proxy_jan10annmtg.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 26, 2010, for the following purposes:
1.
|
To
elect as directors the three persons named in the Company’s proxy
statement for the meeting, each to hold office for a term of three
years.
|
2.
|
To
approve an amendment of the Company’s 1996 Equity Incentive Plan
increasing the number of shares authorized for
issuance.
|
3.
|
To
ratify the selection of Caturano and Company, P.C. as the Company’s
independent registered public accounting firm for the fiscal year ending
September 30, 2010.
|
4.
|
To
transact such other business as may properly come before the
meeting.
|
Only stockholders of record at the
close of business on December 2, 2009 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 17, 2009
PROXY
STATEMENT
INFORMATION
CONCERNING THE PROXY SOLICITATION
Important
Notice Regarding the Availability of Proxy Materials for the
Stockholder
Meeting to Be Held on January 26, 2010:
This
Proxy Statement and the Annual Report are available to the Company’s
stockholders
electronically
via the Internet at www.proxyvote.com
Approximate
Date of Mailing: December 17, 2009
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 26, 2010, at 5:00 p.m. at the offices of Edwards Angell Palmer &
Dodge LLP, 20th Floor, 111 Huntington Avenue at Prudential Center, Boston,
Massachusetts, and 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 proxy and proxy materials will also be distributed, at the expense of
the Company, through brokers, custodians and other similar parties to beneficial
owners.
On December 2, 2009, the Company had
outstanding 3,326,322 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 2, 2009 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 or her 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, FOR the amendment increasing the authorized shares under the
Company’s 1996 Equity Incentive Plan and FOR the ratification of the selection
of the Company’s independent registered public accounting firm.
BENEFICIAL
OWNERSHIP OF COMMON STOCK
The following table provides
information as to the ownership of the Company’s Common Stock as of December 2,
2009 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 3
and 4 below.
Name
and Address
Of Beneficial Owner
|
Amount
Beneficially
Owned (1)
|
Percent
of Class
|
|
|
|
Mario
J. Gabelli/GGCP, Inc./GAMCO Investors, Inc.
One Corporate
Center
Rye, NY
10580-1435
|
701,527(2)
|
21.1%
|
|
|
|
Dr.
Marvin G. Schorr
330 Beacon Street
Boston, MA 02116
|
364,278
|
11.0%
|
Name
and Address
Of Beneficial Owner
|
Amount
Beneficially
Owned (1)
|
Percent
of Class
|
|
|
|
Bernard
F. Start
Water Ridge, Front Street,
Corbridge,
Northumberland, NE46
2JY,
United Kingdom
|
242,477
|
7.3%
|
|
|
|
Wells
Fargo & Company
Wachovia
Securities LLC (3)
420
Montgomery Street
San
Francisco, CA
|
222,448
|
6.7%
|
|
|
|
Paul
D. Sonkin/Hummingbird Management LLC/Hummingbird Capital, LLC
(4)
460 Park Avenue, 12th
Floor
New York, New York
10022
|
211,925
|
6.4%
|
|
|
|
Matthew
Boyle
Tech/Ops Sevcon,
Inc.
155 Northboro Road
Southborough, MA
01772
|
77,400(5)
|
2.3%
|
|
|
|
Paul
N. Farquhar
Tech/Ops Sevcon,
Inc.
155 Northboro Road
Southborough, MA
01772
|
27,000
|
(#)
|
|
|
|
All
current executive officers and
directors as a group (8
persons)
|
850,635(5)
|
25.3%
|
(#)
|
Less
than 1%
|
|
|
(1)
|
Unless
otherwise indicated, each owner has sole voting and investment power with
respect to the shares listed or shares that power with his
spouse.
|
|
|
(2)
|
As
reported on Schedule 13D/A filed with the Securities and Exchange
Commission (“SEC”) on July 27, 2009, 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 GGCP,
Inc. and GAMCO Investors, Inc. As reported in that Schedule 13D/A, GAMCO
Asset Management, Inc., a subsidiary of GAMCO Investors, Inc., has sole
voting and investment power with respect to 435,519 of such shares (13.1%
of the class) and Gabelli Funds, LLC, a subsidiary of GAMCO Investors,
Inc., has sole voting and investment power with respect to 200,006 of such
shares (6.0% of the class). Teton Advisors, Inc., which is controlled by
Mr. Gabelli and GGCP, Inc., has sole voting and investment power with
respect to 66,002 of such shares (2.0% of the class).
|
|
|
(3)
|
As
reported on Schedule 13G/A filed with the SEC on January 27, 2009, the
shares shown are held by Wachovia Securities LLC, an investment adviser
subsidiary of Wells Fargo & Company.
|
|
|
(4)
|
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.
|
|
|
(5)
|
Includes the following shares subject to
stock options exercisable within sixty days: Mr. Boyle (26,000), all
current executive officers and directors as a group
(29,000).
|
PROPOSAL
1: 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
three of the Company’s current directors, Maarten D. Hemsley, Dr. Marvin G.
Schorr and David R. A. Steadman, expire at the annual meeting. Based on the
recommendation of its Nominating and Governance Committee, the Board has
nominated Messrs. Hemsley, Schorr and Steadman 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.
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
Beneficially
Owned
and
Percent
of
Class (†)
|
Matthew
Boyle (3)
Age
– 47
|
2011
|
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
|
77,400
(2.3%)(1)
|
*Maarten
D. Hemsley (4)(5)
Age
– 60
|
2010
|
Former
Chief Financial Officer and currently a director of Sterling Construction
Company, Inc., a NASDAQ listed company involved in civil construction in
Texas and Nevada. Senior fund manager at North Atlantic Value LLP, part of
the J. O. Hambro Capital Management Group, London, England, since 2001.
President of Bryanston Management Ltd., a specialized financial services
company, since 1993. Director of a number of UK privately-held
companies.
|
2003
|
13,000
(#)(2)
|
Paul
B. Rosenberg (4)(6)
Age
– 77
|
2012
|
Former
Treasurer of the Company.
|
1988
|
94,480
(2.8%)
|
*Dr.
Marvin G. Schorr (3)(5)(6)
Age
– 84
|
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
|
364,278
(11.0%)
|
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
Beneficially
Owned
and
Percent
of
Class (†)
|
Bernard
F. Start
Age
– 71
|
2012
|
Vice-Chairman
of the Board since November 1997. President and Chief Executive Officer of
the Company from January 1988 to November 1997.
|
1988
|
242,477
(7.3%)
|
*David
R. A. Steadman (3)(4)(6)
Age
– 72
|
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
|
22,000
(#)
|
Paul
O. Stump (4)(5)
Age
– 57
|
2011
|
President
and Chief Executive Officer of Telequip Corporation, a manufacturer of
coin dispensing equipment, from 1997 to 2007. Currently Vice President of
Engineering of Telequip Corporation.
|
2005
|
10,000
(#)
|
†
|
Unless
otherwise indicated, each person has sole voting and investment power with
respect to the shares listed or shares that power with his
spouse.
|
(#)
|
Less
than 1%
|
(1)
|
Includes
26,000 shares subject to stock options exercisable within sixty
days.
|
(2)
|
Includes
3,000 shares subject to stock options exercisable within sixty
days.
|
(3)
|
Member
of the Executive Committee.
|
(4)
|
Member
of the Audit Committee.
|
(5)
|
Member
of the Compensation Committee.
|
(6)
|
Member
of the Nominating and Governance Committee.
|
Vote
Required
Pursuant to the Company’s by-laws,
directors will be elected by a plurality of the votes properly cast at the
annual meeting. Broker non-votes and votes withheld will not be treated as votes
cast and will not affect the outcome of the election.
The Board
of Directors recommends that you vote FOR the election
of
Messrs.
Hemsley, Schorr and Steadman as directors.
PROPOSAL
2:
|
APPROVAL
OF AN AMENDMENT OF THE 1996 EQUITY INCENTIVE PLAN INCREASING THE NUMBER OF
SHARES AUTHORIZED FOR ISSUANCE
|
General
The Company is seeking stockholder
approval of an amendment to its 1996 Equity Incentive Plan (the “Equity Plan”)
increasing the number of shares of common stock authorized for issuance by
200,000. Approval of the amended Equity Plan will also constitute re-approval of
the material terms of the Plan’s performance goals for purposes of Rule 162(m)
of the U.S. tax code, as described below. Since 1996 the stockholders have
approved an aggregate of 250,000 shares for issuance under the 1996 Equity
Incentive Plan and 50,000 shares under the 1998 Directors Stock Option Plan. The
Directors Stock Option Plan was merged with the 1996 Equity Incentive Plan in
January 2004. Of the 300,000 shares previously approved, only 54,500 remained
available for grant as of December 2, 2009, as the other shares have been
granted to key employees and directors. If approved, the increase of 200,000
shares, combined with the 54,500 still available for issuance under the Equity
Plan and 63,500 options still outstanding, would represent 9.56% of the
3,326,322 shares issued and outstanding as of December 2, 2009. The Company
expects to use the additional authorized shares for continued periodic equity
grants to key employees, directors and consultants.
The Company has not increased the
number of shares authorized for issuance to directors and employees since the
2003 annual meeting. The Equity Plan is the Company’s sole vehicle
for granting equity awards and will terminate on January 27, 2014.
The purpose of the Equity Plan is to
attract and retain key employees and consultants of the Company, to provide them
an incentive to achieve long-range performance goals and to enable them to
participate in the Company’s long-term growth. The Equity Plan also serves to
align the interests of non-employee directors with those of the stockholders by
increasing the directors’ proprietary interest in the Company’s growth and
success, since a portion of the directors’ compensation is paid in the form of
shares. This also helps attract and retain well-qualified persons to serve as
directors. As of December 2, 2009, six key employees and six non-employee
directors were eligible for awards under the Equity Plan. The Equity Plan is
administered by a committee (the "Committee") of not less than three members of
the Board of Directors, currently the Compensation Committee. The Committee may
make awards to the Company’s employees, directors and consultants based on their
past or anticipated contributions to the achievement of the Company’s objectives
and other relevant matters.
The Board of Directors believes that
the amendment is needed to ensure that a sufficient number of shares are
available to be issued under the Equity Plan in the future in order to provide
appropriate equity incentives to attract, motivate and retain key employees,
directors and consultants of the Company.
Shares
Subject to Awards
Assuming approval of this proposal,
254,500 shares will be available for awards under the Equity Plan. The number
and kind of shares are subject to adjustment to reflect stock dividends,
recapitalizations or other changes affecting the Company’s Common Stock. If any
outstanding or future award expires or is terminated unexercised or settled in a
manner that results in fewer shares outstanding than were initially awarded, the
shares which would have been issuable will again be available for award under
the Equity Plan.
Description
of Awards
The Equity Plan provides for the
following basic types of awards:
Restricted
Stock. The
Committee may grant shares of Common Stock that are only earned if specified
conditions, such as a completing a term of employment or satisfying
pre-established performance goals, are met and that are otherwise subject to
forfeiture.
Restricted Stock
Units. The
Committee may grant the right to receive shares of Common Stock in the future,
also based on meeting specified conditions and subject to forfeiture. These
awards are to be made in the form of “units,” each representing the equivalent
of one share of Common Stock, although they may be settled in either cash or
stock. Restricted stock unit awards represent an unfunded and unsecured
obligation of the Company. In the discretion of the Committee, units may be
awarded with rights to the payment of dividend equivalents.
Stock Options.
The Committee may grant options to purchase shares of Common Stock that are
either incentive stock options (ISOs) eligible for the special tax treatment
described below or nonstatutory stock options. No option may have an exercise
price that is less than the fair market value of the Common Stock on the date of
grant or a term of more than ten years. An option may be exercised by the
payment of the option price in cash or with such other lawful consideration as
the Committee may determine, including by delivery of a note (other than for a
director or executive officer) or shares of Common Stock valued at their fair
market value on the date of delivery.
Stock
Appreciation Rights. The Committee may grant
Stock Appreciation Rights (SARs), under which the participant receives cash,
shares of Common Stock or other property, or a combination thereof, as
determined by the Committee, equal in value to the difference between the
exercise price of the SAR and the fair market value of the Common Stock on the
date of exercise. SARs may be granted in tandem with options (at or after award
of the option) or alone and unrelated to an option. SARs in tandem with an
option terminate to the extent that the related option is exercised, and the
related option terminates to the extent that the tandem SAR is exercised. The
exercise price of an SAR may not be less than the fair market value of the
Common Stock on the date of grant or in the case of a tandem SAR, the exercise
price of the related option.
Awards under the Equity Plan contain
such terms and conditions consistent with the Equity Plan as the Committee in
its discretion approves. The Committee has discretion to administer the Equity
Plan in the manner which it determines, from time to time, is in the best
interest of the Company. For example, the Committee will fix the terms of stock
options, SARs and restricted stock grants and determine whether, in the case of
options and SARs, they may be exercised immediately or at a later date or dates.
Awards may be granted subject to conditions relating to continued employment,
achievement of performance goals and restrictions on transfer. The Committee may
provide, at the time an award is made or at any time thereafter, for the
acceleration of a participant's rights or cash settlement upon a change in
control of the Company. All options and restricted stock awards granted to date
provide for the acceleration of vesting in the event of a change in control of
the Company. The terms and conditions of awards need not be the same for each
participant. The foregoing examples illustrate, but do not limit, the manner in
which the Committee may exercise its authority in administering the Equity
Plan.
The maximum aggregate number of shares
subject to all awards that may be granted to a participant in any calendar year
is 60,000 shares, subject to adjustment for changes in capitalization.
Incorporation of this limit is intended to qualify the awards as
performance-based compensation that is not subject to the Section 162(m) $1
million limit on deductibility for federal income tax purposes of compensation
paid to certain senior officers, as further discussed below.
Amendment
of Equity Plan
The Board may amend the Equity Plan
subject to stockholder approval required to comply with any applicable tax or
regulatory requirement. The Committee has authority to amend
outstanding awards, including changing the date of exercise and converting an
incentive stock option to a nonstatutory option, if the Committee determines
that such action would not adversely affect the participant.
U.S.
Federal Income Tax Consequences Relating to Awards under the Equity
Plan
The following discussion summarizes
certain U.S. federal income tax consequences of awards under the Equity Plan
based on the law as in effect on the date of this proxy statement. It does not
purport to cover federal employment taxes or other federal tax consequences that
may be associated with awards, nor does it cover state, local or non-U.S.
taxes.
Incentive Stock
Options. A
participant does not realize taxable income upon the grant or exercise of an ISO
under the Equity Plan. If a participant does not dispose of shares received upon
exercise of an ISO for at least two years from the date of grant and one year
from the date of exercise, then (1) upon sale of the shares, any amount realized
in excess of the exercise price is taxed to the participant as long-term capital
gain and any loss sustained will be a long-term capital loss and (2) the Company
may not take a deduction for federal income tax purposes. The exercise of ISOs
gives rise to an adjustment in computing alternative minimum taxable income that
may result in alternative minimum tax liability for the
participant.
If shares of Common Stock acquired upon
the exercise of an ISO are disposed of before the end of the one and two-year
periods described above (a “disqualifying disposition”), the participant
realizes ordinary income in the year of disposition in an amount equal to the
excess (if any) of the fair market value of the shares at exercise (or, if less,
the amount realized on a sale of such shares) over the exercise price. The
Company would be entitled to a tax deduction for the same amount. Any further
gain realized by the participant would be taxed as a short-term or long-term
capital gain and would not result in any deduction for the Company. A
disqualifying disposition in the year of exercise will generally avoid the
alternative minimum tax consequences of the exercise of an ISO.
Nonstatutory
Stock Options. No
income is realized by the participant at the time a nonstatutory option is
granted. Upon exercise, the participant realizes ordinary income in an amount
equal to the difference between the exercise price and the fair market value of
the shares on the date of exercise. the Company would receive a tax deduction
for the same amount. Upon disposition of the shares, appreciation or
depreciation after the date of exercise is treated as a short-term or long-term
capital gain or loss and will not result in any further tax deduction by the
Company. The ordinary income recognized with respect to the receipt of shares
upon exercise of a nonstatutory option will be subject to applicable wage
withholding and other employment taxes.
Restricted
Stock. Generally,
a participant will be taxed at the time the restrictions on the shares lapse
without a forfeiture. The excess of the fair market value of the shares at that
time over the amount paid, if any, by the participant for the shares will be
treated as ordinary income. The participant may instead elect under Section
83(b) of the U.S. tax code within 30 days after the date of the grant to be
taxed (as ordinary income) on the date of grant on the excess of the then fair
market value of the shares over the amount paid, if any, for the shares. If the
shares subject to the Section 83(b) election are subsequently forfeited, the
recipient will not be entitled to any deduction, refund or loss for tax
purposes. In either case, the Company would receive a tax deduction for the
amount reported as ordinary income to the participant. Upon the participant’s
disposition of the shares, any subsequent appreciation or depreciation is
treated as a short or long-term capital gain or loss and will not result in any
further tax deduction by the Company.
Restricted Stock
Units. A participant
will generally realize ordinary income in an amount equal to the fair market
value of the shares (or the amount of cash) distributed to settle the restricted
stock units at the time of settlement, which is generally upon vesting of the
restricted stock units. In certain limited circumstances, a settlement date may
be later than the vesting date, in which case the settlement would be made in a
manner intended to comply with the rules governing non-qualified deferred
compensation arrangements. In either case, the Company would receive a
corresponding tax deduction at the time of settlement. If the restricted stock
units are settled in shares, then upon sale of those shares any subsequent
appreciation or depreciation would be treated as short-term or long-term capital
gain or loss to the participant and would not result in any further tax
deduction by the Company.
Other Tax
Matters.
Section 162(m). United States
tax laws generally do not allow publicly-held companies to obtain tax deductions
for compensation of more than $1 million paid in any year to any of the Chief
Executive Officer or three most highly paid executive officers other than the
Chief Financial Officer (each, a “covered person”) unless the compensation is
“performance-based” as defined in Section 162(m) of the U.S. tax code. Stock
options and SARs granted under the Equity Plan are performance-based
compensation if they have exercise prices not less than the fair value of Common
Stock on the date of grant. In the case of restricted stock and restricted stock
units, performance goals generally must be pre-established for the relevant
performance period and satisfaction of any such performance goals must be
certified by the Committee.
Section 162(m) also requires that the
general business criteria of any performance goals that are established by the
Committee be periodically reapproved by stockholders in order for such awards to
be considered performance-based and to preserve the Company's federal income tax
deductions that may become available to the Company when payments based on these
performance goals are made to covered persons. The Equity Plan sets forth the
following list of business criteria upon which the Committee may establish
performance goals for deductible performance-based awards made to covered
persons: (i) increases in the price of the Common Stock; (ii) market share;
(iii) sales; (iv) revenue; (v) return on equity, assets, or capital; (vi)
economic profit (economic value added); (vii) total shareholder return; (viii)
costs; (ix) expenses; (x) margins; (xi) earnings or earnings per share; (xii)
cash flow; (xiii) customer satisfaction; (xiv) operating profit; or (xv) any
combination of the foregoing, including without limitation goals based on any of
such measures relative to appropriate peer groups or market indices. Performance
goals may be particular to a participant or may be based, in whole or in part,
on the performance of the division, department, line of business, subsidiary, or
other business unit in which the participant works, or on the performance of the
Company generally. Shareholder approval of the amended Equity Plan pursuant to
this Proposal 3 will constitute re-approval of the material terms of the
performance goals of the Equity Plan for purposes of Section
162(m).
Parachute Payment Tax. A
participant who receives any accelerated vesting or exercise of options or stock
appreciation rights or accelerated lapse of restrictions on restricted stock or
restricted stock units in connection with a change in control might be deemed to
have received an “excess parachute payment” under federal tax law. In such
cases, the participant may be subject to an excise tax and the Company may be
denied a tax deduction.
Plan
Benefits
To date, the Committee has granted
stock options and restricted stock under the Equity Plan in the following
aggregate amounts to: (i) Matthew Boyle, President and Chief Executive Officer,
125,000 shares, (ii) Paul N. Farquhar, Vice President and Chief Financial
Officer, 27,000 shares, (iii) all current executive officers as a group, 152,000
shares, (iv) all current non-employee directors as a group, 85,000 shares, and
(v) all other employees as a group, 170,500 shares.
The following table sets out the status
of shares authorized for issuance under equity compensation plans at September
30, 2009.
Plan
Category
|
Number
of
securities
to
be
issued
upon
exercise
of
outstanding
options
warrants
and
rights
|
Weighted-
average
exercise
price
of
outstanding
options,
warrants
and rights
|
Number
of
securities
remaining
available
for
future
issuance
under
equity
compensation
plans
(excluding
securities
reflected
in
column
(a)) at
end
of year
|
|
(a)
|
(b)
|
(c)
|
Equity
compensation plans approved by security holders:
1996 Equity Incentive
Plan
1998 Directors Stock Option
Plan
|
58,500
5,000
|
$7.17
$5.40
|
54,500
-
|
Sub Total
|
63,500
|
$7.03
|
54,500
|
Equity
compensation plans not approved by security holders
|
-
|
-
|
-
|
Total
|
63,500
|
$7.03
|
54,500
|
The closing price of the Company’s
Common Stock on the NASDAQ Capital Market on December 2, 2009 was
$3.00.
Vote
Required
Approval of an increase in the number
of shares authorized for issuance under the Equity Plan will require the
affirmative vote of a majority of the votes cast at the annual meeting.
Accordingly, abstentions and broker non-votes will not count as votes cast for
or against this proposal.
The Board
of Directors recommends that you vote FOR the approval
of
the
increase in the number of shares authorized for issuance under
the
Company’s 1996 Equity Incentive Plan.
Director
Independence
The Board has determined that all
directors, other than Mr. Boyle, are independent under the NASDAQ Capital Market
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 2009, 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.
PROPOSAL
3: RATIFICATION OF THE SELECTION OF THE COMPANY’S
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING SEPTEMBER
30, 2010
Upon the recommendation of its Audit
Committee, the Board of Directors has appointed the independent registered
public accounting firm of Caturano and Company, P.C. (“Caturano”), an
independent member of Baker Tilly International, as independent auditor to
conduct the annual audit of the Company’s financial statements for the fiscal
year ending September 30, 2010 and is seeking stockholder ratification of the
appointment. Caturano audited the Company's financial statements in fiscal 2009,
and the Audit Committee believes it is well qualified to continue.
Representatives of Caturano are
expected to attend the annual meeting and to be available to respond to
appropriate questions. They will also have the opportunity to make a statement
if they desire.
The fees billed by Caturano for each of
the last two fiscal years are set out below. They include fees billed by
independent Baker Tilly International members in the United Kingdom, France, the
Netherlands and Poland relating to the United Kingdom and French subsidiaries of
the Company.
|
|
(in
thousands)
|
|
|
|
2009
|
|
|
2008
|
|
Audit
fees
|
|
$ |
168 |
|
|
$ |
173 |
|
Audit-related
fees
|
|
|
5 |
|
|
|
6 |
|
Tax
fees
|
|
|
25 |
|
|
|
29 |
|
All
other fees
|
|
|
24 |
|
|
|
10 |
|
Total
|
|
$ |
222 |
|
|
$ |
218 |
|
The audit-related fees in fiscal 2009
and fiscal 2008 relate to the audit of the pension plan for the Company’s UK
subsidiary. The tax fees for both years 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.
Vote
Required
Ratification of the appointment of
Caturano by the stockholders is not required by law or by the Company’s by-laws.
The Board of Directors is nevertheless submitting this non-binding resolution to
the stockholders to ascertain their views. If this proposal is not approved at
the annual meeting, the Audit Committee intends to reconsider its recommendation
of Caturano as independent auditors. The Company may retain the firm for fiscal
2010 notwithstanding a negative stockholder vote.
The ratification of the appointment of
Caturano will require the affirmative vote of a majority of the votes cast at
the annual meeting. Accordingly, abstentions and broker non-votes will not count
as votes cast for or against this proposal.
The Board
of Directors recommends that you vote FOR the ratification of the
selection of
Caturano
as the Company’s independent registered public accounting firm
for the
fiscal year ending September 30, 2010.
Board Meetings
During the fiscal year ended September
30, 2009, the Board of Directors held a total of eight 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 2009.
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 NASDAQ Capital Market 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. The Audit
Committee met six times during the fiscal year ended September 30, 2009. 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, although, in light of
the current economic conditions, it has deferred consideration of any fiscal
2010 grants until January 2010. Other compensation decisions are made throughout
the year as circumstances warrant. 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 once
during the fiscal year ended September 30, 2009.
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,
2009.
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 NASDAQ Capital Market 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 $3,000 per year for their duties as such. In
fiscal 2009, in line with salary reductions in the company workforce, director
fees were reduced by 10%.
Consistent with past practice, the Compensation Committee granted
2,000 shares of restricted stock to each of the non-employee directors on
January 27, 2009. Restricted shares may not be sold, assigned, transferred,
pledged or otherwise disposed of by the recipient until they vest. Such
restricted shares will fully vest the day before the 2010 annual meeting of
stockholders or, if earlier, upon the
recipient’s death or disability or upon a change in control of the Company. If
the recipient’s service as a director of the Company is terminated for any
reason other than the recipient’s death or disability, any unvested shares will
be forfeited and returned to the Company,
unless the Committee determines otherwise in its discretion.
The following table shows compensation
paid to all non-employee directors who served during fiscal 2009:
Name
|
Fees
Earned or Paid in
Cash
($)
|
Stock
Awards
($)(1)(2)
|
Option
Awards
($)(1)(2)
|
Total($)
|
Maarten
D. Hemsley
|
20,125
|
7,507
|
1,382
|
29,014
|
Paul
B. Rosenberg(3)
|
20,125
|
7,507
|
-
|
27,632
|
Marvin
G. Schorr
|
20,125
|
7,507
|
-
|
27,632
|
Bernard
F. Start
|
17,250
|
7,507
|
-
|
24,757
|
David
R.A. Steadman
|
20,125
|
7,507
|
-
|
27,632
|
Paul
O. Stump
|
17,250
|
7,507
|
-
|
24,757
|
(1)
|
Represents
the compensation expense incurred by the Company relating to restricted
stock awards and stock options held by the director during fiscal 2009,
determined in accordance with FASB authoritative guidance in respect of
accounting for stock based compensation using
the methodology described in Note (1) E to the Company’s Financial
Statements included in the fiscal 2009 Form 10-K, which assumed that there
would be no forfeitures of restricted stock awards. For options, the
amount shown above assumes no forfeitures.
|
|
|
(2)
|
As
of September 30, 2009, the non-employee directors held restricted stock
and options as follows:
|
|
Restricted
Stock
|
Outstanding
Options
|
Name
|
#
Shares
|
#
Shares
|
#
Shares Vested
|
Maarten
D. Hemsley
|
2,000
|
5,000
|
3,000
|
Paul
B. Rosenberg
|
2,000
|
-
|
-
|
Marvin
G. Schorr
|
2,000
|
-
|
-
|
Bernard
F. Start
|
2,000
|
-
|
-
|
David
R.A. Steadman
|
2,000
|
-
|
-
|
Paul
O. Stump
|
2,000
|
-
|
-
|
(3)
|
Mr.
Rosenberg is a participant in the Company’s Directors Retirement Plan,
which was terminated in 1997. The change in value of his accumulated
benefit under the Plan in 2009 was
$2,341.
|
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 Compensation
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
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 $100,000 in
the most recent fiscal year.
Fiscal
2009 Summary Compensation Table
Name
and Principal Position
|
Year
|
|
Salary
($)(1)
|
|
|
Bonus
($)(1)
|
|
|
Stock
Awards
($)(2)
|
|
|
Option
Awards
($)(2)
|
|
|
All
Other
Compensation
($)(1)
|
|
|
Total
($)
|
|
Matthew
Boyle
President
and Chief Executive Officer
|
2009
|
|
$ |
216,062 |
|
|
$ |
- |
|
|
$ |
34,315 |
|
|
$ |
9,800 |
|
|
$ |
9,577 |
|
|
$ |
269,754 |
|
2008
|
|
$ |
290,172 |
|
|
$ |
- |
|
|
$ |
33,525 |
|
|
$ |
11,954 |
|
|
$ |
12,434 |
|
|
$ |
348,085 |
|
Paul
N. Farquhar
Vice
President and Chief Financial Officer
|
2009
|
|
$ |
136,637 |
|
|
$ |
- |
|
|
$ |
26,149 |
|
|
$ |
- |
|
|
$ |
4,999 |
|
|
$ |
167,785 |
|
2008
|
|
$ |
183,017 |
|
|
$ |
- |
|
|
$ |
23,899 |
|
|
$ |
- |
|
|
$ |
6,519 |
|
|
$ |
213,435 |
|
(1)
|
Messrs.
Boyle and Farquhar are residents of the United Kingdom and receive their
cash compensation in British Pounds. The amounts shown in the table were
determined using the exchange rates (ranging from $1.37 to $1.65 per Pound during
fiscal 2009) in force on the respective payment dates. In April 2009, to
preserve cash and lower the costs of the business, the executive officers,
in line with the rest of the Company workforce, implemented a 10% salary
sacrifice. This sacrifice was still in place at the end of the fiscal year
although the Company restored salaries to previous levels in
December 2009. The following table sets out their cash compensation as
actually paid in British Pounds
(£):
|
|
Year
|
|
Salary
(£)(1)
|
|
|
Bonus
(£)(1)
|
|
|
All
Other
Compensation
(£)
|
|
Mr.
Boyle
|
2009
|
|
£ |
141,550 |
|
|
£ |
- |
|
|
£ |
6,954 |
|
|
2008
|
|
£ |
147,450 |
|
|
£ |
- |
|
|
£ |
6,879 |
|
Mr.
Farquhar
|
2009
|
|
£ |
89,505 |
|
|
£ |
- |
|
|
£ |
3,625 |
|
|
2008
|
|
£ |
93,000 |
|
|
£ |
- |
|
|
£ |
3,592 |
|
(2)
|
The
amounts shown in these columns do not reflect compensation actually
received by the executive officer. Instead, they represent the
compensation expense incurred by the Company relating to restricted stock
awards and stock options, respectively, held by the officer during fiscal
2009. These amounts are determined in accordance with FASB authoritative
guidance in respect of accounting for stock based compensation using the
assumptions described in Note (1) E to the Company’s financial statements
included in the fiscal 2009 Form 10-K, except that no forfeitures of
awards have been assumed.
|
|
Outstanding
Equity Awards at Fiscal 2009
Year-End
|
|
Option
Awards
|
Stock
Awards
|
Name
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Number
of
Shares
that
Have
Not
Vested
(#)
|
Market
Value of
Shares
that
Have
Not Vested
($)(†)
|
Matthew
Boyle
Matthew
Boyle
Matthew
Boyle
Matthew
Boyle
Matthew
Boyle
Matthew
Boyle
|
10,000
7,000
8,000
|
-
3,000
(1)
8,000
(2)
|
$10.63
$9.60
$4.37
|
Nov
1, 2009
Nov
6, 2011
Apr
30, 2013
|
3,000
(3)
6,000
(4)
15,000
(5)
|
$9,840
$19,680
$49,200
|
Paul
N. Farquhar
Paul
N. Farquhar
|
|
|
|
|
12,000
(6)
10,000
(7)
|
$39,360
$32,800
|
(†)
|
Based
on the closing sale price ($3.28) of the Common Stock on September 30,
2009, the last trading day of the fiscal year.
|
(1)
|
The
shares subject to this option vest at 1,000 shares per year, beginning on
November 6, 2009.
|
(2)
|
The
shares subject to this option vest at 2,000 shares per year, beginning on
April 30, 2010.
|
(3)
|
These
shares of restricted stock vest on the earlier of November 21, 2009, or
the third business day after the Company publicly announces its financial
results for fiscal 2009.
|
(4)
|
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 2009 and the earlier of December 5, 2010, or the third business
day after the Company publicly announces its financial results for fiscal
2010.
|
(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 2009, 2010, 2011, 2012, and the earlier of January 26, 2014, or
the third business day after the Company publicly announces its financial
results for fiscal 2013.
|
(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 2009, 2010, 2011, and the earlier of December 3, 2012, or the
third business day after the Company publicly announces its financial
results for fiscal 2012.
|
(7)
|
These
shares of restricted stock vest as to 2,000 shares per year on the third
business day after the Company publicly announces its financial results
for fiscal 2009, 2010, 2011, 2012, and the earlier of January 26, 2014, or
the third business day after the Company publicly announces its financial
results for fiscal 2013.
|
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 non-equity
compensation of Messrs. Boyle 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 2.5% per year, compounded, and at a higher rate in certain
circumstances.
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, 2009, would have been as follows: Mr. Boyle ($78,720)
and Mr. Farquhar ($72,160). These amounts consist of (i) the value of the shares
of restricted stock for which vesting accelerated, based on the $3.28 closing
sale price of the Company’s Common Stock on September 30, 2009, plus (ii) the
difference between the exercise prices of the options for which vesting
accelerated and $3.28, multiplied by the respective numbers of option shares.
Pursuant to their employment contracts, each of Mr. Boyle and Mr. Farquhar would
be entitled to a minimum of three months pay on termination of employment. This
amounts to £37,250 ($59,578 at the exchange rate in effect on September 30,
2009) for Mr. Boyle and £23,500 ($37,586) 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. Messrs. Boyle
and Farquhar have each agreed not to compete with the Company for twelve months
after termination of his employment.
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, 2009, (ii)
discussed with Caturano, 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 Caturano required by applicable requirements of the Public Company
Accounting Oversight Board regarding Caturano’s communications with the Audit
Committee concerning independence, and discussed with Caturano 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, 2009 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
TRANSACTIONS
WITH RELATED PERSONS
During
fiscal 2009, 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 2011 ANNUAL MEETING;
ADVANCE NOTICE PROVISIONS FOR
STOCKHOLDER PROPOSALS AND
NOMINATIONS
In order for a stockholder proposal to
be considered for inclusion in the Company’s proxy materials for the annual
meeting in 2011, it must be received by the Company at 155 Northboro Road,
Southborough, Massachusetts 01772, Attention: Treasurer, no later than August
19, 2010.
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.
The 2011 annual meeting of stockholders
will be held on January 25, 2011.
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities
Exchange Act of 1934 requires the Company’s directors, executive officers and
persons owning more than 10% of the Company’s registered equity securities to
file with the Securities and Exchange Commission reports of their initial
ownership and of changes in their ownership of the Company’s equity securities
and to provide the Company with copies of all Section 16(a) reports they
file.
Based on a review of the reports filed
by such persons with respect to the Company’s 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 17, 2009
PROXY
Important
Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The
Annual Report, Notice & Proxy Statement, Shareholder Letter is/are available
at www.proxyvote.com:
|
TECH/OPS SEVCON,
INC.
Annual Meeting of Stockholders
January 26, 2010 5:00 PM
|
This proxy is solicited by the Board of Directors
The
stockholder(s) hereby appoint(s) Paul B. Rosenberg, Paul N. Farquhar and Matthew
C. Dallett or any of them, as proxies, each with the power to appoint his
substitute, and hereby authorizes them to represent and to vote, as designated
on the reverse side of this ballot, all of the shares of Common Stock of
TECH/OPS SEVCON, INC. that the stockholder(s) is/are entitled to vote at the
Annual Meeting of stockholders, to be held at 5:00 PM, EST on January 26, 2010,
at Edwards, Angell, Palmer & Dodge LLP, 20th Floor 111 Huntington
Avenue at
Prudential Center, Boston, Massachusetts, and any adjournment or postponement
thereof.
This
proxy, when properly executed, will be voted in the manner directed herein. If
no such direction is made, this proxy will be voted in accordance with the Board
of Directors' recommendations.
TECH/OPS
SEVCON, INC.
155
NORTHBORO ROAD
SOUTHBOROUGH,
MA 01772
VOTE
BY INTERNET - www.proxyvote.com
Use the
Internet to transmit your voting instructions and for electronic delivery of
information up until 11:59 P.M. Eastern Time the day before the cut-off date or
meeting date. Have your proxy card in hand when you access the web site and
follow the instructions to obtain your records and to create an electronic
voting instruction form.
Electronic
Delivery of Future PROXY MATERIALS
If you
would like to reduce the costs incurred by our company in mailing proxy
materials, you can consent to receiving all future proxy statements, proxy cards
and annual reports electronically via e-mail or the Internet. To sign up for
electronic delivery, please follow the instructions above to vote using the
Internet and, when prompted, indicate that you agree to receive or access proxy
materials electronically in future years.
VOTE
BY PHONE - 1-800-690-6903
Use any
touch-tone telephone to transmit your voting instructions up until
11:59
P.M.
Eastern Time the day before the cut-off date or meeting date. Have your proxy
card in hand when you call and then follow the instructions.
VOTE
BY MAIL
Mark,
sign and date your proxy card and return it in the postage-paid envelope we have
provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way,
Edgewood, NY 11717.
TO VOTE,
MARK BLOCKS BELOW IN BLUE OR BLACK INK AS
FOLLOWS:
KEEP THIS
PORTION FOR YOUR RECORDS
THIS
PROXY CARD IS VALID ONLY WHEN SIGNED AND
DATED.
DETACH
AND RETURN THIS PORTION ONLY
The
Board of Directors recommends that you
vote
For Withhold
For All
FOR
the
following:
All All
Except
1. Election of
Directors
0
0
0
Nominees
01
Hemsley 02
Schorr 03
Steadman
To
withhold authority to vote for any individual nominee(s), mark “For All Except”
and write the number(s) of the nominee(s) on the line below:
______________________________________________________________________
The
Board of Directors recommends you vote FOR the following proposal(s): For
Against Abstain
2. To
approve the amendment of the Company’s 1996 Equity Incentive
Plan.
0
0
0
3. To
ratify the selection of the independent
auditors.
0
0
0
NOTE: The person(s) named in this proxy are
authorized to vote in their discretion upon such other matters as may properly
come before the meeting or any adjournment or postponement
thereof.
Please
sign exactly as your name(s) appear(s) hereon. When signing as attorney,
executor, administrator, or other fiduciary, please give full title as such.
Joint owners should each sign personally. All holders must sign. If a
corporation or partnership, please sign in full corporate or partnership name,
by authorized officer.
Signature [PLEASE SIGN WITHIN
BOX] Date:
Signature (Joint
Owners)
Date:
Appendix
TECH/OPS
SEVCON, INC.
1996
EQUITY INCENTIVE PLAN
(As
Amended and Restated)
1. Purpose
and History
The
purpose of the Tech/Ops Sevcon, Inc. 1996 Equity Incentive Plan as amended and
restated (the “Plan”) is to attract and retain key employees, directors, and
consultants of the Company and its Affiliates, to provide an incentive for them
to achieve long-range performance goals, and to enable them to participate in
the long-term growth of the Company.
The Plan
was originally adopted by the Board and approved by the Company’s stockholders
effective as of January 31, 1996. The Board and the Company’s
stockholders subsequently approved an amendment to the Plan effective as of
January 21, 2003, increasing the number of shares available for
award.
The Board
and the Company’s stockholders also adopted and approved the establishment of
the 1998 Director Stock Option Plan effective as of January 28, 1998 (the
“Directors’ Plan”). Effective as of January 27, 2004,
non-employee directors of the Company shall be eligible to participate in this
Plan, any remaining shares of Common Stock available for grant under the
Directors’ Plan shall instead be available for issue under this Plan, and no
further options shall be granted under the Directors’ Plan. Any
options that are outstanding under the Directors’ Plan as of January 27,
2004, shall continue to be governed by the terms and conditions of the
Directors’ Plan and the relevant grant agreements.
2. Definitions
“Affiliate”
means any business entity in which the Company owns directly or indirectly 50%
or more of the total voting power or has a significant financial interest as
determined by the Committee.
“Award”
means any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock
Unit, or Foreign National Award granted under the Plan.
“Board”
means the Board of Directors of the Company.
“Code”
means the Internal Revenue Code of 1986, as amended from time to time, or any
successor law.
“Committee”
means one or more committees each comprised of not less than three members of
the Board appointed by the Board to administer the Plan or a specified portion
thereof. If a Committee is authorized to grant Awards to a Reporting
Person or a Covered Employee, each member shall be a “disinterested person” or
the equivalent within the meaning of applicable Rule 16b-3 under the Exchange
Act or an “outside director” or the equivalent within the meaning of
Section 162(m) of the Code, respectively.
“Common
Stock” or “Stock” means the Common Stock, $.10 par value, of the
Company.
“Company”
means Tech/Ops Sevcon, Inc.
“Covered
Employee” means a “covered employee” within the meaning of
Section 162(m)(3) of the Code.
“Designated
Beneficiary” means the beneficiary designated by a Participant, in a manner
determined by the Committee, to receive amounts due or exercise rights of the
Participant in the event of the Participant’s death. In the absence
of an effective designation by a Participant, “Designated Beneficiary” means the
Participant’s estate.
“Exchange
Act” means the Securities Exchange Act of 1934, as amended from time to time, or
any successor law.
“Fair
Market Value” means, with respect to Common Stock or any other property, the
fair market value of such property as determined by the Committee in good faith
or in the manner established by the Committee from time to time.
“Foreign
National Award” – See Section 9(i).
“Incentive
Stock Option” – See Section 6(a).
“Nonstatutory
Stock Option” – See Section 6(a).
“Option”
– See Section 6(a).
“Participant”
means a person selected by the Committee to receive an Award under the
Plan.
“Performance
Goals” means with respect to any Performance Period, one or more objective
performance goals based on one or more of the following objective criteria
established by the Committee prior to the beginning of such Performance Period
or within such period after the beginning of the Performance Period as shall
meet the requirements to be considered “pre-established performance goals” for
purposes of Code Section 162(m): (i) increases in the price
of the Common stock; (ii) market share; (iii) sales;
(iv) revenue; (v) return on equity, assets, or capital;
(vi) economic profit (economic value added); (vii) total shareholder
return; (viii) costs; (ix) expenses; (x) margins;
(xi) earnings or earnings per share; (xii) cash flow;
(xiii) customer satisfaction; (xiv) operating profit; or (xv) any
combination of the foregoing, including without limitation goals based on any of
such measures relative to appropriate peer groups or market
indices. Such Performance Goals may be particular to a Participant or
may be based, in whole or in part, on the performance of the division,
department, line of business, subsidiary, or other business unit, whether or not
legally constituted, in which the Participant works or on the performance of the
Company generally.
“Performance
Period” means the period of service designated by the Committee applicable to an
Award subject to Section 9(l) during which the Performance Goals will be
measured.
“Reporting
Person” means a person subject to Section 16 of the Exchange
Act.
“Restricted
Period” – See Section 8(a).
“Restricted
Stock” – See Section 8(a).
“Restricted
Stock Unit” – See Section 8©.
“Stock
Appreciation Right” or “SAR” – See Section 7(a).
3. Administration
The Plan
shall be administered by the Committee. The Committee shall have
authority to adopt, alter and repeal such administrative rules, guidelines and
practices governing the operation of the Plan as it shall from time to time
consider advisable, and to interpret the provisions of the Plan. The
Committee’s decisions shall be final and binding. To the extent
permitted by applicable law, the Committee may delegate to one or more executive
officers of the Company the power to make Awards to Participants who are not
subject to Section 16 of the Exchange Act and all determinations under the
Plan with respect thereto, provided that the Committee shall fix the maximum
amount of such Awards for all such Participants, a maximum for any one
Participant, and such other features of the Awards as required by applicable
law.
4. Eligibility
All
employees and, in the case of Awards other than Incentive Stock Options under
Section 6, consultants and directors of the Company or any Affiliate,
capable of contributing significantly to the successful performance of the
Company, other than a person who has irrevocably elected not to be eligible, are
eligible to be Participants in the Plan. Incentive Stock Options may
be granted only to persons eligible to receive such Options under the
Code.
5. Stock
Available for Awards
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(a)
|
Amount. Subject
to adjustment under subsection (b), Awards may be made under the Plan
for up to 250,000 shares of Common Stock, together with all shares of
Common Stock available for issue under the 1987 Plan on January 31,
1996, and all shares of stock available for issuance under the Directors’
Plan as of January 27, 2004. If any Award (including any
grant under the 1987 Plan or the Directors’ Plan) expires or is terminated
unexercised or is forfeited or settled in a manner that results in fewer
shares outstanding than were awarded, the shares subject to such Award, to
the extent of such expiration, termination, forfeiture or decrease, shall
again be available for award under the Plan. Common Stock
issued through the assumption or substitution of outstanding grants from
an acquired company shall not reduce the shares available for Awards under
the Plan. Shares issued under the Plan may consist in whole or
in part of authorized but unissued shares or treasury
shares.
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(b)
|
Adjustment. In
the event that the Committee determines that any stock dividend,
extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination, exchange of shares, or
other transaction affects the Common Stock such that an adjustment is
required in order to preserve the benefits intended to be provided by the
Plan, then the Committee (subject in the case of Incentive Stock Options
to any limitation required under the Code) shall equitably adjust any or
all of (i) the number and kind of shares in respect of which Awards
may be made under the Plan, (ii) the number and kind of shares
subject to outstanding Awards, and (iii) the exercise price with
respect to any of the foregoing, and if considered appropriate, the
Committee may make provision for a cash payment with respect to an
outstanding Award, provided that the number of shares subject to any Award
shall always be a whole number.
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(c)
|
Limit on Individual
Grants. The maximum number of shares of Common Stock
subject to all Awards that may be granted under this Plan to any
Participant in the aggregate in any calendar year shall not exceed 60,000
shares, subject to adjustment under
subsection (b).
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6. Stock
Options
|
(a)
|
Grant of
Options. Subject to the provisions of the Plan, the
Committee may grant options (“Options”) to purchase shares of Common Stock
(i) complying with the requirements of Section 422 of the Code
or any successor provision and any regulations thereunder (“Incentive
Stock Options”) and (ii) not intended to comply with such
requirements (“Nonstatutory Stock Options”). The Committee
shall determine the number of shares subject to each Option and the
exercise price therefor, which shall not be less than 100% of the Fair
Market Value of the Common Stock on the date of grant. No
Incentive Stock Option may be granted hereunder more than ten years after
the effective date of the Plan.
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(b)
|
Terms and
Conditions. Each Option shall be exercisable at such
times and subject to such terms and conditions as the Committee may
specify in the applicable grant or thereafter; provided that no Option
shall be exercisable after the expiration of ten years from the date the
Option is granted. The Committee may impose such conditions
with respect to the exercise of Options, including conditions relating to
applicable securities laws, as it considers necessary or
advisable.
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(c)
|
Payment. No
shares shall be delivered pursuant to any exercise of an Option until
payment in full of the exercise price therefor is received by the
Company. Such payment may be made in whole or in part in cash
or through a so-called “cashless” or “broker-assisted”
exercise. To the extent permitted by the Committee at or after
the grant of the Option, such payment may also be made by delivery of a
note (subject to the limitations of Section 9(g)) or shares of Common
Stock owned by the optionee, including vested Restricted Stock, or by
retaining shares otherwise issuable pursuant to the Option, in each case
valued at their Fair Market Value on the date of delivery or retention, or
such other lawful consideration as the Committee may
determine.
|
7. Stock
Appreciation Rights
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(a)
|
Grant of
SARs. Subject to the provisions of the Plan, the
Committee may grant rights to receive any excess in value of shares of
Common Stock over the exercise price (“Stock Appreciation Rights” or
“SARs”) in tandem with an Option (at or after the award of the Option), or
alone and unrelated to an Option. SARs in tandem with an Option
shall terminate to the extent that the related Option is exercised, and
the related Option shall terminate to the extent that the tandem SARs are
exercised. The Committee shall determine at the time of grant
or thereafter whether SARs are settled in cash, Common Stock or other
securities of the Company, Awards or other
property.
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(b)
|
Exercise
Price. The Committee shall fix the exercise price of
each SAR or specify the manner in which the price shall be
determined. An SAR granted in tandem with an Option shall have
an exercise price not less than the exercise price of the related
Option. An SAR granted alone and unrelated to an Option may not
have an exercise price less than 100% of the Fair Market Value of the
Common Stock on the date of the
grant.
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(c)
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Limited
SARs. An SAR related to an Option, which SAR can only be
exercised upon or during limited periods following a change in control of
the Company, may entitle the Participant to receive an amount based upon
the highest price paid or offered for Common Stock in any transaction
relating to the change in control or paid during a specified period
immediately preceding the occurrence of the change in control in any
transaction reported in the stock market in which the Common Stock is
normally traded.
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8. Restricted
Stock and Restricted Stock Units
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(a)
|
Grant of Restricted
Stock. Subject to the provisions of the Plan, the
Committee may grant shares of Common Stock subject to forfeiture
(“Restricted Stock”) and determine the duration of the period (the
“Restricted Period”) during which, and the conditions under which, the
shares may be forfeited to the Company and the other terms and conditions
of such Awards. Shares of Restricted Stock may be issued for no
cash consideration or such minimum consideration as may be required by
applicable law.
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(b)
|
Restrictions. Shares
of Restricted Stock may not be sold, assigned, transferred, pledged or
otherwise encumbered, except as permitted by the Committee, during the
Restricted Period. Shares of Restricted Stock shall be
evidenced in such manner as the Committee may determine. Any
certificates issued in respect of shares of Restricted Stock shall be
registered in the name of the Participant and unless otherwise determined
by the Committee, deposited by the Participant, together with a stock
power endorsed in blank, with the Company. At the expiration of
the Restricted Period, the Company shall deliver such certificates to the
Participant or if the Participant has died, to the Participant’s
Designated Beneficiary.
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(c)
|
Restricted Stock
Units. Subject to the provisions of the Plan, the
Committee may grant the right to receive in the future shares of Common
Stock subject to forfeiture (“Restricted Stock Units”) and determine the
duration of the Restricted Period during which, and the conditions under
which, the Award may be forfeited to the Company and the other terms and
conditions of such Awards. Restricted Stock Unit Awards shall
constitute an unfunded and unsecured obligation of the Company, and shall
be settled in shares of Common Stock or cash, as determined by the
Committee at the time of grant or thereafter. Such Awards shall
be made in the form of “units” with each unit representing the equivalent
of one share of Common Stock.
|
9. General
Provisions Applicable to Awards
|
(a)
|
Reporting Person
Limitations. Notwithstanding any other provision of the
Plan, to the extent required to qualify for the exemption provided by Rule
16b-3 under the Exchange Act, Awards made to a Reporting Person shall not
be transferable by such person other than by will or the laws of descent
and distribution and are exercisable during such person’s lifetime only by
such person or by such person’s guardian or legal
representative. If then permitted by Rule 16b-3, such Awards
shall also be transferable pursuant to a qualified domestic relations
order as defined in the Code or Title I of the Employee Retirement Income
Security Act or the rules
thereunder.
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(b)
|
Documentation. Each
Award under the Plan shall be evidenced by a writing delivered to the
Participant specifying the terms and conditions thereof and containing
such other terms and conditions not inconsistent with the provisions of
the Plan as the Committee considers necessary or advisable to achieve the
purposes of the Plan (including but not limited to the requirement that a
Participant satisfy Performance Goals) or to comply with applicable tax
and regulatory laws and accounting
principles.
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(c)
|
Committee
Discretion. Each type of Award may be made alone, in
addition to or in relation to any other Award. The terms of
each type of Award need not be identical, and the Committee need not treat
Participants uniformly. Except as otherwise provided by the
Plan or a particular Award, any determination with respect to an Award may
be made by the Committee at the time of grant or at any time
thereafter.
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(d)
|
Dividends and Cash
Awards. In the discretion of the Committee, any Award
under the Plan may provide the Participant with (i) dividends or
dividend equivalents payable currently or deferred with or without
interest, and (ii) cash payments in lieu of or in addition to an
Award.
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(e)
|
Termination of Employment or
Service. The Committee shall determine the effect on an
Award of the disability, death, retirement or other termination of
employment or service of a Participant and the extent to which, and the
period during which, the Participant’s legal representative, guardian or
Designated Beneficiary may receive payment of an Award or exercise rights
thereunder. Unless the Committee provides otherwise in any
case, a Participant’s employment or other service shall have terminated
for purposes of this Plan at the time the entity by which the Participant
is employed or to which the Participant renders service ceases to be an
Affiliate of the Company.
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(f)
|
Change in
Control. In order to preserve a Participant’s rights
under an Award in the event of a change in control of the Company, the
Committee in its discretion may, at the time an Award is made or at any
time thereafter, take one or more of the following
actions: (i) provide for the acceleration of any time
period relating to the exercise or payment of the Award, (ii) provide
for payment to the Participant of cash or other property with a Fair
Market Value equal to the amount that would have been received upon the
exercise or payment of the Award had the Award been exercised or paid upon
the change in control, (iii) adjust the terms of the Award in a
manner determined by the Committee to reflect the change in control,
(iv) cause the Award to be assumed, or new rights substituted
therefor, by another entity, or (v) make such other provision as the
Committee may consider equitable to Participants and in the best interests
of the Company.
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(g)
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Loans. The
Committee may authorize the making of loans or cash payments to
Participants in connection with the grant or exercise any Award under the
Plan, which loans may be secured by any security, including Common Stock,
underlying or related to such Award (provided that the loan shall not
exceed the Fair Market Value of the security subject to such Award), and
which may be forgiven upon such terms and conditions as the Committee may
establish at the time of such loan or at any time
thereafter. Notwithstanding the foregoing, no loans may be made
to any director or executive officer (or equivalent thereof) of the
Company which would be prohibited by Section 13(k) of the Exchange
Act.
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(h)
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Withholding
Taxes. The Participant shall pay to the Company, or make
provision satisfactory to the Committee for payment of, any taxes required
by law to be withheld in respect of Awards under the Plan no later than
the date of the event creating the tax liability. In the
Committee’s discretion, such tax obligations may be paid in whole or in
part in shares of Common Stock, including shares retained from the Award
creating the tax obligation, valued at their Fair Market Value on the date
of delivery. The Company and its Affiliates may, to the extent
permitted by law, deduct any such tax obligations from any payment of any
kind otherwise due to the
Participant.
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(i)
|
Foreign National
Awards. Notwithstanding anything to the contrary
contained in this Plan, Awards may be made to Participants who are foreign
nationals or employed outside the United States on such terms and
conditions different from those specified in the Plan as the Committee
considers necessary or advisable to achieve the purposes of the Plan or to
comply with applicable laws.
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(j)
|
Amendment of
Award. The Committee may amend, modify or terminate any
outstanding Award, including substituting therefor another Award of the
same or a different type, changing the date of exercise or realization and
converting an Incentive Stock Option to a Nonstatutory Stock Option,
provided that the Participant’s consent to such action shall be required
unless the Committee determines that the action, taking into account any
related action, would not materially and adversely affect the
Participant.
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(k)
|
Exchange
Programs. In addition to the authority granted to the
Committee in Section 9(j), the Committee may, without further
shareholder approval, engage in one or more exchange offers under which
Participants may elect to exchange or surrender their outstanding Awards
(including awards made under the Directors’ Plan) for other Awards or cash
(each, an “Exchange Program”). Each Exchange Program shall
provide that each eligible Participant must exchange or surrender Awards
with a fair value (as determined by the Committee using established
methods including but not limited to Black-Scholes) equal to or greater
than the fair value of the replacement Award or the present value of any
cash consideration, as the case may be. No Award granted on or
after January 27, 2004, shall be eligible for any Exchange
Program.
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(l)
|
Code Section 162(m)
Provisions. If the Committee determines at the time
Restricted Stock or a Restricted Stock Unit is granted to a Participant
that such Participant is, or may be as of the end of the tax year for
which the Company would claim a tax deduction in connection with such
Award, a Covered Employee, then the Committee may provide that the
Participant’s right to receive cash, Shares, or other property pursuant to
such Award shall be subject to the satisfaction of Performance Goals
during a Performance Period. Prior to the payment of any Award
subject to this Section 9(l), the Committee shall certify in writing
that the Performance Goals applicable to such award were
met. The Committee shall have the power to impose such other
restrictions on Awards subject to this Section 9(l) as it may deem
necessary or appropriate to ensure that such Awards satisfy all
requirements for “performance-based compensation” within the meaning of
Section 162(m)(4)(C) of the
Code.
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10. Miscellaneous
|
(a)
|
No Right To
Employment. No person shall have any claim or right to
be granted an Award. Neither the Plan nor any Award hereunder
shall be deemed to give any employee the right to continued employment or
service, or to limit the right of the Company to discharge any Participant
at any time.
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(b)
|
No Rights As
Stockholder. Subject to the provisions of the applicable
Award, no Participant or Designated Beneficiary shall have any rights as a
stockholder with respect to any shares of Common Stock to be distributed
under the Plan until he or she becomes the holder thereof. A
Participant to whom Common Stock is awarded shall be considered the holder
of the Stock at the time of the Award except as otherwise provided in the
applicable Award.
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(c)
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Effective
Date. Subject to the approval of the stockholders of the
Company, the Plan as herein amended and restated shall be effective on
January 27, 2004. Unless terminated earlier by the Board,
the Plan shall terminate such that no further Awards shall be made as of
January 27, 2014.
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(d)
|
Amendment of
Plan. The Board may amend, suspend or terminate the Plan
or any portion thereof at any time, subject to such stockholder approval
as the Board determines to be necessary or advisable to comply with any
tax or regulatory requirement.
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(e)
|
Governing
Law. The provisions of the Plan shall be governed by and
interpreted in accordance with the laws of
Delaware.
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