Proxy Statement for January 2007 annual meeting
TECH/OPS
SEVCON, INC.
155
NORTHBORO ROAD, SOUTHBOROUGH, MASSACHUSETTS 01772
TELEPHONE
(508) 281-5510
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
Notice
is
hereby given that the annual meeting of the stockholders of Tech/Ops Sevcon,
Inc., a Delaware corporation, will be held at the offices of Edwards Angell
Palmer & Dodge LLP, 20th Floor, 111 Huntington Avenue at Prudential Center,
Boston, Massachusetts, at 5:00 p.m. on Tuesday, January 23, 2007 for the
following purposes:
1. To
elect
three directors to hold office for a term of three years.
2. To
transact such other business as may properly come before the
meeting.
Only
stockholders of record at the close of business on December 19, 2006 are
entitled to notice of the meeting or to vote thereat.
IT
IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. THEREFORE, WHETHER
OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE YOUR PROXY AND RETURN
IT
IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. IF YOU ATTEND THE MEETING AND WISH TO VOTE IN PERSON, YOUR PROXY WILL
NOT BE USED.
By
order
of the Board of Directors,
MATTHEW
C. DALLETT
Secretary
Dated
December 27, 2006
PROXY
STATEMENT
Approximate
Date of Mailing: December 27, 2006
INFORMATION
CONCERNING THE PROXY SOLICITATION
The
enclosed proxy is solicited by and on behalf of the Board of Directors of
Tech/Ops Sevcon, Inc. (the “Company”) for use at the annual meeting of
stockholders of the Company to be held on January 23, 2007 at 5:00 p.m. at
the
offices of Edwards Angell Palmer & Dodge LLP, 20th Floor, 111 Huntington
Avenue at Prudential Center, Boston, Massachusetts, or any adjournments or
postponements thereof. It is subject to revocation at any time prior to the
exercise thereof by giving written notice to the Company, by submission of
a
later dated proxy or by voting in person at the meeting. The costs of
solicitation, including the preparation, assembly and mailing of proxy
statements, notices and proxies, will be paid by the Company. Such solicitation
will be made by mail and in addition may be made by the officers and employees
of the Company personally or by telephone or e-mail. Forms of proxies and proxy
material will also be distributed, at the expense of the Company, through
brokers, custodians and other similar parties to beneficial owners.
On
December 19, 2006, the Company had outstanding 3,211,051 shares of Common Stock,
$.10 par value, which is its only class of stock outstanding and entitled to
vote at the meeting. Stockholders of record at the close of business on December
19, 2006 will be entitled to vote at the meeting. With respect to all matters
which will come before the meeting, each stockholder may cast one vote for
each
share registered in his name on the record date. The shares represented by
every
proxy received will be voted, and where a choice has been specified, the shares
will be voted in accordance with the specification so made. If no choice has
been specified on the proxy, the shares will be voted FOR the election of the
nominees as directors.
BENEFICIAL
OWNERSHIP OF COMMON STOCK
The
following table provides information as to the ownership of the Company’s Common
Stock as of December 19, 2006 by (i) persons known to the Company to be the
beneficial owners of more than 5% of the Company’s outstanding Common Stock,
(ii) the executive officers named in the Summary Compensation Table below,
and
(iii) all current executive officers and directors of the Company as a group.
Beneficial ownership by individual directors and nominees for director is shown
in the table on pages 4 and 5 below.
Name
and Address
of
Beneficial Owner
|
|
Amount
Beneficially
Owned
(1)
|
|
Percent
of
Class
|
|
|
|
|
|
|
|
|
|
Paul
D. Sonkin /
Hummingbird
Management LLC (2)
460
Park Avenue, 12th
Floor
New
York, New York 10022
|
|
|
390,865
|
(3)
|
|
12.2%
|
|
|
|
|
|
|
|
|
|
Dr.
Marvin G. Schorr
330
Beacon Street
Boston,
MA 02116
|
|
|
362,778
|
(4)
|
|
11.3%
|
|
|
|
|
|
|
|
|
|
Bernard
F. Start
Dotland
Grange
Hexham,
NE46 2JY, United Kingdom
|
|
|
240,977
|
(4)
|
|
7.5%
|
|
|
|
|
|
|
|
|
|
Mario
J. Gabelli / GGCP, Inc. /
Gabelli
Investors, Inc. (5)
One
Corporate Center
Rye,
NY 10580-1435
|
|
|
237,000
|
|
|
7.4%
|
|
Name
and Address
of
Beneficial Owner
|
|
|
Amount
Beneficially
Owned
(1)
|
|
|
Percent
of
Class
|
|
|
|
|
|
|
|
|
|
Wachovia
Corporation (6)
One
Wachovia Center
Charlotte
NC 28288-0137
|
|
|
194,875
|
|
|
6.1%
|
|
|
|
|
|
|
|
|
|
Paul
A. McPartlin
Tech/Ops
Sevcon, Inc.
155
Northboro Road
Southborough,
MA 01772
|
|
|
86,546
|
(7)
|
|
2.6%
|
|
|
|
|
|
|
|
|
|
Matthew
Boyle
Tech/Ops
Sevcon, Inc.
155
Northboro Road
Southborough,
MA 01772
|
|
|
68,400
|
(8)
|
|
2.1%
|
|
|
|
|
|
|
|
|
|
All
current executive officers and
directors
as a group (8 persons)
|
|
|
874,681
|
(9)
|
|
27.2%
|
|
|
|
(1)
|
Unless
otherwise indicated, each owner has sole voting and investment
power with
respect to the shares listed.
|
|
|
(2)
|
As
reported on Schedule 13D filed with the Securities and Exchange
Commission
(“SEC”) on April 15, 2003, and subsequent Forms 4, Mr. Sonkin is the
managing member and control person of Hummingbird Management, LLC
and of
Hummingbird Capital LLC, which are the investment manager and general
partner, respectively, of two investment funds, and these parties
act
together as a group with respect to their shareholdings in the
Company.
|
|
|
(3)
|
According
to the SEC filings and communications with the Company, Hummingbird
Management, LLC has sole dispositive power over 389,375 of these
shares,
which are held by the investment funds, and Mr. Sonkin has sole
dispositive power over 1,490 shares. Mr. Sonkin and Hummingbird
Management
LLC share voting power over all 390,865 shares.
|
|
|
(4)
|
Includes
4,500 shares subject to stock options exercisable within sixty
days.
|
|
|
(5)
|
As
reported on Schedule 13D filed with the SEC on July 12, 2006, each
of Mr.
Gabelli, GGCP, Inc. and Gabelli Investors, Inc. is the beneficial
owner of
the shares shown, which are held in investment advisory accounts
of
various subsidiaries of Gabelli Investors, Inc. Gabelli Funds,
LLC, a
subsidiary of Gabelli Investors, Inc., has sole voting and investment
power with respect to 60,000 of such shares.
|
|
|
(6)
|
As
reported on Schedule 13G as filed with the SEC on February 13,
2006,
Wachovia Securities LLC,
an
investment adviser and subsidiary of Wachovia Corporation, is also
a
beneficial owner of the shares shown.
|
|
|
(7)
|
Includes
11,000 shares subject to stock options exercisable within sixty
days.
|
|
|
(8)
|
Includes
36,000 shares subject to stock options exercisable within sixty
days.
|
|
|
(9)
|
Includes
66,500 shares subject to stock options exercisable within sixty
days.
|
ELECTION
OF DIRECTORS
The
Company’s Board of Directors has fixed the number of directors at seven. Members
of the Board of Directors are divided into three classes serving staggered
three-year terms. The term of three of the Company’s current directors, Maarten
D. Hemsley, Marvin G. Schorr and David R. A. Steadman, expires at the annual
meeting. Based on the recommendation of its Nominating and Governance Committee,
the Board has nominated Mr. Hemsley, Dr. Schorr and Mr. Steadman for re-election
to a new three-year term. Each nominee has consented to serve if elected, and
the Company is not presently aware of any reason that would prevent any nominee
from serving as a director. If a nominee should become unavailable for election,
the proxies will be voted for another nominee selected by the
Board.
Pursuant
to the Company’s by-laws, directors will be elected by a plurality of the votes
properly cast at the annual meeting. Abstentions, votes withheld and broker
non-votes will not be treated as votes cast and will not affect the outcome
of
the election. A “broker non-vote” occurs when a broker holding a customer’s
shares indicates on the proxy that the broker has not received voting
instructions on a matter from the customer and is barred by applicable rules
from exercising discretionary authority to vote on the matter.
The
following table contains information on the nominees for election at the annual
meeting and each other person whose term of office as a director will continue
after the meeting. The nominees for election at the meeting are indicated by
an
asterisk.
Name
|
Term
Expires
|
Business
Experience
During
Past
Five
Years
and
Other Directorships
|
Has
Been
a
Director
of
the
Company
or
its
Predecessor
Tech/Ops,
Inc.
Since
|
No.
of
Common
Shares
of
the Company
Owned
Beneficially
on
December
19, 2006
and
Percent
of
Class (+)
|
|
|
|
|
|
Matthew
Boyle
(4)
Age
- 44
|
2008
|
President
and Chief Executive Officer of the Company since November 1997.
Vice
President and Chief Operating Officer of the Company from November
1996 to
November 1997.
|
1997
|
68,400
(2.1%)
(1)
|
*Maarten
D. Hemsley
(5)(6)
Age
- 57
|
2007
|
Chief
Financial Officer and a director since 1988 (and until July 2001,
President) of Sterling Construction Company, Inc., a Texas-based
civil
construction company Fund manager at North Atlantic Value LLP,
part of the
J. O. Hambro Capital Management Group, London, England, since March
2001,
with responsibility for Leisure & Media Venture Capital Trust, Plc and
Trident Private Equity Fund II, L.P. President of Bryanston Management
Ltd., a specialized financial services company, since 1993. Director
of a
number of UK privately-held companies.
|
2003
|
5,500
(#)
(3)
|
Paul
B. Rosenberg
(5)(7)
Age
- 74
|
2009
|
Former
Treasurer of the Company.
|
1988
|
92,980
(2.9%)
(2)
|
*Dr.
Marvin G. Schorr
(4)(6)(7)
Age
- 81
|
2007
|
Chairman
of the Company’s Board of Directors from January 1988 until January 2005.
Prior to that, Chairman of the Board of Directors and President of
Tech/Ops, Inc., the Company’s predecessor. Also a director emeritus of
Brooks Automation, Inc.
|
1951
|
362,778
(11.3%)
(2)
|
Bernard
F. Start
Age
- 68
|
2009
|
Vice-Chairman
of the Board since November 1997. President and Chief Executive Officer
of
the Company from January 1988 to November 1997.
|
1988
|
240,977
(7.5%)
(2)
|
*David
R. A. Steadman
(4)(5)(7)
Age
- 69
|
2007
|
Chairman
of the Company’s Board of Directors since January 2005. President of
Atlantic Management Associates, Inc., a management services firm,
since
1988. Chairman of Brookwood Companies Incorporated, a director of
Aavid
Thermal Technologies, Inc., a director of Sterling Construction Company,
Inc. and a director of several privately held companies.
|
1997
|
13,500
(
#
)
(2)
|
Paul
O. Stump
(5)(6)
Age
- 54
|
2008
|
President
and Chief Executive Officer of Telequip Corporation, a manufacturer
of
coin dispensing equipment, since 1997.
|
2005
|
4,000
(#)
|
|
|
|
|
|
(+)
|
Unless
otherwise indicated, each person has sole voting and investment
power with
respect to the shares listed.
|
|
|
(#)
|
Less
than 1%
|
|
|
(1)
|
Includes
36,000 shares subject to stock options exercisable within sixty
days.
|
|
|
(2)
|
Includes
4,500 shares subject to stock options exercisable within sixty
days.
|
|
|
(3)
|
Includes
1,500 shares subject to stock options exercisable within sixty
days.
|
|
|
(4)
|
Member
of the Executive Committee.
|
|
|
(5)
|
Member
of the Audit Committee.
|
|
|
(6)
|
Member
of the Compensation Committee.
|
|
|
(7)
|
Member
of the Nominating and Governance
Committee.
|
Board
of Directors Independence and Meetings
The
Board
has determined that all directors, other than Mr. Boyle, are independent under
the American Stock Exchange rules, based on information known to the Company
and
on the annual questionnaire completed by each director. The Board regularly
schedules meetings at which only independent directors are present.
During
the fiscal year ended September 30, 2006, the Board of Directors held a total
of
seven meetings. Each director attended at least 75% of the total number of
meetings of the Board of Directors and all committees of the Board on which
the
director served. All Board members are expected to attend the annual meeting
of
stockholders, subject to special circumstances. All of the Board members
attended the annual meeting of stockholders in 2006.
Communications
to the Board
Stockholders
may communicate with the Board of Directors by mailing a communication to the
entire Board or to one or more individual directors, in care of the Corporate
Secretary, Tech/Ops Sevcon, Inc., 155 Northboro Road, Southborough,
Massachusetts 01772. All communications from stockholders to Board members
(other than communications soliciting the purchase of products and services)
will be promptly relayed to the Board members to whom the communications are
addressed.
Committees
of the Board
The
Board
of Directors has an Audit Committee, a Compensation Committee and a Nominating
and Governance Committee, all the members of which are independent, as defined
by Securities and Exchange Commission rules and American Stock Exchange listing
standards, as applicable. In addition to the meetings described below, the
members of each committee communicate regularly amongst themselves and with
management on Company matters.
The
charters of the Audit Committee, the Compensation Committee and the Nominating
and Governance Committee are available on the Company’s web site:
www.techopssevcon.com.
Audit
Committee.
The
Audit Committee is composed of four directors. The Board has determined that
at
least one of the members of the Committee, Mr. Rosenberg, is an “audit committee
financial expert,” as defined by the Securities and Exchange Commission. The
Committee selects, evaluates and oversees the Company’s independent auditors,
approves any engagement of the independent auditors to perform non-audit
services, reviews the audited financial statements and discusses the adequacy
and quality of the Company’s financial reporting principles and procedures and
its internal controls with management and the auditors. The Committee, which
met
five times during the fiscal year ended September 30, 2006, operates under
a
written charter which was last revised by the Board in July 2006. The Audit
Committee’s report appears on page 12.
Compensation
Committee. The Compensation Committee reviews and approves generally all
compensation and fringe benefit programs of the Company, and also reviews and
determines the base salary and incentive compensation of the executive officers,
as well as grants of equity compensation to all employees. All compensation
actions taken by the Committee are reported to the full Board of Directors,
which, excluding employee directors, approves the actions of the Committee.
The
Committee also reviews and makes recommendations to the Board on director
compensation and on policies and programs for the development of management
personnel, as well as management structure and organization. The Compensation
Committee met twice during the fiscal year ended September 30, 2006. Its report
appears on page 10.
Nominating
and Governance Committee.
The
Nominating and Governance Committee approves nominations to the Board and
recommends to the Board of Directors’ action related to Board composition, size
and effectiveness and management succession plans for the positions of Chairman
of the Board and Chief Executive Officer. The Committee operates under a
written
charter. The Nominating and Governance Committee met twice during the fiscal
year ended September 30, 2006.
In
identifying potential candidates and selecting nominees for directors, the
Nominating and Governance Committee does not foreclose any sources. The
Committee reviews candidates recommended by stockholders in the same manner
and
using the same general criteria as candidates recruited by the Committee or
recommended by the Board.
The
Nominating and Governance Committee does not rely on a fixed set of
qualifications for director nominees. The Committee’s primary objective for
director nominees is to create a Board with a broad range of skills and
attributes that is aligned with the Company’s strategic needs.
The
minimum qualifications for director nominees are that they:
a)
|
be
able to dedicate time and resources sufficient for the diligent
performance of the duties required of a member of the
Board,
|
|
|
b)
|
not
hold positions or interests that conflict with their responsibilities
to
the Company,
|
|
|
c)
|
comply
with any other minimum qualifications for either individual directors
or
the Board as a whole mandated by applicable laws or
regulations.
|
Additionally,
at least a majority of members of the Board of Directors must qualify as
independent directors in accordance with American Stock Exchange independence
rules.
The
Nominating and Governance Committee’s process for evaluating nominees for
director, including nominees recommended by stockholders, is to consider their
skills, character and professional ethics, judgment, leadership experience,
business experience and acumen, familiarity with relevant industry issues,
national and international experience, and other relevant criteria as they
may
contribute to the Company’s success. This evaluation is performed in light of
the Committee’s views as to what skill set and other characteristics would most
complement those of the current directors, including the diversity, age, skills
and experience of the Board as a whole.
In
order
to recommend a candidate for consideration by the Nominating and Governance
Committee, a stockholder must provide the Committee with the candidate's name,
background and relationship with the proposing stockholder, a brief statement
outlining the reasons the candidate would be an effective director of the
Company and information relevant to the considerations described above. Such
information should be sent to the Nominating and Governance Committee of
Tech/Ops Sevcon, Inc., 155 Northboro Road, Southborough, Massachusetts 01772,
Attention: Corporate Secretary.
The
Committee may seek further information from or about the candidate, or the
stockholder making the recommendation, including information about all business
and other relationships between the candidate and the stockholder.
Director
Compensation; Stock Ownership Policy
Directors
of the Company (except Mr. Boyle) are each paid $16,000 per year for their
services. Mr. Steadman, the Chairman of the Board of Directors and committee
chairmen, Mr. Rosenberg (Chairman of the Audit Committee), Mr. Hemsley (Chairman
of the Compensation Committee) and Dr. Schorr (Chairman of the Nominating and
Governance Committee) each receive an additional $3,000 per year.
Each
director (except Mr. Boyle and Mr. Stump) currently in office has previously
received an option under the 1998 Director Stock Option Plan to purchase 5,000
shares of Common Stock at the fair market value of the Common Stock on the
date
of grant. All of these options become exercisable in equal 500 share amounts
on
each of the first ten anniversaries of the date of grant or, if earlier, in
the
event of a change in control of the Company and will expire 90 days after the
tenth anniversary of the date of grant. In January 2004 the stockholders
approved the discontinuance of any future grants under the 1998 Director Stock
Option Plan and that any future grants of options or other equity to
non-employee directors would be under the 1996 Equity Incentive Plan, as revised
in January 2004.
The
Compensation Committee granted 2,000 shares of restricted stock to each
non-employee director who was elected at the 2006 annual meeting of stockholders
or whose term in office continued after the 2006 annual meeting. Restricted
shares may not be sold, assigned, transferred, pledged or otherwise disposed
of
by the recipient until they vest. Such restricted shares will fully vest
the day
before the 2007 annual meeting of stockholders or, if earlier, upon the
recipient’s death or disability or upon a change in control of the Company. If
the recipient’s service as a director of the Company is terminated for any
reason other than the recipient’s death or disability, any unvested shares will
be forfeited and returned to the Company, unless the Committee determines
otherwise in its discretion.
In
2004,
the Board adopted Equity Compensation Guidelines in which it established
a
target level of stock ownership for directors of twice the level of annual
cash
compensation. Grants of restricted stock will be intended in part to assist
in
reaching these levels of ownership over time. Shares held by members of a
person’s immediate family or a trust for his or their sole benefit may be
counted towards the ownership requirement. Each director will be required
to
refrain from selling Company stock acquired as restricted stock (other than
to
make required tax payments related to a grant) if the value, based on current
market price, of his Company stock after the sale would be below his designated
ownership level. The Committee has discretion to make exceptions in
extraordinary circumstances where not contrary to Company goals, such as
cases
of significant personal hardship.January 2004.
EXECUTIVE
COMPENSATION
The
following tables provide information for the last three fiscal years concerning
the compensation of each of the executive officers of the Company whose total
compensation exceeded $100,000 in the most recent fiscal year, and the value
of
unexercised stock options held by him at the end of such years.
Mr.
Boyle
and Mr. McPartlin are residents of the United Kingdom and receive their
compensation in British Pounds. The table below sets out their compensation
in
both British Pounds (£) and in US Dollars ($) translated at the average exchange
rates in force during the relevant period.
Summary
Compensation Table
|
|
Annual
Compensation
|
Long-Term
Compensation
Awards
|
Name
and Principal Position
|
Fiscal
Year
|
Salary
|
Bonus
|
Restricted
Stock
Awards
(1)
|
Securities
Underlying
Options
|
|
|
|
|
|
|
In
British Pounds:
|
|
|
|
|
|
Matthew
Boyle
President
and Chief Executive
Officer
|
2006
2005
2004
|
£134,662
£129,400
£122,730
|
£50,636
£6,085
£7,500
|
£45,800
£47,900
-
|
-
-
-
|
|
|
|
|
|
|
Paul
A. McPartlin
Vice
President, Chief Financial
Officer
and Treasurer
|
2006
2005
2004
|
£84,200
£81,113
£78,475
|
£23,906
£6,100
£4,000
|
-
£16,000
-
|
-
-
-
|
|
|
|
|
|
|
In
US Dollars:
|
|
|
|
|
|
Matthew
Boyle
President
and Chief Executive
Officer
|
2006
2005
2004
|
$242,794
$238,797
$220,754
|
$91,250
$11,230
$13.500
|
$82,575
$88,350
-
|
-
-
-
|
|
|
|
|
|
|
Paul
A .McPartlin
Vice
President, Chief Financial
Officer
and Treasurer
|
2006
2005
2004
|
$151,728
$149,730
$141,100
|
$43,080
$11,260
$7,200
|
-
$29,450
-
|
-
-
-
|
(1)
|
Restricted
stock granted under the Company’s 1996 Equity Incentive Plan for the year
shown, expressed as the value of the shares granted at the closing
price
on the date of grant. The restricted shares will vest in five equal
annual
installments, provided that they will fully vest upon the recipient’s
Death or Disability or upon a Change of Control (as each is defined
in the
Plan). If the recipient’s employment with the Company is terminated for
any reason other than the recipient’s Death or Disability, any unvested
shares will be forfeited and returned to the Company, unless the
Compensation Committee determines otherwise in its discretion. At
fiscal
year-end 2006, the number and aggregate value of restricted stock
holdings
of Mr. Boyle were 27,000 shares ($186,840) and those of Mr. McPartlin
were
4,000 shares ($29,750), as calculated using the year-end closing
price of
the Company’s Common Stock, which was
$6.92.
|
Option
Grants in Last Fiscal Year
No
stock
options were granted to the named executive officers of the Company during
the
fiscal year ended September 30, 2006.
Aggregated
Option Exercises During Fiscal 2006 and Fiscal Year-End Option
Values
|
|
|
Number
of
|
|
|
|
|
Securities
|
|
|
|
|
Underlying
|
Value
of
|
|
|
|
Unexercised
|
Unexercised
|
|
Number
of
|
|
Options
|
In-the-Money
Options
|
|
Shares
|
|
At
9/30/2006
|
at
9/30/2006 (a)
|
|
acquired
on
|
Value
|
Exercisable/
|
Exercisable/
|
Name
|
exercise
|
Realized
|
Unexercisable
|
Unexercisable
|
Matthew
Boyle
|
-
|
-
|
50,000
/ 30,000
|
$41,520
/ $96,880
|
Paul
A. McPartlin
|
-
|
-
|
9,000
/ 6,000
|
$41,520
/ $27,680
|
(a) Based
on
the difference between the option exercise price and the closing price of the
underlying Common Stock on September 30, 2006, which closing price was $6.92
per
share.
Retirement
Plan
Mr.
Boyle
and Mr. McPartlin participate in the Company’s U.K. Retirement Plan, a defined
benefit plan, under which benefits at age 65 are based upon 1/60th
of final
U.K. - base salary (as defined in the Plan) for each year of service, subject
to
a maximum of 2/3rds of final U.K. - base salary. The employee contributes 6%
of
base salary, with the balance of the cost being met by the Company. The
following table sets forth information concerning the annual benefits payable
to
the employee pursuant to the U.K. Retirement Plan upon retirement at age 65
for
specified compensation levels and years of service classifications.
U.K.
Retirement Plan Table
Average
Annual Earnings on which Retirement Benefits
are Based
|
|
Estimated
Annual Pension Based on
Years
of Service Indicated
|
|
|
|
15
years
|
|
|
20
years
|
|
|
25
years
|
|
|
30
years
|
|
|
35
years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$100,000
|
|
$
|
25,000
|
|
$
|
33,300
|
|
$
|
41,700
|
|
$
|
50,000
|
|
$
|
58,300
|
|
125,000
|
|
|
31,300
|
|
|
41,700
|
|
|
52,100
|
|
|
62,500
|
|
|
72,900
|
|
150,000
|
|
|
37,500
|
|
|
50,000
|
|
|
62,500
|
|
|
75,000
|
|
|
87,500
|
|
175,000
|
|
|
43,800
|
|
|
58,300
|
|
|
72,900
|
|
|
87,500
|
|
|
102,100
|
|
200,000
|
|
|
50,000
|
|
|
66,700
|
|
|
83,300
|
|
|
100,000
|
|
|
116,700
|
|
225,000
|
|
|
56,300
|
|
|
75,000
|
|
|
93,800
|
|
|
112,500
|
|
|
131,300
|
|
250,000
|
|
|
62,500
|
|
|
83,300
|
|
|
104,200
|
|
|
125,000
|
|
|
145,800
|
|
275,000
|
|
|
68,800
|
|
|
91,700
|
|
|
114,600
|
|
|
137,500
|
|
|
160,400
|
|
300,000
|
|
|
75,000
|
|
|
100,000
|
|
|
125,000
|
|
|
150,000
|
|
|
175,000
|
|
Credited
years of service at September 30, 2006 were 10 for Mr. Boyle and 30 for Mr.
McPartlin. Benefits
under the U.K. Retirement Plan are computed solely on the U.K. base salary
of
participants, exclusive of bonuses, incentive and other compensation, and
are
not reduced on account of U.K. Social Security entitlement. The
compensation of Mr. Boyle and Mr. McPartlin is entirely U.K. based. A
spouse’s pension of 50% of the employee’s pension is payable beginning at the
death of the employee either before or during retirement. Pension payments
escalate by at least 3% per year, compounded, and at a higher rate in certain
circumstances.
COMPENSATION
COMMITTEE REPORT
The
Company’s compensation program is designed to motivate and retain employees by
encouraging and rewarding performance. The program is administered by the
Compensation Committee of the Board of Directors (the “Committee”).
The
Committee believes that the combination of salary and incentive compensation
is
the best method for compensating its executive officers and senior managers
to
promote uniform excellence, long-term commitment and team performance.
Management salaries are determined based upon individual performance, level
of
responsibility, experience and industry comparables. The
Committee reviews these salaries annually and may measure them against
compensation data obtained from published compensation surveys and surveys
of
peer companies. The Committee believes that the salaries of the Company's
executive officers are within the range of these surveys. The peer companies
are
generally of about the same size as the Company and are in technical, rather
than consumer or distribution fields. The Company believes that its competitors
for executive talent are not necessarily companies which engage in the same
business as the Company and, therefore, the companies used for comparative
compensation purposes differ from the companies included in the Electric
Industrial Apparatus Index. Incentive compensation includes grants of restricted
stock and cash bonuses which are awarded at year-end in the discretion of the
Committee to reward particular performance. The cash bonuses may include an
element to cover the tax obligations arising on vesting of restricted stock.
The
Committee has awarded bonuses for performance with respect to fiscal 2006 of
37%
of base salary for Mr. Boyle and an average of 19% of base salary for the senior
managers other than Mr. Boyle.
Prior
to
2004, the Company used stock options as an important incentive to motivate
executive officers and other key employees for improved long-term performance
of
the Company and to align their interests with those of the stockholders. In
2004, the Company modified its approach to providing equity incentives in
response to changing business needs and financial accounting requirements,
and
obtained stockholder approval to amend the 1996 Equity Incentive Plan to provide
for awards of restricted stock and other forms of equity
compensation.
The
Equity
Compensation Guidelines adopted by the Board articulate the goals and
considerations the Committee takes into account in determining equity
compensation awards. The Guidelines recognize that equity awards may play a
purely compensatory role and they may also provide an incentive for future
individual achievement. The incentive function may be implemented through
performance vesting or, more simply, through making grants of equity in
recognition for the achievement of desired performance. The Guidelines provide
that, in general, the incentive component of compensation for senior executives
should have a high proportion of equity in order to promote longer-term thinking
and to align the benefits gained by the executives to those attained by
stockholders in both good and bad times. One aim of the Guidelines, over the
long term, is to
target
the
equity holdings of the chief executive and chief financial officers at greater
than twice their annual cash compensation. In
adopting the Equity Compensation Guidelines, the Board also established a target
level of stock ownership for other senior managers equal to annual cash
compensation. Grants of restricted stock will be intended in part to assist
in
reaching these levels of ownership over time. Shares held by members of a
person’s immediate family or a trust for his or their sole benefit may be
counted towards the ownership requirement.
The
recommended base salary and any incentive compensation award for the President
are determined each year by the Committee based upon its subjective assessment
of the overall financial performance of the Company and the performance of
the
President relative to corporate objectives and other factors. In the light
of
the Company’s financial performance during the prior year, Mr. Boyle’s base
salary during fiscal 2006 was increased by 4.1% from 2005. Mr. Boyle is a
resident of the United Kingdom and receives his base salary in British Pounds.
Measured in United States Dollars, Mr. Boyle’s 2006 base salary was 1.6% higher
than in 2005.
Members
of the Compensation Committee
Maarten
D. Hemsley, Chairman
Marvin
G.
Schorr
Paul
O.
Stump
PERFORMANCE
GRAPH
The
following graph compares the cumulative total return (change in stock price
plus
reinvested dividends) assuming $100 invested in the Common Stock of the Company,
in the American Stock Exchange (“AMEX”) Market Value Index, in the Hemscott
Electric Industrial Apparatus Index and in the Hemscott Industrial Controls
Sector Index during the period from September 30, 2001 through September 30,
2006. For many years the Company has used an index of peer issuers based on
the
Company’s SIC code (3625: Relays and Industrial Controls). In 2005 this index
comprised six peer companies; however, by September 2006 only one of these
peer
companies remained in this index. The Company has now selected a new index
of
peer issuers based on a wider-based SIC code (362: Electric Industrial
Apparatus). The table and performance graph below include both the new and
old
peer company indices.
Value
of Investment at September 30,
|
|
|
2001
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
Tech/Ops
Sevcon, Inc.
|
|
|
100
|
|
|
56
|
|
|
77
|
|
|
79
|
|
|
80
|
|
|
96
|
|
AMEX
Market Value Index
|
|
|
100
|
|
|
109
|
|
|
134
|
|
|
155
|
|
|
188
|
|
|
195
|
|
Hemscott
Electric Industrial Apparatus Index
|
|
|
100
|
|
|
87
|
|
|
116
|
|
|
141
|
|
|
174
|
|
|
222
|
|
Hemscott
Industrial Controls Index
|
|
|
100
|
|
|
135
|
|
|
131
|
|
|
178
|
|
|
251
|
|
|
235
|
|
AUDIT
COMMITTEE REPORT
In
the
course of its oversight of the Company’s financial reporting process, the Audit
Committee of the Board of Directors has (i) reviewed and discussed with
management the Company’s audited financial statements for the fiscal year ended
September 30, 2006, (ii) discussed with Vitale, Caturano & Company, Ltd.,
the Company’s independent auditors, the matters required to be discussed by
Statement on Accounting Standard No. 61, Communication
with Audit Committees,
and
(iii) received the written disclosures and the letter from Vitale, Caturano
& Company, Ltd., required by Independence Standards Board Standard No. 1,
Independence
Discussions with Audit Committees,
and
discussed with Vitale, Caturano & Company, Ltd., its
independence.
Based
on
the foregoing review and discussions, the Committee recommended to the Board
of
Directors that the audited financial statements for the year ended September
30,
2006 be included in the Company’s Annual Report on Form 10-K for filing with the
Securities and Exchange Commission.
Members
of the Audit Committee
Paul
B.
Rosenberg, Chairman
Maarten
D. Hemsley
David
R.
A. Steadman
Paul
O.
Stump
AUDITORS
The
Audit
Committee of the Board of Directors has appointed Vitale, Caturano &
Company, Ltd. (VCC) as the Company’s independent registered public accounting
firm to conduct the audit of the Company’s financial statements for
2007.
In
2005,
the Audit Committee of the Board of Directors reviewed the Company’s independent
auditors as part of its ongoing efforts to reduce operating costs and expenses.
As a result, on September 1, 2005, the Audit Committee voted to replace Grant
Thornton LLP (Grant Thornton) with Vitale, Caturano & Company, Ltd. as the
Company’s independent registered public accounting firm.
Grant
Thornton’s audit reports on the consolidated financial statements of the Company
and subsidiaries for the fiscal years ended September 30, 2004 and 2003 did
not
contain any adverse opinion or disclaimer of opinion, and were not qualified
or
modified as to uncertainty, audit scope or accounting principles. During those
years and through the date of the Audit Committee’s action, there were no
disagreements between the Company and Grant Thornton on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope
or
procedure, which disagreements, if not resolved to the satisfaction of Grant
Thornton, would have caused Grant Thornton to make reference to the matter
in
its audit report.
During
fiscal 2004 and fiscal 2005 (through the date of VCC’s engagement), neither the
Company nor anyone on behalf of the Company consulted with VCC in any matter
regarding either (A) the application of accounting principles to a specified
transaction, either completed or proposed, or the type of audit opinion that
might be rendered on the Company’s financial statements, and neither was a
written report nor oral advice provided to the Company by VCC that was an
important factor considered by the Company in reaching a decision as to the
accounting, auditing or financial reporting issue, or (B) any matter that was
the subject of either a disagreement or a reportable event, as each are defined
in Items 304(a)(1)(iv) and (v) of SEC Regulation S-K, respectively.
Representatives
of VCC are expected to be present at the meeting with an opportunity to make
a
statement if they desire to do so and are expected to be available to respond
to
appropriate questions.
The
fees
billed by VCC, the Company’s principal accountant for 2006 and the 2005 year-end
audit, and the fees billed by Grant Thornton, the principal accountant up to
September 2005, for each of the last two fiscal years are set out below:
|
|
(in
thousands of dollars)
|
|
|
|
2006
|
|
|
2005
|
|
Vitale
Caturano:
|
|
|
|
|
|
|
|
Audit
fees
|
|
$
|
152
|
|
$
|
116
|
|
Audit-Related
fees
|
|
|
5
|
|
|
-
|
|
Tax
fees
|
|
|
24
|
|
|
-
|
|
All
other fees
|
|
|
-
|
|
|
-
|
|
Total
- Vitale Caturano fees
|
|
$
|
181
|
|
$
|
116
|
|
|
|
|
|
|
|
|
|
Grant
Thornton:
|
|
|
|
|
|
|
|
Audit
fees
|
|
$
|
-
|
|
$
|
41
|
|
Audit-Related
fees
|
|
|
10
|
|
|
42
|
|
Tax
fees
|
|
|
2
|
|
|
33
|
|
All
other fees
|
|
|
-
|
|
|
-
|
|
Total
- Grant Thornton fees
|
|
$
|
12
|
|
$
|
116
|
|
|
|
|
|
|
|
|
|
Total
Fees:
|
|
|
|
|
|
|
|
Audit
fees
|
|
$
|
152
|
|
$
|
157
|
|
Audit-Related
fees
|
|
|
15
|
|
|
42
|
|
Tax
fees
|
|
|
26
|
|
|
33
|
|
All
other fees
|
|
|
-
|
|
|
-
|
|
Total
fees
|
|
$
|
193
|
|
$
|
232
|
|
The
audit-related fees in fiscal 2006 relate primarily to the audit of the pension
plan for the Company’s UK subsidiary and the Grant Thornton consent to the
inclusion of their 2004 report in the 2005 Form 10-K. The audit-related fees
in
fiscal 2005 relate primarily to reviews of the Company’s internal controls, the
audit of the pension plan for the Company’s UK subsidiary, assistance with the
Company’s response to a comment letter from the SEC, and services related to the
change of auditors late in fiscal 2005. The tax fees are for the filing of
the
Company’s tax returns in both the United States and the United Kingdom and in
both years also include fees for tax advice on employee benefits.
All
of
the above fees were approved by the Audit Committee before the respective
engagements were undertaken. The Company has not adopted pre-approval policies
and procedures relating to non-audit services.
The
fees
billed by VCC, an independent member of Baker Tilly International, include
fees
billed by independent Baker Tilly International members in the United Kingdom
and France relating to the audits of United Kingdom and French subsidiaries
of
the Company.
DEADLINE
FOR STOCKHOLDER PROPOSALS FOR 2007 ANNUAL MEETING
In
order
for a stockholder proposal to be considered for inclusion in the Company’s proxy
materials for the annual meeting in 2007, it must be received by the Company
at
155
Northboro Road, Southborough, Massachusetts 01772,
Attention: Treasurer, no later than August 29, 2007.
ADVANCE
NOTICE PROVISIONS FOR
STOCKHOLDER
PROPOSALS AND NOMINATIONS
The
by-laws of the Company provide that in order for a stockholder to bring business
before or propose director nominations at an annual meeting, the stockholder
must give written notice to the Secretary or other specified officer of the
Company not less than 50 days nor more than 75 days prior to the meeting, except
that if notice thereof is mailed to stockholders or publicly disclosed less
than
65 days in advance, the notice given by the stockholder must be received not
later than the 15th day following the day on which the notice of such annual
meeting date was mailed or public disclosure made, whichever occurs first.
The
notice must contain specified information about the proposed business or each
nominee and the stockholder making the proposal or nomination.
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Securities Exchange Act of 1934 requires our directors, executive
officers and persons owning more than 10% of our registered equity securities
to
file with the Securities and Exchange Commission reports of their initial
ownership and of changes in their ownership of our common stock and to provide
us with copies of all Section 16(a) reports they file.
Based
on
a review of the reports filed by such persons with respect to our last fiscal
year, the Company believes that all its executive officers and directors have
complied with the Section 16(a) filing requirements, except for Mr. Start who
filed a late report covering two gifts of shares. The shareholder group
comprised of Paul D. Sonkin, Hummingbird Management LLC and related entities
filed a late report covering two sales of shares.
OTHER
BUSINESS
The
Board
of Directors does not know of any business which will come before the meeting
except the matters described in the notice. If other business is properly
presented for consideration at the meeting, the enclosed proxy authorizes the
persons named therein to vote the shares in their discretion.
Dated
December 27, 2006
PROXY
TECH/OPS
SEVCON, INC.
Proxy
Solicited by the Board of Directors for Annual Meeting of Stockholders to
be
held January 23, 2007.
The
undersigned, revoking all prior proxies, appoints Paul B. Rosenberg, Paul
A.
McPartlin and Matthew C. Dallett and each of them, the attorneys and proxies
of
the undersigned, with power of substitution, to vote all the shares of Tech/Ops
Sevcon, Inc. which the undersigned is entitled to vote at the Annual meeting
of
Stockholders to be held January 23, 2007 at the offices of Edwards Angell
Palmer
& Dodge LLP, 20th Floor, 111 Huntington Avenue at Prudential Center, Boston,
Massachusetts at 5:00 p. m. and at any adjournments thereof.
Please
complete, sign and date on reverse side and mail in enclosed
envelope.
PLEASE
SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE
MARK YOUR
VOTE IN BLUE OR BLACK INK AS SHOWN HERE x
|
1. Election
of Directors for three-year terms
|
This
proxy will be voted FOR all nominees for Director if no contrary
instructions are given. The proxies are authorized to vote in their
discretion upon other business that may properly come before the
meeting.
|
o FOR
ALL NOMINEES
|
|
o WITHHOLD
AUTHORITY
FOR
ALL NOMINEES
|
|
o FOR
ALL EXCEPT NOMINEES:
(See
instructions below)
O Hemsley
O Schorr
O Steadman
|
|
|
|
INSTRUCTION: To
withhold authority for any individual nominee(s) mark “FOR ALL EXCEPT” and
fill in the circle next to each nominee you wish to withhold, as
shown
here: ●
|
|
|
|
To
change the address on your account, please check the box at right
and
indicate your new address in the address space above. Please note
that
changes to the registered name(s) on the account may not be submitted
via
this method. o
|
|
Signature
of Stockholder: Date: Signature
of Stockholder: Date:
Note:
Please sign exactly as your name or names appear on this Proxy. When shares
are
held jointly, each holder should sign. When signing as executor, administrator,
attorney, trustee or guardian, please give full title as such. If the signer
is
a corporation, please sign full corporate name by duly authorized officer,
giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person.