proxy_jan08annmtg.htm
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 22, 2008, for the
following purposes:
1. To
elect
two 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 14, 2007 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, 2007
PROXY
STATEMENT
Approximate
Date of Mailing: December
27, 2007
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 Tuesday, January 22, 2008, 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 14, 2007, the Company had outstanding 3,257,702 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
14, 2007 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 14, 2007 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
|
|
|
|
Dr.
Marvin G. Schorr
330
Beacon Street
Boston,
MA 02116
|
365,278(2)
|
11.2%
|
|
|
|
Mario
J. Gabelli / GGCP, Inc. /
GAMCO
Investors, Inc. (3)
One
Corporate Center
Rye,
NY 10580-1435
|
283,200
|
8.7%
|
|
|
|
Bernard
F. Start
Dotland
Grange
Hexham,
NE46 2JY, United Kingdom
|
243,477(2)
|
7.5%
|
|
|
|
Wachovia
Corporation
Wachovia
Securities LLC (4)
One
Wachovia Center
Charlotte
NC 28288-0137
|
228,450
|
7.0%
|
Name
and Address
Of
Beneficial Owner
|
Amount
Beneficially
Owned
(1)
|
Percent
of
Class
|
|
|
|
Paul
D. Sonkin /
Hummingbird
Management LLC / Hummingbird Capital, LLC (5)
460
Park Avenue, 12th
Floor
New
York, New York 10022
|
211,925
|
6.5%
|
|
|
|
Paul
A. McPartlin
Tech/Ops
Sevcon, Inc.
155
Northboro Road
Southborough,
MA 01772
|
85,793(6)
|
2.6%
|
|
|
|
Matthew
Boyle
Tech/Ops
Sevcon, Inc.
155
Northboro Road
Southborough,
MA 01772
|
54,400(7)
|
1.7%
|
|
|
|
Paul
N. Farquhar
Tech/Ops
Sevcon, Inc.
155
Northboro Road
Southborough,
MA 01772
|
17,000
|
(#)
|
|
|
|
All
current executive officers and
directors
as a group (9 persons)
|
891,428(8)
|
27.4%
|
(#)
Less
than 1%
|
|
(1)
|
Unless
otherwise indicated, each owner has sole voting and investment power
with
respect to the shares listed.
|
|
|
(2)
|
Includes
5,000 shares subject to stock options exercisable within sixty
days.
|
|
|
(3)
|
As
reported on Schedule 13D/A filed with the Securities and Exchange
Commission (“SEC”) on October 30, 2007, each of Mr. Gabelli, GGCP, Inc.
and GAMCO Investors, Inc. is the beneficial owner of the shares shown,
which are held in investment advisory accounts of various subsidiaries
of
GAMCO Investors, Inc. Gabelli Funds, LLC, a subsidiary of GAMCO Investors,
Inc., has sole voting and investment power with respect to 120,000
of such
shares.
|
|
|
(4)
|
As
reported on Schedule 13G/A filed with the SEC on February 6, 2007,
Wachovia Securities LLC,
a
subsidiary of Wachovia Corporation, is an investment adviser to clients
who own the shares shown.
|
|
|
(5)
|
As
reported on Schedule 13D/A filed with the SEC on May 7, 2007, 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 that hold
the
shares shown. Hummingbird Management, LLC and Hummingbird Capital,
LLC
each disclaims beneficial ownership of such shares.
|
|
|
(6)
|
Includes
7,000 shares subject to stock options exercisable within sixty
days.
|
|
|
(7)
|
Includes
18,000 shares subject to stock options exercisable within sixty
days.
|
|
|
(8)
|
Includes
47,000 shares subject to stock options exercisable within sixty
days.
|
ELECTION
OF
DIRECTORS
Board
of Directors and Nominees for
Election
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 terms of two of the Company’s current directors, Matthew
Boyle and Paul O. Stump, expire at the annual meeting. Based on the
recommendation of its Nominating and Governance Committee, the Board has
nominated Messrs. Boyle and Stump for re-election to new three-year terms.
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.
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
14,
2007
and
Percent
of
Class
(+)
|
|
|
|
|
|
*Matthew
Boyle (4)
Age
- 45
|
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
|
54,400
(1.7%)
(1)
|
Maarten
D. Hemsley
(5)(6)
Age
- 58
|
2010
|
Chief
Financial Officer (until August 2007) and a director since 1988
of
Sterling Construction Company, Inc., a NASDAQ listed Texas-based
civil
construction company. Senior fund manager at North Atlantic Value
LLP,
part of the J. O. Hambro Capital Management Group, London, England.
President of Bryanston Management Ltd., a specialized financial
services
company, since 1993. Director of a number of UK privately-held
companies.
|
2003
|
8,000
(#)
(2)
|
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
14, 2007
and
Percent
of
Class (+)
|
|
|
|
|
|
Paul
B. Rosenberg (5)(7)
Age
– 75
|
2009
|
Former
Treasurer of the Company.
|
1988
|
95,480
(2.9%)
(3)
|
Dr.
Marvin G. Schorr (4)(6)(7)
Age
– 82
|
2010
|
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
|
365,278
(11.2%)
(3)
|
Bernard
F. Start
Age
– 69
|
2009
|
Vice-Chairman
of the Board since November 1997. President and Chief Executive
Officer of
the Company from January 1988 to November 1997.
|
1988
|
243,477
(7.5%)
(3)
|
David
R. A. Steadman
(4)(5)(7)
Age
– 70
|
2010
|
Chairman
of the Company’s Board of Directors since January 2005. President of
Atlantic Management Associates, Inc., a management services firm,
since
1988. Director of Aavid Thermal Technologies, Inc., a director
of Sterling
Construction Company, Inc. and a director of several privately
held
companies.
|
1997
|
16,000
(#)
(3)
|
*Paul
O. Stump
(5)(6)
Age
– 55
|
2008
|
Former
President and Chief Executive Officer of Telequip
Corporation.
|
2005
|
6,000
(#)
|
(+)
|
Unless
otherwise indicated, each person has sole voting and investment power
with
respect to the shares listed.
|
|
|
(#)
|
Less
than 1%
|
|
|
(1)
|
Includes
18,000 shares subject to stock options exercisable within sixty
days.
|
|
|
(2)
|
Includes
2,000 shares subject to stock options exercisable within sixty
days.
|
|
|
(3)
|
Includes
5,000 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.
|
Director
Independence
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 Company may from
time to time have arms-length commercial dealings with companies of which its
directors may be officers and/or directors. To the Company’s knowledge, during
fiscal 2007, there were no such dealings and none of the independent directors
had any other business, financial, family or other type of relationship with
the
Company or its management other than as a director and stockholder.
Board Meetings
During
the fiscal year ended September 30, 2007, the Board of Directors held a total
of
seven meetings. The Board regularly holds meetings at which only independent
directors are present. 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 2007.
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.
Each
of
the Audit Committee, the Compensation Committee and the Nominating and
Governance Committee operates under a written charter that is 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, and oversees the Company’s internal accounting and financial controls.
It reviews the audited financial statements and discusses them, as well as
the
adequacy and quality of the Company’s financial reporting principles and
procedures, with management and the auditors together and in separate executive
sessions. It also reviews and approves related person transactions, as described
on page 16. The Audit Committee met seven times during the fiscal year ended
September 30, 2007. The Committee’s report appears on page 15.
Compensation
Committee.
The
Compensation Committee is
composed of three directors. Generally all compensation and fringe benefit
programs of the Company are subject to the review and approval of the Committee,
which also reviews and determines the base salary and incentive compensation
of
the executive officers and a group of senior managers, as well as grants of
equity compensation to all employees. The Chief Executive Officer provides
a
detailed performance assessment and compensation recommendation for each
executive officer (other than himself), which the Committee considers in making
its decisions. The Compensation Committee usually makes annual equity grants
to
executives in its December meeting each year. Other compensation decisions
are
made throughout the year as circumstances warrant and as described in detail
in
“Compensation Discussion and Analysis” on page 9. All compensation actions taken
by the Committee are reported to the full Board of Directors, and are subject
to
the approval of the Board, excluding management. The Committee did not use
the
services of any compensation consultants during the past fiscal
year.
The
Committee
also reviews and makes recommendations to the Board on director compensation
and
equity awards, on policies and programs for the development of management
personnel, as well as management structure and organization. The
Compensation Committee
met
three times during the fiscal year ended September 30, 2007. Its report appears
on page 11.
Nominating
and Governance
Committee. The
Nominating and Governance Committee is composed of three directors. It considers
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 Nominating and Governance Committee met once during the fiscal year ended
September 30, 2007.
Director
Nominations
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
Directors
of the Company (except Mr. Boyle) are each paid $18,000 per year for their
services. Mr. Steadman, the Chairman of the Board of Directors, and each
committee chairman, Mr. Rosenberg (Chairman of the Audit Committee), Mr. Hemsley
(Chairman of the Compensation Committee) and Dr. Schorr (Chairman of the
Nominating and Governance Committee) receives an additional $3,000 per
year.
Consistent
with past practice, the Compensation Committee granted 2,000 shares of
restricted stock to each of the non-employee directors on January 23, 2007.
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 2008 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.
The
following table shows compensation paid to all non-employee directors who served
during fiscal 2007:
Name
|
Fees
Earned or Paid in Cash
$
|
Stock
Awards
(1)(2)
$
|
Option
Awards
(1)(2)
$
|
Change
in Pension Value
$
|
Total
$
|
Maarten
D. Hemsley
|
20,500
|
14,017
|
1,580
|
-
|
36,097
|
Paul
B. Rosenberg
|
20,500
|
14,017
|
-
|
1,467
(3)
|
35,984
|
Marvin
G. Schorr
|
20,500
|
14,017
|
-
|
-
|
34,517
|
Bernard
F. Start
|
17,500
|
14,017
|
-
|
-
|
31,517
|
David
R.A. Steadman
|
20,500
|
14,017
|
-
|
-
|
34,517
|
Paul
O. Stump
|
17,500
|
14,017
|
-
|
-
|
31,517
|
(1)
Represents the compensation expense incurred by the Company relating to
restricted stock awards and stock options held by the director during fiscal
2007, determined in accordance with FAS 123(R) using the assumptions described
in Note (1) E to the Company’s Financial Statements included in the fiscal 2007
Form 10-K, which assumed that there would be no forfeitures of
awards.
(2)
The
grant date fair value of the award of restricted stock in fiscal 2007 was
$15,310 per person. As of September 30, 2007, the non-employee directors held
restricted stock and options as follows:
|
Restricted
Stock
|
Outstanding
Options
|
Name
|
#
Shares
|
Fair
Value per share on date of
grant
|
Fair
Value on date of
grant
|
#
Shares
|
#
Shares
vested
|
Price/Share
|
Term
|
Expires
|
Maarten
D. Hemsley
|
2,000
|
7.655
|
$15,310
|
5,000
|
2,000
|
$
5.4000
|
10
years
|
2013
|
Paul
B. Rosenberg
|
2,000
|
7.655
|
$15,310
|
5,000
|
4,500
|
$15.1875
|
10
years
|
2008
|
Marvin
G. Schorr
|
2,000
|
7.655
|
$15,310
|
5,000
|
4,500
|
$15.1875
|
10
years
|
2008
|
Bernard
F. Start
|
2,000
|
7.655
|
$15,310
|
5,000
|
4,500
|
$15.1875
|
10
years
|
2008
|
David
R.A. Steadman
|
2,000
|
7.655
|
$15,310
|
5,000
|
4,500
|
$15.1875
|
10
years
|
2008
|
Paul
O. Stump
|
2,000
|
7.655
|
$15,310
|
-
|
-
|
-
|
-
|
-
|
(3)
Mr.
Rosenberg is a participant in the Company’s Director’s Retirement Plan, which
was terminated in 1997.
Stock
Ownership
Policy
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 is 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.
EXECUTIVE
COMPENSATION
Compensation
Discussion and
Analysis
Overview
The
compensation committee (the “Committee”) administers the Company’s Key Executive
compensation program (the “Program”) for the executive officers named in the
Summary Compensation Table on page 12 (Named Executive Officers (“NEO”)) and a
group of senior managers. In 2004 the Board adopted a set of Equity Compensation
Guidelines (the “Equity Guidelines”) to assist the Committee in assessing
criteria for and levels of equity compensation.
The
Committee uses different compensation elements to align the interests of the
executives with those of our stockholders, to motivate and retain employees
by
rewarding good performance. In most cases the types of compensation awarded
fulfill more than one objective. The Committee believes that the combination
of
targeted short and long-term compensation is the best method for compensating
its executive officers and senior managers to promote excellence, long-term
commitment and team performance. The elements of compensation for key executives
include salary, annual bonus, equity compensation, pension and other
benefits.
Objectives
The
Program objectives are:
· |
To
recognize and reward good performance of individuals in any one fiscal
year
|
· |
To
align the motivation of employees with the interests of the
stockholders
|
· |
To
retain the skills, experience and knowledge of excellent employees
|
Performance
The
Committee measures the performance of the business and executives regularly.
It
sets salaries and bonuses at levels which it believes, through its research
and
the Committee members’ judgment, are competitive and recognize good
performance.
· |
Executive
salaries are determined based upon business and individual performance,
level of responsibility, experience and industry comparables. The
Committee reviews these salaries annually and measures them against
compensation data obtained from published compensation surveys. The
Company’s NEOs are based in the United Kingdom; accordingly the industry
comparables and compensation surveys are mainly UK based, but there
are
inherent limitations in making precise comparisons because of differences
in the size, nature and location of companies within the published
survey.
The Committee generally sets the salaries of the Company's NEOs at
or
close to the mid-range of the salaries of the companies reported
by these
surveys.
|
· |
Executive
bonus is determined each year after the financial performance of
the
businesses is known. The bonus is discretionary and is based upon
achievement of the Company’s financial objectives for the year and the
individual’s performance against previously agreed personal goals. The
cash bonuses may, at the discretion of the Committee, include an
element to
cover the tax obligations arising on the vesting of restricted
stock
|
Alignment
The
Board
and Committee wish 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.
· |
The
Equity Guidelines adopted by the Board articulate the goals and
considerations the Committee takes into account in determining equity
compensation awards, as detailed further
below.
|
· |
The
Company uses equity compensation as an important incentive to motivate
NEOs and other key employees for improved long-term performance of
the
Company and to align their interests with those of the stockholders.
The
Equity Guidelines provide for awards of restricted stock and other
forms
of equity compensation.
|
· |
One
aim of the Equity Guidelines, over the long term, is to target the
market
value of equity holdings of the chief executive and chief financial
officers at greater than twice their annual cash compensation.
|
· |
In
adopting the Equity Guidelines, the Board also established a target
level
of stock ownership for other senior managers equal to annual cash
compensation. Grants of restricted stock are 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.
|
Retention
The
Committee seeks to retain key executives using a combination of competitive
salaries and equity. The major component of this element of compensation is
equity.
· |
The
retention element is implemented through making grants of equity,
which
vest over time. Grants of options and restricted stock are designed
to
vest in tranches over a defined period. Options usually vest over
five or
ten years and have a time limit for exercise of 10 years. Restricted
stock
usually vests over a five year period. The vesting criteria stipulate
that
the employee will gain the full value of any grant under the plan
should
they continue to be an employee of the Company throughout the vesting
period.
|
Other
benefits
All
employees may participate in the following benefit plans upon the attainment
of
certain entrance requirements:
· |
UK
employees may participate in the Company’s UK pension plan, to which both
the Company and the employee make
contributions.
|
· |
US
employees may participate in the Company’s US pension plan, which is
funded by the Company.
|
· |
Senior
managers in the UK receive private medical coverage which is a taxable
benefit to the employee.
|
· |
US
employees may participate in a contributory medical
plan.
|
Performance
of the NEOs
In
line with
considering the compensation objectives, performance criteria and Equity
Guidelines described above, as well as the industry comparables, the Committee
reviewed the individual performance of the senior management group consisting
of
the CEO, CFO and Principal Accounting Officer early
in
the fiscal year to determine annual salaries, and again after the end of the
fiscal year to determine annual bonuses. Mr. Boyle’s salary was increased by 5%
for fiscal 2007 reflecting inflation and to maintain his salary in line with
industry comparables. Based on his performance during fiscal 2006, especially
including the successful implementation of a Company-wide financial accounting
system, and on the Committee’s desire to compensate him at the average salary
for comparable positions in the area of the Company’s headquarters, Mr.
McPartlin’s salary was increased by 10% for fiscal 2007. In April 2007 the
Company recruited Mr. Paul N. Farquhar as Principal Accounting Officer at an
annual salary of £90,000.
The
Committee
determined to grant the NEOs cash bonuses after year-end in the amounts shown
in
the Summary Compensation Table in recognition of performance against their
individual targets, and the financial performance of the Company as a whole.
In
order to encourage the NEO’s to retain restricted stock on vesting, these cash
bonuses also included amounts to meet tax liabilities arising from the vesting
of restricted stock in December 2007.
Shortly
after joining the Company the Committee awarded Mr. Farquhar 2,000 shares of
restricted stock, which vested in December 2007.
Compensation
Committee
Report
The
Compensation Committee has reviewed and discussed the foregoing Compensation
Discussion and Analysis with management and, based on this review and
discussion, the Compensation Committee recommended to the Board of Directors
that the Compensation Discussion and Analysis be included in this Proxy
Statement.
|
By
the Compensation Committee,
|
|
Maarten
D. Hemsley, Chairman
|
|
Marvin
G. Schorr
|
|
Paul
O. Stump
|
Compensation
Tables
The
following tables provide information for the last fiscal year concerning the
compensation of each of the executive officers of the Company whose total
compensation exceeded $100,000 in the most recent fiscal year.
Fiscal
2007 Summary Compensation
Table
Name
and principal position
|
Year
|
Salary
(1)
(£)($)
|
Bonus
(1)
(£)($)
|
Stock
Awards (2)
($)
|
Option
Awards
(2)
($)
|
Change
in Pension Value
(1)
($)
|
All
Other
Compensation
(1)
($)
|
Total
($)
|
Matthew
Boyle
President
and Chief Executive Officer
|
2007
|
£141,100
$279,308
|
£35,183
$71,668
|
$32,283
|
$13,232
|
£37,000
$75,369
|
£ 804
$1,575
|
$
473,435
|
Paul
A. McPartlin
Vice
President and Chief Financial Officer
|
2007
|
£
91,375
$180,927
|
£14,697
$29,938
|
$5,662
|
$
2,049
|
£78,000
$158,886
|
£1,532
$3,003
|
$
380,465
|
Paul
N. Farquhar
Vice
President, Treasurer and Principal Accounting Officer
|
2007
|
£
45,000
$
90,578
|
£12,394
$25,247
|
$10,588
|
-
|
-
-
|
£
434
$
882
|
$127,295
|
(1) Messrs.
Boyle,
McPartlin and Farquhar are residents of the United Kingdom and receive their
non-equity compensation in British Pounds, as well as participating in the
Company’s U.K. pension plan. The table sets out their non-equity compensation
and change in pension value in both British Pounds (£) and in US Dollars ($)
translated at the exchange rates (ranging from $1.90 to 2.04) in force on the
respective payment dates.
(2) The
amounts shown in these columns do not reflect compensation actually received
by
the executive officer. Instead, they represent
the compensation expense incurred by the Company relating to restricted stock
awards and stock options, respectively, held by the officer during fiscal 2007.
These amounts are determined in accordance with FAS 123(R) using the assumptions
described in Note (1) E to the Company’s financial statements included in the
fiscal 2007 Form 10-K, except that no forfeitures of awards have been
assumed.
Fiscal
2007 Grants
of Plan-Based
Awards
Name
|
Grant
Date
|
Stock
Awards: Number of Shares
of Stock (#)(1)
|
Grant
Date Fair Value of Stock
Awards
|
Paul
N. Farquhar
|
4/24/07
|
2,000
|
$16,940
|
(1) These
shares of restricted stock vested in full on December 7, 2007, the third
business day after the Company publicly announced its financial results for
fiscal 2007. Dividends are paid on shares of restricted stock at the same rate
as on all other outstanding shares.
Outstanding
Equity Awards at Fiscal
2007 Year-End
|
Option
Awards
|
Stock
Awards
|
Name
|
Number
of
Securities
Underlying
Unexercised Options (#)
Exercisable
|
Number
of Securities Underlying
Unexercised Options (#)
Unexercisable
|
Option
Exercise Price
($)
|
Option
Expiration
Date
|
Number
of Shares that Have not
Vested (#)
|
Market
Value of Shares that
Have not Vested ($)(X)
|
Matthew
Boyle
|
18,000
|
2,000(1)
|
$13.75
|
Nov
13, 2007
|
|
|
Matthew
Boyle
|
7,000
|
3,000(2)
|
$10.63
|
Nov
1, 2009
|
|
|
Matthew
Boyle
|
5,000
|
5,000(3)
|
$
9.60
|
Nov
6, 2011
|
|
|
Matthew
Boyle
|
8,000
|
12,000(4)
|
$
4.37
|
Apr
30, 2013
|
|
|
Matthew
Boyle
|
|
|
|
|
9,000(5)
|
$78,300
|
Matthew
Boyle
|
|
|
|
|
12,000(6)
|
$104,400
|
Paul
A. McPartlin
|
5,000
|
-
|
$10.91
|
Jan
26, 2010
|
|
|
Paul
A. McPartlin
|
-
|
2,000(7)
|
$
4.37
|
Apr
30, 2013
|
|
|
Paul
A. McPartlin
|
|
|
|
|
3,000(8)
|
$26,100
|
Paul
N. Farquhar
|
-
|
-
|
-
|
-
|
2,000(9)
|
$17,400
|
(1) The
shares subject to this option vest on November 13, 2007.
(2) The
shares subject to this option vest at 1,000 shares per year, beginning on
November 1, 2007 until October 30, 2009
(3) The
shares subject to this option vest at 2,000 shares per year, beginning on April
30, 2008 until April 29, 2013.
(4) The
shares subject to this option vest at 1,000 shares per year, beginning on
November 6, 2007 until November 5, 2013.
(5) These
shares of restricted stock vest as to 3,000 shares per year on the third
business day after the Company publicly announces its financial results for
fiscal 2007 and 2008 and the earlier of November 21, 2009, or the third business
day after the Company publicly announces its financial results for fiscal
2009.
(6) These
shares of restricted stock vest as to 3,000 shares per year on the third
business day after the Company publicly announces its financial results for
fiscal 2007, 2008 and 2009 and the earlier of December 5, 2010, or the third
business day after the Company publicly announces its financial results for
fiscal 2010.
(7) The
shares subject to this option vest at 1,000 shares per year on April 30, 2008
until April 30, 2009. The Compensation committee has determined that the vesting
of this option will be accelerated on Mr. McPartlin’s retirement from the
Company which is expected to take place in January 2008.
(8) These
shares of restricted stock vest as to 1,000 shares per year on the third
business day after the Company publicly announces its financial results for
fiscal 2007 and 2008 and the earlier of November 21, 2009, or the third business
day after the Company publicly announces its financial results for fiscal 2009.
The Compensation committee has determined that the vesting of this restricted
stock will be accelerated on Mr. McPartlin’s retirement from the Company which
is expected to take place in January 2008.
(9) These
shares of restricted stock vested in full on December 7, 2007, the third
business day after the Company publicly announced its financial results for
fiscal 2007.
(X)
|
Based
on the closing sale price ($8.70) of the common stock on September
28,
2007, the last trading day of the fiscal
year.
|
Option
Exercises and Stock Vested
during Fiscal 2007
|
Option
Awards
|
Stock
Awards
|
|
Number
of Shares Acquired on
Exercise (#)
|
Value
Realized on Exercise
($)(1)
|
Number
of Shares Acquired on
Vesting (#)
|
Value
Realized on Vesting
($)(2)
|
Matthew
Boyle
|
-
|
-
|
6,000
|
$44,100
|
Paul
A. McPartlin
|
8,000
|
$55,200
|
1,000
|
$
7,350
|
(1) The
difference between the average of the high and low sale price of the common
stock on the day of exercise and the respective option exercise price,
multiplied by the number of shares.
(2) The
average of the high and low sale price of the common stock on the day of vesting
multiplied by the number of shares.
Pension
Benefits
Table
The
executive officers participate in the Company’s U.K. Retirement Plan, a defined
benefit plan, under which benefits at retirement (normally, 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. 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 Messrs. Boyle, McPartlin, and Farquhar 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. The following table sets forth
information concerning the accumulated benefit of each officer employee pursuant
to the U.K. Retirement Plan.
Name
|
Plan
Name
|
Number
of Years of Credited
Service (#)
|
Present
Value of Accumulated
Benefit
(£)($)(1)(2)
|
Payments
During Last Fiscal
Year (£)($)
|
Matthew
Boyle
|
Sevcon
Ltd Pension Plan
|
10
|
£
218,000
$
444,066
|
-
|
Paul
A. McPartlin
|
Sevcon
Ltd Pension Plan
|
31
|
£
699,000
$1,423,863
|
-
|
Paul
N.Farquhar(3)
|
Sevcon
Ltd Pension Plan
|
-
|
-
|
-
|
(1) The
valuation method and assumptions used to calculate these amounts are those
used
for financial reporting purposes, as discussed in Note 7 to the Company’s
financial statements included in the fiscal 2007 Form 10-K, except that each
officer’s retirement age is assumed to be the normal
retirement age as defined in the plan.
(2) Pension
benefits are accrued and paid in British Pounds (£). This column also provides
the US Dollars ($) equivalent, translated at the exchange rate ($2.04) in force
on September 30, 2007, the pension plan measuring date used for financial
reporting purposes with respect to the Company’s financial statements for fiscal
2007.
(3) Mr.
Farquhar joined the UK Pension plan on October 1, 2007 and therefore had no
benefits accrued at September 30, 2007.
Potential
Payments upon Termination
or Change in Control
Upon
a
change in control of the Company, whether or not the officer’s employment is
terminated, vesting of shares of restricted stock and unvested stock options
held by each officer would accelerate. (For this purpose, a "change in control"
means a change in control of the Company that would be required by SEC rules
to
be reported in the Company’s proxy statement, including the acquisition by any
person of beneficial ownership of securities of the Company representing 25%
or
more of the combined voting power of the Company's then outstanding securities.)
The value of this accelerated vesting for each officer, assuming that a change
of control had occurred on September 30, 2007, would have been as follows:
Mr.
Boyle ($234,660), Mr. McPartlin ($34,760) and Mr. Farquhar ($17,400). These
amounts consist of (i) the value of the shares of restricted stock for which
vesting accelerated, based on the $8.70 closing sale price of the Company’s
common stock on September 28, 2007, plus (ii) the difference between the
exercise prices of the options for which vesting accelerated and $8.70,
multiplied by the respective numbers of option shares. Pursuant to their
employment contracts, each of Mr. Boyle, Mr. McPartlin and Mr. Farquhar would
be
entitled to a minimum of 3 months pay on termination of employment. This amounts
to £35,700 ($72,721) for Mr. Boyle, £23,375 ($47,615) for Mr. McPartlin and
£22,500 ($45,833) for Mr. Farquhar. The Company has no other arrangements with
any executive officer to provide any other severance or benefits upon
termination of employment or a change in control.
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, 2007, (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,
2007 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 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 fiscal 2007 and to
provide audit and certain non-audit services during fiscal 2008. 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 Company’s principal accountant (including fees billed by other members
of Baker Tilly International), for each of the last two fiscal years are set
out
below:
|
|
(in
thousands)
|
|
|
|
2007
|
|
|
2006
|
|
Audit
fees
|
|
$
|
165
|
|
$
|
152
|
|
Audit-related
fees
|
|
|
6
|
|
|
5
|
|
Tax
fees
|
|
|
23
|
|
|
24
|
|
All
other fees
|
|
|
11
|
|
|
-
|
|
Total
|
|
$
|
205
|
|
$
|
181
|
|
The
audit-related fees in fiscal 2007 relate primarily to the audit of the pension
plan for the Company’s UK subsidiary. The audit-related fees in fiscal 2006
relate primarily to reviews of the Company’s internal controls and the audit of
the pension plan for the Company’s UK subsidiary. 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.
The other fees disclosed above are for advice in relation to indirect taxes
and
employment taxes.
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
above include fees billed by VCC (the Company’s principal accountant), an
independent member of Baker Tilly International, as well as fees billed by
independent Baker Tilly International members in the United Kingdom and France
relating to the United Kingdom and French subsidiaries of the Company.
TRANSACTIONS
WITH RELATED
PERSONS
The
Audit
Committee of the Board of Directors is charged with the review and oversight
of
any transaction involving the Company in which any of the directors or executive
officers, any nominee for director, or any of their immediate family members
has
a direct or indirect material interest. The Chief Financial Officer is primarily
responsible for the development and implementation of processes and controls
to
obtain information from the directors and executive officers with respect to
related person transactions and for then determining whether the related person
has a direct or indirect material interest in the transaction. The Audit
Committee will review all such transactions of which it is informed and will
approve or ratify those it considers appropriate. Transactions that are
determined to be directly or indirectly material to a related person will be
disclosed in our proxy statement. In the course of its review of a related
person transaction, the Audit Committee will consider the nature of the person’s
interest in the transaction, the material terms of the transaction, including,
without limitation, the amount and type of transaction, the importance of the
transaction to the person, the importance of the transaction to the Company,
whether the transaction would impair the judgment of a director or executive
officer to act in the best interest of the Company, and any other factors the
Committee deems appropriate. Any member of the Audit Committee who is a related
person with respect to a transaction under review may not participate in the
deliberations or vote respecting approval or ratification of the transaction,
although such director may be counted in determining the presence of a quorum
at
a meeting of the Committee that considers the transaction.
During
fiscal 2007, no related person transactions requiring disclosure in the proxy
statement were identified or submitted to the Audit Committee for approval.
DEADLINE
FOR STOCKHOLDER PROPOSALS
FOR 2009 ANNUAL MEETING
In
order
for a stockholder proposal to be considered for inclusion in the Company’s proxy
materials for the annual meeting in 2009, it must be received by the Company
at
155 Northboro Road, Southborough, Massachusetts 01772, Attention: Treasurer,
no
later than August 29, 2008.
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.
OTHER
BUSINESS
The
Board
of Directors does not know of any business that 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, 2007
PROXY
TECH/OPS
SEVCON,
INC.
Proxy
Solicited by the Board of
Directors for Annual Meeting of Stockholders
to
be held January 22,
2008
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 22, 2008 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 Boyle
O Stump
|
|
|
|
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.