At the time of the Annual Meeting, Clifford H. Tuttle (who retired as
President and Chief Executive Officer of the Company in 1996) will retire from
the Board of Directors, of which he has been Chairman since 1989. Ronald F.
Murphy, a member of the Board of Directors since 1989 (who retired as Senior
Vice President and Treasurer of the Company in 1996) will also retire from the
Board at the time of the Annual Meeting. The Company thanks Mr. Tuttle and Mr.
Murphy for their years of service to the Company.
The retirement of Mr. Tuttle and Mr. Murphy will create a vacancy in the
Class III nominee ranks. In order to keep the classes of directors as even as
possible, Mr. Brennan resigned as a Class II Director, to be effective at the
time of the Annual Meeting, and will stand for nomination at the 1998 Annual
Meeting as a Class III Director. The names of the Class III nominees and
incumbent Class I and Class II 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 III DIRECTORS--TERMS EXPIRING 2001
<S> <C> <C>
John F. Brennan............ 65 Mr. Brennan is Dean, Sawyer School of
Director since 1989 Management, 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.
Dennis Horowitz............ 52 Mr. Horowitz became President and Chief
Director since 1995 Executive Officer of Wolverine Tube, Inc., a
manufacturer of high technology copper and
copper alloy tube and fabricated products, in
March of 1998. From 1994 to 1997 he was
President of the Americas, AMP Incorporated, a
manufacturer of electronic components. Mr.
Horowitz served as 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--all
divisions of Philips Electronics North America
Corporation. Mr. Horowitz currently serves as a
director of Superconductor Technologies, Inc.,
and is also a director of Wolverine Tube, Inc.
INCUMBENT CLASS II DIRECTORS--TERMS EXPIRING 2000
Sherel D. Horsley.......... 55 Mr. Horsley is Senior Vice President and Manager
Director since 1997 of Marketing for the Digital Imaging Group of
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 April 1997, was Senior Vice
President and General Manager of the company's
Digital Printing Systems Business Unit. Before
that assignment, he served the company as
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
NAME AGE INFORMATION
- ---- --- -----------
<S> <C> <C>
Senior Vice President and Manager of Business
Development for the Systems and Software
Businesses and Manager of Corporate Marketing;
and as Senior Vice President and Manager of
Business Development for the Defense Systems
and Electronics Group.
Benedict P. Rosen........... 62 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.
INCUMBENT CLASS I DIRECTORS--TERMS EXPIRING 1999
Robert D. Elliott........... 47 Mr. Elliott was named President of Aerovox in
Director 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........... 56 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 Chairman of the United
States Chamber of Commerce.
John L. Sprague............. 67 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>
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.
The Board has established an Executive Committee, an Audit Committee, a
Compensation Committee and a Nominating Committee. The Executive Committee,
consisting of Messrs. Brennan, Horowitz, Rosen, Tuttle and Elliott (Chairman),
has the authority to act for the Board of Directors between meetings of the
full Board.
3
<PAGE>
The Executive Committee did not hold any meetings during fiscal 1997. After
the Annual Meeting, the Executive Committee will consist of Messrs. Brennan,
Horowitz, Rosen and Elliott (Chairman).
The Audit Committee, consisting of Messrs. Horsley, Sprague and Brennan
(Chairman), held 4 meetings during fiscal 1997. 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 Compensation Committee, consisting of Messrs. Horowitz, Rosen and Little
(Chairman), held 2 meetings during fiscal 1997. 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. Elliott, Little, Murphy and
Sprague (Chairman), held 1 meeting in 1997. After the Annual Meeting, the
Committee will consist of Messrs. Elliott, Little 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 10 meetings during fiscal 1997. Each of the
directors attended all the directors' meetings and the relevant committee
meetings during 1997
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 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 2,500 shares awarded to Mr. Horsley and the options for
1,000 shares awarded to each Messrs. Brennan, Horowitz, Little, Murphy, Rosen,
Sprague and Tuttle, all in 1997, was $4.50. 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).
4
<PAGE>
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 27, 1997 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)
------------------------------------- ------------
SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION(2) OPTIONS COMPENSATION(3)
------------------ ---- -------- ------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Robert D. Elliott....... 1997 $240,000 -- $47,027 -- $12,670
President & CEO 1996 198,462 $54,000 -- 100,000 9,840
1995 -- -- -- -- --
Jeffrey A. Templer...... 1997 160,000 16,000 -- -- 6,446
Senior Vice President &
CFO 1996 89,231 16,000 -- 50,000 1,897
1995 -- -- -- -- --
John A. Chmura Jr....... 1997 145,247 -- -- -- 8,209
Senior Vice President,
Sales 1996 158,234 -- -- 5,000 8,210
1995 143,598 -- -- 10,000 7,568
Martin Hudis............ 1997 147,420 -- -- -- 6,823
Senior Vice President, 1996 147,420 -- -- 5,000 6,086
Technology 1995 164,023 -- -- -- 6,501
Earl F. Sherman......... 1997 120,000 -- -- -- 7,199
Senior Vice President, 1996 120,000 -- -- -- 7,200
Business Development 1995 122,640 5,024 -- -- 8,618
</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. Elliott who received relocation compensation of $47,027.
(3) The amounts shown for each named officer for fiscal 1997 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. Elliott:
$2,400, $4,750, $5;520; Mr. Templer: $4,400 (Profit Sharing Savings Plan)
and $2,046 (Deferred Supplemental Plan); Mr. Chmura: $2,400, $4,214,
$1,595; Mr. Hudis: $2,400, $4,322, $101; Mr. Sherman: $2,400, $3,481,
$1,318.
OPTION GRANT TABLE
No stock options were granted during the fiscal year ended December 27, 1997
to the Chief Executive Officer and the other officers named in the Summary
Compensation Table.
5
<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 27, 1997.
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 OPTIONS AT FISCAL
YEAR END 1997 YEAR END 1997(1)
------------------------- -------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Robert D. Elliott........... 20,000 80,000 -0- -0-
Jeffrey A. Templer.......... 10,000 40,000 -0- -0-
John A. Chmura Jr........... 30,000 10,000 $33,600 -0-
Martin Hudis................ 30,000 10,000 -0- -0-
Earl F. Sherman............. 40,000 -0- 33,760 -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 $4.50 which was the closing price for a share
of the Company's common stock on December 26, 1997.
Change of Control Severance Benefits
The Company has Severance Agreements with certain key employees, including
Messrs. Elliott, and Templer. 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 twice his base salary (at the rate in
effect immediately before the change of control) and his target bonus for such
year, without deduction for any amounts previously paid under the bonus plan,
in the case of Mr. Templer, and 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, Mr. Templer 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. 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. 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, 1996). Pursuant to
the agreements, the Company has agreed to pay 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.
6
<PAGE>
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.
PERFORMANCE COMPARISON
The graphs below compare 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 which has been revised this year to better reflect the
Company's market.
[GRAPH APPEARS HERE]
COMPARISION OF CUMULATIVE TOTAL RETURN
OF COMPANY, PEER GROUP AND BROAD MARKET
- -------------------------------FISCAL YEAR ENDING-------------------------------
COMPANY 1992 1993 1994 1995 1996 1997
AEROVOX INC. 100 127.27 123.23 94.95 76.77 67.68
PEER GROUP 100 96.92 118.85 139.20 133.81 184.00
BROAD MARKET 100 119.95 125.94 163.35 202.99 248.30
7
<PAGE>
Assumes $100 invested on January 1, 1993. The Peer Group consists of
American Technical Ceramics Corp., Bel Fuse Inc., CTS Corp., Corcom Inc.,
Robinson Nugent Inc., The Cherry Corp., Vishay Intertechnology Inc., and
MagneTek. The latter, a replacement for Dallas Semiconductor Corp. and Del
Global Technology Corp. which were previously included, was selected because
it participates in some of the same markets as Aerovox.
The following graph includes the peer group used in previous years, and is
presented here for comparison with the performance of that group.
[GRAPH APPEARS HERE]
COMPARISION OF CUMULATIVE TOTAL RETURN
OF COMPANY, PEER GROUP AND BROAD MARKET
- -------------------------------FISCAL YEAR ENDING-------------------------------
COMPANY 1992 1993 1994 1995 1996 1997
AEROVOX INC. 100 127.27 123.23 94.95 76.77 67.68
PEER GROUP 100 107.08 135.27 177.14 167.38 245.30
BROAD MARKET 100 119.95 125.94 163.35 202.99 248.30
Assumes $100 invested on January 1, 1993. This Peer Group consists of
American Technical Ceramics Corp., Bel Fuse Inc., CTS Corp., Corcom Inc.,
Dallas Semiconductor Corp. and 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 industry surveys on
officer salaries, focusing generally on the "durable goods manufacturing"
sector. Information from these sources, 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.
8
<PAGE>
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 surveys. 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
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
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 were 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 is measured monthly and cumulatively throughout the year, payments
to participating officers and management, if warranted, are 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,
1993, 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,
1993.
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
1,000 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.
Chief Executive Officer Compensation
In 1997, Robert D. Elliott, President and Chief Executive Officer ("CEO")
was paid a base salary of $240,000, the same as during 1996. Mr. Elliott, who
is eligible to participate in the Incentive Compensation Plan at a Target
Participation level of 60%, was not paid a bonus in 1997.
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.
William G. Little, Chairman
Dennis Horowitz
Benedict P. Rosen
9
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 17, 1998, 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 PERCENT
NATURE OF BENEFICIAL OF
NAME OF BENEFICIAL OWNER OWNERSHIP(1) CLASS
------------------------ -------------------- -------
<S> <C> <C>
Clifford H. Tuttle................................ 132,362 2.5%
Robert D. Elliott................................. 42,000 *
John F. Brennan................................... 16,000 *
John A. Chmura Jr................................. 44,000 *
Dennis Horowitz................................... 5,300 *
Sherel D. Horsley................................. 2,500 *
Martin Hudis...................................... 39,000 *
William D. Little................................. 21,750 *
Ronald F. Murphy.................................. 49,859 *
Benedict P. Rosen................................. 9,500 *
Earl F. Sherman................................... 47,681 *
John L. Sprague................................... 11,625 *
Jeffrey A. Templer................................ 12,000 *
All directors and executive officers as a group
(17 persons)..................................... 482,231(2) 9.0%
</TABLE>
- --------
* Less than 1%.
(1) Includes the following number of shares issuable pursuant to options
currently exercisable or exercisable within sixty days: Messrs. Tuttle:
1,000; Elliott: 30,000; Brennan: 9,000; Chmura: 33,000; Horowitz: 4,500;
Horsley: 2,500; Hudis: 34,000; Little: 4,750; Murphy: 41,000; Rosen:
4,500; Sherman: 40,000; Sprague: 8,625; and Templer: 10,000.
(2) Includes 261,875 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 PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP CLASS
------------------------------------ -------------------- -------
<S> <C> <C>
Dimensional Fund Advisors Inc..................... 318,500(a) 5.9%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Franklin Resources, Inc........................... 378,800(b) 7.0%
777 Mariners Island Blvd.
San Mateo, CA 94403
Paine Webber Group Inc............................ 328,000(c) 6.1%
1285 Avenue of the Americas
New York, NY 10019-
Charles E. Sheedy................................. 379,100(d) 7.0%
Two Houston Center, Suite 2907
Houston, TX 77010
Texas Art Supply Co............................... 503,934(e) 9.4%
910 Travis Street, Suite 2030
Houston, TX 77002
William D. Witter, Inc............................ 445,753(f) 8.3%
One Citicorp Center
153 East 53rd Street
New York, NY 10022
</TABLE>
10
<PAGE>
- --------
(a) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 318,500 shares of
Aerovox Inc. stock as of December 31, 1997, 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) The Adviser Subsidiaries of Franklin Resources, Inc. ("FRI") are deemed to
have beneficial ownership of 378,800 shares of Aerovox stock as of
December 31, 1997, all of which are held in open or closed-end investment
companies or other managed accounts advised directly and indirectly by the
Adviser Subsidiaries. FRI, the Principal Shareholders (Charles B. Johnson
and Rupert H. Johnson) and the Adviser Subsidiaries disclaim any economic
interest or beneficial ownership of such shares. Franklin Advisory
Services, Inc. has sole voting and dispositive power over the shares.
(c) Sole dispositive power: 328,000 shares.
(d) Sole voting and dispositive power: 379,100 shares.
(e) Texas Art Supply Co., Louis K. Adler, Marc F. Adler, and the Adler
Foundation beneficially own, with sole voting and dispositive power,
475,300 shares, 18,500 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.
(f) Sole voting power and dispositive power: 445,753 shares.
OTHER INFORMATION
OUTSTANDING SHARES
Only shareholders of record at the close of business on March 23, 1998, are
entitled to notice of and to vote at the meeting. There were 5,385,409 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.
Class III directors will be elected by a plurality of the votes properly
cast at the meeting.
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
11
<PAGE>
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.
SHAREHOLDER PROPOSALS
In order for any proposal that a shareholder intends to present at the 1999
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 12, 1998.
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.
12
<PAGE>
AEROVOX INCORPORATED
MAY 11, 1998
ANNUAL MEETING OF AEROVOX INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
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 Monday, May 11, 1998 at the
offices of Ropes & 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 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 III DIRECTORS, AND IN THE
DISCRETION OF THE NAMED PROXIES AS 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)
- --------------------------------------------------------------------------------
[ ] Please mark
your votes as in
this example
FOR WITHHELD NOMINEES: PLEASE MARK, SIGN, DATE
1. Election of [ ] [ ] John F. Brennan AND RETURN THE PROXY
Class III Dennis Horowitz CARD USING THE
Directors: ENCLOSED ENVELOPE.
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.
