<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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
[X] Definitive Proxy Statement by Rule 14a-6(e)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
AEROVOX INCORPORATED
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(Name of Registrant as Specified In Its Charter)
AEROVOX INCORPORATED
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
AEROVOX INCORPORATED
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held On May 2, 2000
----------------
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
Tuesday, May 2, 2000 for the following purposes:
1. To elect three Class II directors to serve until the Annual Meeting
in the year 2003.
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 20, 2000 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/ F. Randal Hunt
F. Randal Hunt
Secretary
New Bedford, Massachusetts
March 20, 2000
<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 2, 2000 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, 2000 to all shareholders entitled to
vote at the meeting. The Annual Report to Shareholders for the Company's
fiscal year ended January 1, 2000 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.
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 II 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 Bylaws 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 eight members. As provided in the Company's Amended and Restated
Certificate of Incorporation and Bylaws, 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 2003 and until their successors are
elected and shall qualify. The remaining four 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
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The names of the Class II nominees 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 2003
Sherel D. Horsley......... 57 Mr. Horsley is Senior Vice President and Product
Director since 1997 Manager for the Digital Imaging Group of Texas
Instruments Incorporated, an electronics
company whose products include semiconductor
components, electronic/ electromechanical
controls, digital imaging systems and
electronic 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 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......... 64 Mr. Rosen is Chairman 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. Mr. Rosen
also serves as a director of Nordson
Corporation.
Enrique Sanchez Aldunate.. 55 Mr. Sanchez is Senior Vice President of Aerovox
Director since 1999 Inc. and President of Aerovox de Mexico, the
Company's subsidiary in Mexico City. He joined
the Board of Directors in May 1999 as part of
the Company's acquisition of Compania General
de Electronica S.A. de C.V. (CGE) in April
1999. From 1972 to 1999, he served as General
Manager of CGE. Prior to his post there, he
held the positions of Manufacturing Manager and
Marketing Manager at Dispositivos Electronicos
S.A., a manufacturer of vacuum tubes in Mexico
City. From 1996 to 1999, Mr. Sanchez served as
President of NYCE, the Electronic Normalization
and Certification Institute, in Mexico.
Incumbent Class I Directors--Terms Expiring 2002
Robert D. Elliott......... 49 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
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Name Age Information
- ---- --- -----------
<S> <C> <C>
1991 to 1993, he served as President of Hendrix
Wire & Cable, a manufacturer of cable and
accessories for the electric utility market and
unit of Eagle's Electrical Products Division.
William G. Little......... 58 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 the former Chairman of the
United States Chamber of Commerce.
John L. Sprague (1)....... 69 Dr. Sprague is President of John L. Sprague
Director since 1989 Associates, a private management and business
consulting firm. He is also a partner of the
CEO Perspective Group, a senior executive
counseling 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 2001
John F. Brennan........... 67 Mr. Brennan is Dean, Sawyer School of
Director since 1989 Management, Suffolk University, a position he
has held 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, Data
Storage Corporation and Lite Control
Corporation.
Dennis Horowitz........... 54 Mr. Horowitz is President and Chief Executive
Director since 1995 Officer of Wolverine Tube, Inc. a manufacturer
of high technology copper and copper alloy tube
and fabricated products, which he joined in
March 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.
</TABLE>
- --------
(1) As per the Company's Bylaws, which state a Director must resign from his
position at the Annual Meeting of Shareholders held in the same year as
the director's 70th birthday, Mr. Sprague will resign from the Board of
Directors at the 2000 Annual Meeting of Shareholders.
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. Mr. Horsley, who serves as Chairman, receives an annual fee of
$24,000. 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, Horsley and Elliott (Chairman), has
the authority to act for the Board of Directors between meetings of the full
Board. The Executive Committee held one meeting during fiscal 1999.
The Audit Committee, consisting of Messrs. Sprague and Brennan (Chairman),
held two meetings during fiscal 1999. Messers. Sprague and Brennan are
independent directors as defined by Nasdaq listing standards. 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 Company will adopt a formal
written audit committee charter by June 14, 2000 and will be in compliance
with new Nasdaq audit committee structure and membership requirements by June
14, 2001.
The Compensation Committee, consisting of Messrs. Horowitz, Rosen and Little
(Chairman), held two meetings during fiscal 1999. 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 and Sprague
(Chairman), held no meetings in 1999. The Nominating Committee recommends
potential Board members and the re-election of the Directors at the expiration
of their respective terms, presents 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 five meetings during fiscal 1999. Each of the
directors attended all the directors' meetings and the relevant committee
meetings during 1999, except for Mr. Sanchez, who was appointed to the Board
of Directors on May 3, 1999 and attended three of five directors' meetings
during the year.
The Company's Bylaws establish an advance notice procedure with respect to
stockholder nominations 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 1999 Stock Option Plan for Directors (the
"Plan") pursuant to which each director who is not an employee of the Company
(each an "Eligible Director") is awarded an initial option grant covering
2,500 shares of common stock upon his election as a director. Following the
initial grant, each Eligible Director, on 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
4
<PAGE>
1,000 shares awarded to each Messrs. Brennan, Horowitz, Horsley, Little, Rosen
and Sprague, all in 1999, was $2.50. Options become exercisable on the first
anniversary of the date of grant. 25,000 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).
5
<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 three most recent fiscal years to the
Chief Executive Officer and the other five most highly compensated executive
officers of the Company.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards(1)
------------
Annual Compensation
-------------------------------------- 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....... 1999 $247,500 $ 47,889 -- 18,000 $17,424
President & CEO 1998 240,000 130,824 -- 12,000 15,412
1997 240,000 15,000 54,227 -- 12,670
Ted M. Miller........... 1999 162,500 35,000 -- 5,000 7,400
Senior Vice President, 1998 154,615 58,144 -- 25,000 7,400
Engineering and
Operations 1997 86,154 17,231 -- 25,000 --
Timothy J. Brown........ 1999 162,500 20,658 -- 5,000 7,275
Senior Vice President, 1998 -- -- -- -- --
Marketing and Sales 1997 -- -- -- -- --
Martin Hudis............ 1999 156,500 19,782 -- 5,000 7,400
Senior Vice President, 1998 155,000 56,327 -- 20,000 7,269
Technology Development 1997 147,420 -- -- -- 6,823
Mulk R. Arora........... 1999 128,000 14,967 -- 5,000 7,275
Vice President, 1998 -- -- -- -- --
Foil Operations 1997 -- -- -- -- --
Jeffrey A. Templer(4)... 1999 132,170 10,000 -- 5,000 4,497
Senior Vice President &
CFO 1998 160,000 78,897 -- 40,000 9,137
1997 160,000 26,000 -- -- 6,446
</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 in 1997.
(3) The amounts shown for each named officer for fiscal 1999 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, $5,000, $10,024; Mr. Miller: $2,400 (Life Insurance Premiums) and
$5,000 (Profit Sharing Savings Plan); Mr. Brown: $2,400 (Life Insurance
Premiums) and $4,875 (Profit Sharing Savings Plan); Mr. Hudis: $2,400
(Life Insurance Premiums) and $5,000 (Profit Sharing Savings Plan); Mr.
Arora: $2,400, $4,710, $605; Mr. Templer: $4,497 (Profit Sharing Savings
Plan).
(4) Mr. Templer resigned from his position as Senior Vice President and Chief
Financial Officer effective September 3, 1999.
6
<PAGE>
Option Grant Table
Stock options granted during the fiscal year ended January 1, 2000 to named
officers set forth below.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------- Potential Realizable Value
Number of Percent of at Assumed Annual Rates
Securities Total Options of Stock Price Appreciation
Underlying Granted to Exercise of Option Term
Options Employees in Price Expiration ----------------------------
Name Granted(1) Fiscal Year ($/Sh) Date 5%(2) 10%(2)
---- ---------- ------------- -------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Robert D. Elliott....... 18,000 16% $2.813 3/09/2009 $ 31,852 $ 80,707
Ted M. Miller........... 5,000 4% $2.813 3/09/2009 8,848 22,418
Timothy J. Brown........ 5,000 4% $2.813 3/09/2009 8,848 22,418
Martin Hudis............ 5,000 4% $2.813 3/09/2009 8,848 22,418
Mulk R. Arora........... 5,000 4% $2.813 3/09/2009 8,848 22,418
Jeffrey A. Templer(3)... -- -- -- -- -- --
</TABLE>
- --------
(1) Options were granted to Messrs. Elliott, Miller, Brown, Hudis and Arora on
March 9, 1999. 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.
(3) Pursuant to the Company's 1989 Stock Option Incentive Plan, options
granted to Mr. Templer were canceled 90 days after his date of
resignation.
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 January 1, 2000.
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-
Options at Fiscal Money Options at Fiscal
Year End 1999 Year End 1999(1)
------------------------- -------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Robert D. Elliott........... 62,400 67,600 -- $5,625
Ted M. Miller............... 15,000 40,000 -- 1,563
Timothy J. Brown............ 8,000 37,000 -- 1,563
Martin Hudis................ 42,000 23,000 -- 1,563
Mulk R. Arora............... 18,000 12,000 -- 1,563
Jeffrey A. Templer(2)....... -- -- -- --
</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 $3.125 which was the closing price for a share
of the Company's common stock on December 31, 1999.
(2) Pursuant to the Company's 1989 Stock Option Incentive Plan, option grants
for Mr. Templer were canceled 90 days after his date of resignation.
7
<PAGE>
Change of Control Severance Benefits
The Company has Severance Agreements with certain key employees, including
Messrs. Elliott, Miller and Brown. 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 Messrs. Miller and Brown, 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 Messrs. Elliott, Miller and Brown, 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.
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 Agreements), 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 Agreements, 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 Agreements cover
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.
8
<PAGE>
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.
Company/Index/Market 12/30/94 12/29/95 12/31/96 12/31/97 12/31/98 12/31/99
Aerovox Inc. 100 77.05 62.3 54.92 27.87 40.98
Peer Group Index 100 118.57 110.01 145.53 124.24 316.76
NASDAQ Market Index 100 129.71 161.18 197.16 278.08 490.46
Assumes $100 invested on January 1, 1995. The Peer Group consists of American
Technical Ceramics Corp., Bel Fuse Inc., CTS Corp., Robinson Nugent Inc., The
Cherry Corp., Vishay Intertechnology Inc., and MagneTek.
9
<PAGE>
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.
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
The Incentive Compensation Plan was adopted in 1998 to motivate
participating employees to do the best possible job improving the Company's
financial performance. Under this Plan, the measurements and the weighted
values established for 1999 were Net Income After Taxes (weighted at 75%) and
a series of non-financial goals (weighted at 25%). Each participant has a
Target Participation level, which is a percentage of their base salary. The
Compensation Committee assesses performance after receipt of audited financial
statements and a written report from management at the close of the year. The
two measurements are assessed independently and, if warranted, bonuses awarded
accordingly.
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.
Guidelines for option awards were established at the inception of the
program in 1999. The awards are commensurate with the participant's ability to
affect 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.
10
<PAGE>
Chief Executive Officer Compensation
In 1999, Robert D. Elliott, President and Chief Executive Officer ("CEO")
was paid a base salary of $247,500. Mr. Elliott, who is eligible to
participate in the Incentive Compensation Plan at a Target Participation level
of 60% with a maximum of 90%, was paid a bonus in 1999, equaling $47,889.
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
11
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 3, 2000, 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 Percent of
Name of Beneficial Owner Beneficial Ownership(1) Class
------------------------ ----------------------- ----------
<S> <C> <C>
Robert D. Elliott.......................... 106,500 1.7%
Mulk R. Arora.............................. 21,868 *
John F. Brennan............................ 25,500 *
Timothy J. Brown........................... 27,244 *
Dennis Horowitz............................ 11,500 *
Sherel D. Horsley.......................... 9,500 *
Martin Hudis............................... 48,000 *
William G. Little.......................... 34,250 *
Ted M. Miller.............................. 21,100 *
Benedict P. Rosen.......................... 21,500 *
Enrique Sanchez A.......................... 802,774(2) 13.1%
John L. Sprague............................ 14,125 *
Jeffrey A. Templer......................... 4,000 *
All directors and executive officers as a
group (15 persons)........................ 1,156,062(3) 18.9%
</TABLE>
- --------
* Less than 1%.
(1) Includes the following number of shares issuable pursuant to options
currently exercisable or exercisable within sixty days: Messrs. Elliott:
76,000; Arora: 19,000; Brennan: 8,500; Brown: 17,000; Horowitz: 6,500;
Horsley: 4,500; Hudis: 43,000; Little: 6,750; Miller: 16,000; Rosen:
6,500; Sanchez: 0; Sprague: 8,125; and Templer: 0.
(2) In connection with the acquisition of the capacitor business of Compania
General de Electronica in April 1999, the Company issued restricted
Aerovox common stock in the specified amounts to the following holders:
Tako Holding B.V. 145,656; Bires Investments B.V. 110,516; Kato Holding
B.V. 110,516; Kasri Holding B.V. 110,516; and Hobir Holding B.V. 110,516.
The 587,720 shares held by Tako Holding B.V., Bires Investments B.V., Kato
Holding B.V., Kasri Holding B.V. and Hobir Holding B.V. are beneficially
owned directly by Mr. Sanchez's adult children. Mr. Sanchez disclaims all
voting and/or dispositive power to these shares. ARVX Inc. beneficially
owns 215,054 shares of non-restricted Aerovox common stock to which Mr.
Sanchez claims sole voting and dispositive power.
(3) Includes 220,875 shares issuable pursuant to options currently exercisable
or exercisable within sixty days.
12
<PAGE>
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 of Beneficial Owner Beneficial Ownership Percent Class
------------------------------------ -------------------- -------------
<S> <C> <C>
Dimensional Fund Advisors Inc. ............. 345,200(a) 5.6%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Enrique Sanchez Aldunate ................... 802,774(b) 13.1%
Bosque de Jacarandas #87
Col. Bosques de las Lomas
Mexico D.F. 11700, Mexico
Charles E. Sheedy........................... 458,160(c) 7.5%
Two Houston Center, Suite 2907
Houston, TX 77010
Texas Art Supply Co. ....................... 503,934(d) 8.2%
910 Travis Street, Suite 2030
Houston, TX 77002
William D. Witter, Inc...................... 375,106(e) 6.1%
One Citicorp Center
153 East 53rd Street
New York, NY 10022
</TABLE>
- --------
(a) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 345,200 shares of
Aerovox Inc. stock as of December 31, 1999, 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) In connection with the acquisition of the capacitor business of Compania
General de Electronica in April 1999, the Company issued restricted
Aerovox common stock in the specified amounts to the following holders:
Tako Holding B.V. 145,656; Bires Investments B.V. 110,516; Kato Holding
B.V. 110,516; Kasri Holding B.V. 110,516; and Hobir Holding B.V. 110,516.
The 587,720 shares held by Tako Holding B.V., Bires Investments B.V., Kato
Holding B.V., Kasri Holding B.V. and Hobir Holding B.V. are beneficially
owned directly by Mr. Sanchez's adult children. Mr. Sanchez disclaims all
voting and/or dispositive power to these shares. ARVX Inc. beneficially
owns 215,054 shares of non-restricted Aerovox common stock to which Mr.
Sanchez claims sole voting and dispositive power.
(c) Sole voting and dispositive power: 458,160 shares.
(d) 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.
(e) Sole voting power and dispositive power: 375,106 shares.
13
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on its review of copies of reports filed pursuant to Section
16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
or written representations from persons required to file such reports
("Reporting Persons"), the Company believes that all such filings required to
be made by such Reporting Persons were timely made in accordance with the
requirements of the Exchange Act, except that Messrs. Horowitz and Sprague
each failed to file a Form 4 reflecting stock purchases on a timely basis and
Mr. Sanchez failed to file a Form 3 on a timely basis.
14
<PAGE>
OTHER INFORMATION
Outstanding Shares
Only shareholders of record at the close of business on March 20, 2000, are
entitled to notice of and to vote at the meeting. There were 6,110,380 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 II 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 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 PricewaterhouseCoopers 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
If a shareholder wishing to present a proposal at the 2001 Annual Meeting
(without regard to whether it will be included in the proxy materials for that
meeting) fails to notify the Company by December 8, 2000, the proxies the
Company's management receives for the meeting will accord management
discretionary authority to vote on that shareholder's proposal if it is
properly brought before the meeting.
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.
15
