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 24,
2006 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,
2005 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, 2005
PROXY STATEMENT
APPROXIMATE DATE OF MAILING: DECEMBER 27, 2005
INFORMATION CONCERNING THE PROXY SOLICITATION
The enclosed proxy is solicited by and on behalf of the Board of
Directors of Tech/Ops Sevcon, Inc. (the "Company") for use at the annual
meeting of stockholders of the Company to be held on January 24, 2006 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 email.
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, 2005, the Company had outstanding 3,197,051 shares of
Common Stock, $.10 par value, which is its only class of stock outstanding
and entitled to vote at the meeting. Stockholders of record at the close of
business on December 14, 2005 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, 2005 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 nominee for director is shown in the table on pages 4 and 5
below.
Name and Address Amount Beneficially Percent
of Beneficial Owner Owned (1) of Class
------------------- ------------------- --------
Paul D. Sonkin /
Hummingbird Management LLC (2) 406,665 (3) 12.8%
460 Park Avenue, 12th Floor
New York, New York 10022
Dr. Marvin G. Schorr 360,278 (4) 11.3%
330 Beacon Street
Boston, MA 02116
Bernard F. Start 238,477 (4) 7.5%
Dotland Grange
Hexham, NE46 2JY, United Kingdom
Mario J. Gabelli / GGCP, Inc. /
Gabelli Asset Management, Inc. (5) 173,000 5.5%
One Corporate Center
Rye, NY 10580-1435
Paul A. McPartlin 84,546 (6) 2.6%
Tech/Ops Sevcon, Inc.
155 Northboro Road
Southborough, MA 01772
Matthew Boyle 79,400 (7) 2.4%
Tech/Ops Sevcon, Inc.
155 Northboro Road
Southborough, MA 01772
All current executive officers and
directors as a group (8 persons) 869,181 (8) 27.2%
(1) Unless otherwise indicated, each owner has sole voting and
investment power with respect to the shares listed.
(2) As reported on Schedule 13D filed with the Securities and Exchange
Commission on April 15, 2003, and subsequent Forms 4, Mr. Sonkin
is the managing member and control person of Hummingbird
Management, LLC and of Hummingbird Capital LLC, which are the
investment manager and general partner, respectively, of two
investment funds, and these parties act together as a group with
respect to their shareholdings in the Company.
(3) According to the SEC filings and communications with the Company,
Hummingbird Management, LLC has sole dispositive power over
405,175 of these shares, which are held by the investment funds,
and Mr. Sonkin has sole dispositive power over 1,490 shares.
Mr. Sonkin and Hummingbird Management LLC share voting power over
all 406,665 shares.
(4) Includes 4,000 shares subject to stock options exercisable within
sixty days.
(5) As reported on Schedule 13D as filed with Securities and Exchange
Commission on July 18, 2005, each of Mr. Gabelli, GGCP, Inc., and
Gabelli Asset Management, Inc. Is the beneficial owner of the
shares shown, which are held in investment advisory accounts of
various subsidiaries of Gabelli Asset Management, Inc.
(6) Includes 9,000 shares subject to stock options exercisable within
sixty days.
(7) Includes 48,000 shares subject to stock options exercisable within
sixty days.
(8) Includes 89,000 shares subject to stock options exercisable within
sixty days.
ELECTION OF DIRECTORS
The Company's Board of Directors has fixed the number of directors at
seven. Members of the Board of Directors are divided into three classes
serving staggered three-year terms. The term of two of the Company's current
directors, Paul B. Rosenberg and Bernard F. Start, expires at the annual
meeting. Based on the recommendation of its Nominating and Governance
Committee, the Board has nominated Mr. Rosenberg and Mr. Start for
re-election to a new three-year term. Each nominee has consented to serve
if elected, and the Company is not presently aware of any reason that would
prevent any nominee from serving as a director. If a nominee should become
unavailable for election, the proxies will be voted for another nominee
selected by the Board.
Pursuant to the Company's by-laws, directors will be elected by a
plurality of the votes properly cast at the annual meeting. Abstentions,
votes withheld and broker non-votes will not be treated as votes cast and
will not affect the outcome of the election. A "broker non-vote" occurs
when a broker holding a customer's shares indicates on the proxy that the
broker has not received voting instructions on a matter from the customer
and is barred by applicable rules from exercising discretionary authority
to vote on the matter.
The following table contains information on the nominees for election
at the annual meeting and each other person whose term of office as a
director will continue after the meeting. The nominees for election at the
meeting are indicated by an asterisk.
Has Been No. of
a Director Common
of the Shares
Company of the Company
or its Owned
Business Experience Predeces- Beneficially on
During Past sor December 14,
Term Five Years and Tech/Ops, 2005
Name Expires Other Directorships Inc. and Percent
Since of Class (+)
---- ------- ------------------- ----- ------------
Matthew Boyle 2008 President and Chief 1997 79,400
(3) Executive Officer of (2.4%)
Age - 43 the Company since (1)
November 1997. Vice
President and Chief
Operating Officer of
the Company from
November 1996 to
November 1997.
Maarten D. Hemsley 2007 Chief Financial 2003 3,000
(4)(5) Officer and a director (#)
Age - 56 since 1988 (and until
July 2001, President) of
Sterling Construction
Company, Inc., a company
principally involved in
civil construction in
Texas. Fund manager at
North Atlantic Value LLP,
part of the J. O. Hambro
Capital Management Group,
London, England, since
March 2001, with
responsibility for Leisure
& Media Venture Capital
Trust, Plc and Trident
Private Equity Fund II,
L.P. President of
Bryanston Management Ltd.,
a specialized financial
services company, since
1993. Director of a number
of UK privately-held
companies.
* Paul B. Rosenberg 2006 Former Treasurer of the 1988 90,480
(4)(6) Company. (2.9%)
Age - 73 (2)
Dr. Marvin G. Schorr 2007 Chairman of the Company's 1951 360,278
(3)(5)(6) Board of Directors from (11.4%)
Age - 80 January 1988 until (2)
January 2005. Prior to
that, Chairman of the
Board of Directors and
President of Tech/Ops,
Inc., the Company's
predecessor. Also a
director of Brooks
Automation, Inc.
* Bernard F. Start 2006 Vice-Chairman of the 1988 238,477
Age - 67 Board since November (7.5%)
1997. President and Chief (2)
Executive Officer of the
Company from January 1988
to November 1997.
David R. A. Steadman 2007 Chairman of the Company's 1997 11,000
(3)(4)(6) Board of Directors since ( # )
Age - 68 January 2005. President (2)
of Atlantic Management
Associates, Inc., a
management services firm,
since 1988. Chairman of
Brookwood Companies
Incorporated, a director
of Aavid Thermal Technologies,
Inc. a director of Sterling
Construction Company, Inc.
and a director of several
privately held companies.
Paul O. Stump 2008 President and Chief 2005 2,000
(5) Executive Officer of
Age - 53 Telequip Corporation, a
manufacturer of coin
dispensing equipment,
since 1997.
(+) Unless otherwise indicated, each person has sole voting and investment
power with respect to the shares listed.
(#) Less than 1%
(1) Includes 48,000 shares subject to stock options exercisable within
sixty days.
(2) Includes 4,000 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.
Board of Directors Independence and Meetings
The Board has determined that all directors, other than Mr. Boyle, are
independent under the American Stock Exchange rules, based on information
known to the Company and on the annual questionnaire completed by each
director. The Board regularly schedules meetings at which only independent
directors are present.
During the fiscal year ended September 30, 2005, the Board of Directors
held a total of eight meetings. Each director attended at least 75% of the
total number of meetings of the Board of Directors and all committees of the
Board on which the director served. All Board members are expected to attend
the annual meeting of stockholders, subject to special circumstances. All of
the Board members attended the annual meeting of stockholders in 2005.
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.
Audit Committee. The Audit Committee is composed of three directors.
The Board has determined that at least one of the members of the Committee,
Mr. Rosenberg, is an "audit committee financial expert," as defined by the
Securities and Exchange Commission. The Committee selects, evaluates and
oversees the Company's independent auditors, approves any engagement of the
independent auditors to perform non-audit services, reviews the audited
financial statements and discusses the adequacy and quality of the Company's
financial reporting principles and procedures and its internal controls with
management and the auditors. The Committee, which met nine times during the
fiscal year ended September 30, 2005, operates under a written charter which
was last revised by the Board in July 2005 and is included as an appendix to
this proxy statement. The Audit Committee's report appears on page 12.
Compensation Committee. The Compensation Committee reviews and approves
generally all compensation and fringe benefit programs of the Company, and
also reviews and determines the base salary and incentive compensation of
the executive officers, as well as grants of equity compensation to all
employees. All compensation actions taken by the Committee are reported to
the full Board of Directors, which, excluding employee directors, approves
the actions of the Committee. The Committee also reviews and makes
recommendations to the Board on director compensation and on policies and
programs for the development of management personnel, as well as management
structure and organization. The Compensation Committee met once during the
fiscal year ended September 30, 2005. Its report appears on page 10.
Nominating and Governance Committee. The Nominating and Governance
Committee approves nominations to the Board and recommends to the Board of
Directors' action related to Board composition, size and effectiveness and
management succession plans for the positions of Chairman of the Board and
Chief Executive Officer. The committee operates under a written charter,
copies of which are available on the Company's web site at
www.techopssevcon.com. The Nominating and Governance Committee met once
during the fiscal year ended September 30, 2005.
In identifying potential candidates and selecting nominees for
directors, the Nominating and Governance Committee does not foreclose any
sources. The Committee reviews candidates recommended by stockholders in the
same manner and using the same general criteria as candidates recruited by
the Committee or recommended by the Board.
The Nominating and Governance Committee does not rely on a fixed set
of qualifications for director nominees. The Committee's primary objective
for director nominees is to create a Board with a broad range of skills and
attributes that is aligned with the Company's strategic needs.
The minimum qualifications for director nominees are that they:
(a) be able to dedicate time and resources sufficient for the diligent
performance of the duties required of a member of the Board,
(b) not hold positions or interests that conflict with their
responsibilities to the Company,
(c) comply with any other minimum qualifications for either individual
directors or the Board as a whole mandated by applicable laws or
regulations.
Additionally, at least a majority of members of the Board of Directors
must qualify as independent directors in accordance with American Stock
Exchange independence rules.
The Nominating and Governance Committee's process for evaluating
nominees for director, including nominees recommended by stockholders, is
to consider their skills, character and professional ethics, judgment,
leadership experience, business experience and acumen, familiarity with
relevant industry issues, national and international experience, and other
relevant criteria as they may contribute to the Company's success. This
evaluation is performed in light of the Committee's views as to what skill
set and other characteristics would most complement those of the current
directors, including the diversity, age, skills and experience of the Board
as a whole.
In order to recommend a candidate for consideration by the Nominating
and Governance Committee, a stockholder must provide the Committee with the
candidate's name, background and relationship with the proposing
stockholder, a brief statement outlining the reasons the candidate would be
an effective director of the Company and information relevant to the
considerations described above. Such information should be sent to the
Nominating and Governance Committee of Tech/Ops Sevcon, Inc., 155 Northboro
Road, Southborough, Massachusetts 01772, Attention: Corporate Secretary.
The Committee may seek further information from or about the candidate, or
the stockholder making the recommendation, including information about all
business and other relationships between the candidate and the stockholder.
Director Compensation; Stock Ownership Policy
Directors of the Company (except Mr. Boyle) are each paid $16,000 per
year for their services. Mr. Steadman, the Chairman of the Board of
Directors and committee chairmen, Mr. Rosenberg (Chairman of the Audit
Committee), Mr. Hemsley (Chairman of the Compensation Committee) and Dr.
Schorr (Chairman of the Nominating and Governance Committee) each receive
an additional $3,000 per year.
Each director (except Mr. Boyle and Mr. Stump) currently in office has
previously received an option under the 1998 Director Stock Option Plan to
purchase 5,000 shares of Common Stock at the fair market value of the Common
Stock on the date of grant. All of these options become exercisable in equal
500 share amounts on each of the first ten anniversaries of the date of
grant or, if earlier, in the event of a change in control of the Company
and will expire 90 days after the tenth anniversary of the date of grant.
In January 2004 the stockholders approved the discontinuance of any future
grants under the 1998 Director Stock Option Plan and that any future grants
of options or other equity to non-employee directors would be under the
1996 Equity Incentive Plan, as revised in January 2004.
The Compensation Committee granted 2,000 shares of restricted stock
to each non-employee director who was elected at the 2005 annual meeting of
stockholders or whose term in office continued after the 2005 annual
meeting. Restricted shares may not be sold, assigned, transferred, pledged
or otherwise disposed of by the recipient until they vest. Such restricted
shares will fully vest the day before the 2006 annual meeting of
stockholders or, if earlier, upon the recipient's death or disability or
upon a change in control of the Company. If the recipient's service as a
director of the Company is terminated for any reason other than the
recipient's death or disability, any unvested shares will be forfeited and
returned to the Company, unless the Committee determines otherwise in its
discretion.
In 2004, the Board adopted Equity Compensation Guidelines in which it
established a target level of stock ownership for directors of twice the
level of annual cash compensation. Grants of restricted stock will be
intended in part to assist in reaching these levels of ownership over time.
Shares held by members of a person's immediate family or a trust for his or
their sole benefit may be counted towards the ownership requirement. Each
director will be required to refrain from selling Company stock acquired as
restricted stock (other than to make required tax payments related to a
grant) if the value, based on current market price, of his Company stock
after the sale would be below his designated ownership level. The Committee
has discretion to make exceptions in extraordinary circumstances where not
contrary to Company goals, such as cases of significant personal hardship.
EXECUTIVE COMPENSATION
The following tables provide information for the last three fiscal
years concerning the compensation of each of the executive officers of the
Company whose total compensation exceeded $100,000 in the most recent
fiscal year, and the value of unexercised stock options held by him at the
end of such years.
Mr. Boyle and Mr. McPartlin are residents of the United Kingdom and
receive their compensation in British Pounds. The table below sets out
their compensation in both British Pounds (GBP) and in US Dollars ($)
translated at the average exchange rates in force during the relevant
period
Summary Compensation Table
Long-Term
Annual Compensation Compensation Awards
Other
Annual Restricted Securities
Name and Principal Fiscal Compensa- Stock Underlying
Position Year Salary Bonus tion (1) Awards(2) Options
In British Pounds:
Matthew Boyle 2005 129,400GBP 6,085GBP - 47,900GBP -
President and Chief 2004 122,730GBP 7,500GBP - - -
Executive Officer 2003 118,858GBP - - - 20,000
Paul A. McPartlin 2005 81,113GBP 6,100GBP 16,000GBP -
Vice President, Chief 2004 78,475GBP 4,000GBP - - -
Financial Officer 2003 70,667GBP - 8,176GBP - 10,000
and Treasurer
In US Dollars:
Matthew Boyle 2005 $238,797 $11,230 - $88,350 -
President and Chief 2004 $220,754 $13.500 - - -
Executive Officer 2003 $189,213 $ - - - 20,000
Paul A .McPartlin 2005 $149,730 $11,260 - $29,450 -
Vice President, Chief 2004 $141,100 $ 7,200 - - -
Financial Officer 2003 $113,420 $ - $13,122 - 10,000
and Treasurer
(1) Value of use of Company owned automobile
(2) Restricted stock granted under the Company's 1996 Equity Incentive Plan
for the year shown, expressed as the dollar value of the shares granted at
the closing price on the date of grant. The restricted shares will vest in
five equal annual installments, provided that they will fully vest upon the
recipient's Death or Disability or upon a Change of Control (as each is
defined in the Plan). If the recipient's employment with the Company is
terminated for any reason other than the recipient's Death or Disability,
any unvested shares will be forfeited and returned to the Company, unless
the Compensation Committee determines otherwise in its discretion. At
fiscal year-end 2005, the number and aggregate value of restricted stock
holdings of Mr. Boyle were 15,000 shares ($89,250) and those of
Mr. McPartlin were 5,000 shares ($29,750), as calculated using the year-end
closing price of the Company's Common Stock, which was $5.95.
Option Grants in Last Fiscal Year
No stock options were granted to the named executive officers of the
Company during the fiscal year ended September 30, 2005.
Aggregated Option Exercises During Fiscal 2005 and Fiscal Year-End Option
Values
Number of
Securities
Underlying Value of
Unexercised Unexercised
Number of Options In-the-Money Options
Shares At 9/30/2005 at 9/30/2005 (a)
acquired on Value Exercisable/ Exercisable/
Name exercise Realized Unexercisable Unexercisable
Matthew Boyle - - 42,000/38,000 $6,320/$25,280
Paul A. McPartlin - - 9,000/ 6,000 $6,320/$ 9,480
(a) Based on the difference between the option exercise price and the
closing price of the underlying Common Stock on September 30, 2005,
which closing price was $5.95 per share.
Retirement Plan
Mr. Boyle and Mr. McPartlin participate in the Company's U.K.
Retirement Plan, a defined benefit plan, under which benefits at age 65
are based upon 1/60th of final U.K. - base salary (as defined in the Plan)
for each year of service, subject to a maximum of 2/3rds of final U.K. -
base salary. The employee contributes 5% of base salary, with the balance
of the cost being met by the Company. The following table sets forth
information concerning the annual benefits payable to the employee pursuant
to the U.K. Retirement Plan upon retirement at age 65 for specified
compensation levels and years of service classifications.
U.K. Retirement Plan Table
Average Annual Earnings Estimated Annual Pension
on which Retirement Based on Years of Service
Benefits are Based Indicated
15 years 20 years 25 years 30 years 35 years
$100,000 $ 25,000 $ 33,300 $ 41,700 $ 50,000 $ 58,300
125,000 31,300 41,700 52,100 62,500 72,900
150,000 37,500 50,000 62,500 75,000 87,500
175,000 43,800 58,300 72,900 87,500 102,100
200,000 50,000 66,700 83,300 100,000 116,700
225,000 56,300 75,000 93,800 112,500 131,300
250,000 62,500 83,300 104,200 125,000 145,800
275,000 68,800 91,700 114,600 137,500 160,400
300,000 75,000 100,000 125,000 150,000 175,000
Credited years of service at September 30, 2005 were 9 for Mr. Boyle
and 29 for Mr. McPartlin. Benefits under the U.K. Retirement Plan are
computed solely on the U.K. base salary of participants, exclusive of
bonuses, incentive and other compensation, and are not reduced on account
of U.K. Social Security entitlement. The compensation of Mr. Boyle and Mr.
McPartlin is entirely U.K. based. A spouse's pension of 50% of the
employee's pension is payable beginning at the death of the employee either
before or during retirement. Pension payments escalate by at least 3% per
year, compounded, and at a higher rate in certain circumstances.
COMPENSATION COMMITTEE REPORT
The Company's compensation program is designed to motivate and retain
employees by encouraging and rewarding performance. The program is
administered by the Compensation Committee of the Board of Directors (the
"Committee").
The Committee believes that the combination of salary and incentive
compensation is the best method for compensating its executive officers and
senior managers to promote uniform excellence, long-term commitment and
team performance. Management salaries are determined based upon individual
performance, level of responsibility, experience and industry comparables.
The Committee reviews these salaries annually and may measure them against
compensation data obtained from published compensation surveys and surveys
of peer companies. The Committee believes that the salaries of the Company's
executive officers are within the range of these surveys. The peer companies
are generally of about the same size as the Company and are in technical,
rather than consumer or distribution fields. The Company believes that its
competitors for executive talent are not necessarily companies which engage
in the same business as the Company and, therefore, the companies used for
comparative compensation purposes differ from the companies included in the
Industrial Controls Industry Index. Incentive compensation includes grants
of restricted stock and cash bonuses which are awarded at year-end in the
discretion of the Committee to reward particular performance. The Committee
has awarded bonuses for performance with respect to fiscal 2005 of 4.7% of
base salary for Mr. Boyle and an average of 4.0% of base salary for the
senior managers other than Mr. Boyle.
Prior to 2004, the Company used stock options as an important incentive
to motivate executive officers and other key employees for improved long-
term performance of the Company and to align their interests with those of
the stockholders. In 2004, the Company modified its approach to providing
equity incentives in response to changing business needs and financial
accounting requirements, and obtained stockholder approval to amend the 1996
Equity Incentive Plan to provide for awards of restricted stock and other
forms of equity compensation.
The Equity Compensation Guidelines adopted by the Board articulate the
goals and considerations the Committee takes into account in determining
equity compensation awards. The Guidelines recognize that equity awards may
play a purely compensatory role and they may also provide an incentive for
future individual achievement. The incentive function may be implemented
through performance vesting or, more simply, through making grants of equity
in recognition for the achievement of desired performance. The Guidelines
provide that, in general, the incentive component of compensation for senior
executives should have a high proportion of equity in order to promote
longer-term thinking and to align the benefits gained by the executives to
those attained by stockholders in both good and bad times. One aim of the
Guidelines, over the long term, is to target the equity holdings of the
chief executive and chief financial officers at greater than twice their
annual cash compensation. In adopting the Equity Compensation Guidelines,
the Board also established a target level of stock ownership for other
senior managers equal to annual cash compensation. Grants of restricted
stock will be intended in part to assist in reaching these levels of
ownership over time. Shares held by members of a person's immediate family
or a trust for his or their sole benefit may be counted towards the
ownership requirement.
Pursuant to the Equity Compensation Guidelines and both in recognition
of prior performance and as an incentive for the future, following the 2005
fiscal year , the Compensation Committee granted 15,000 shares of restricted
stock to Mr. Boyle.
The recommended base salary and any incentive compensation award for
the President are determined each year by the Committee based upon its
subjective assessment of the overall financial performance of the Company
and the performance of the President relative to corporate objectives and
other factors. In the light of the Company's financial performance during
the prior year, Mr. Boyle's base salary during fiscal 2005 was increased
by 4% from 2004. Mr. Boyle is a resident of the United Kingdom and receives
his base salary in British Pounds. Measured in United States Dollars, Mr.
Boyle's 2005 base salary was 7.2% higher than in 2004.
Members of the Compensation Committee
Maarten D. Hemsley, Chairman
Marvin G. Schorr
Paul O. Stump
PERFORMANCE GRAPH
The following graph compares the cumulative total return (change in
stock price plus reinvested dividends) assuming $100 invested in the Common
Stock of the Company, in the American Stock Exchange ("AMEX") Market Value
Index, and in the Media General Industrial Controls Sector Index during the
period from September 30, 2000 through September 30, 2005.
Value of Investment at September 30,
2000 2001 2002 2003 2004 2005
Tech/Ops Sevcon, Inc. 100 82 46 64 65 66
AMEX Market Value Index 100 75 81 101 116 141
Media General Industrial 100 134 182 177 241 339
Controls Sector Index
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, 2005, (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, 2005 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
AUDITORS
In 2005, the Audit Committee of the Board of Directors reviewed the
Company's independent auditors as part of its ongoing efforts to reduce
operating costs and expenses. As a result, on September 1, 2005, the Audit
Committee voted to replace Grant Thornton LLP with Vitale, Caturano &
Company, Ltd. (VCC) as the Company's independent registered public
accounting firm, effective immediately. The Company's Audit Committee
selected VCC based, among other things, on the fee estimates provided by
VCC and the closure by Grant Thornton UK LLP of its office in Newcastle,
near the Company's UK facilities. The Company expects to lower its audit
costs as a result of the change in accounting firms.
Grant Thornton LLP's audit reports on the consolidated financial
statements of the Company and subsidiaries for the fiscal years ended
September 30, 2004 and 2003 did not contain any adverse opinion or
disclaimer of opinion, and were not qualified or modified as to
uncertainty, audit scope or accounting principles. During those years and
through the date of the Audit Committee's action, there were no
disagreements between the Company and Grant Thornton LLP on any matter of
accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of Grant Thornton LLP, would have caused Grant Thornton LLP to
make reference to the matter in its audit report.
During the Company's two most recent fiscal years and through the date
of VCC's engagement, neither the Company nor anyone on behalf of the Company
consulted with VCC in any matter regarding either (A) the application of
accounting principles to a specified transaction, either completed or
proposed, or the type of audit opinion that might be rendered on the
Company's financial statements, and neither was a written report nor oral
advice provided to the Company by VCC that was an important factor
considered by the Company in reaching a decision as to the accounting,
auditing or financial reporting issue, or (B) any matter that was the
subject of either a disagreement or a reportable event, as each are defined
in Items 304(a)(1)(iv) and (v) of SEC Regulation S-K, respectively.
Representatives of VCC are expected to be present at the meeting with
an opportunity to make a statement if they desire to do so and are expected
to be available to respond to appropriate questions.
The fees billed by VCC, the Company's principal accountant for the
2005 year-end audit, and the fees billed by Grant Thornton LLP, the
principal accountant for 2004 and up to September 2005, for each of the
last two fiscal years are set out below:
(in thousands of dollars)
-------------------------------------------------------------------------
2005 2004
-------------------------------------------------------------------------
Vitale Caturano:
Audit fees $ 111 $ -
Audit-Related fees - -
Tax fees - -
All other fees - -
-------------------------------------------------------------------------
Total - Vitale Caturano fees $ 111 $ -
-------------------------------------------------------------------------
Grant Thornton:
Audit fees $ 40 $ 172
Audit-Related fees 42 13
Tax fees 33 39
All other fees - -
-------------------------------------------------------------------------
Total - Grant Thornton fees $ 115 $ 224
-------------------------------------------------------------------------
Total Fees:
Audit fees $ 151 $ 172
Audit-Related fees 42 13
Tax fees 33 39
All other fees - -
-------------------------------------------------------------------------
Total fees $ 226 $ 224
-------------------------------------------------------------------------
The audit-related fees in fiscal 2005 relate primarily to reviews of
the Company's internal controls, the audit of the pension plan for the
Company's UK subsidiary, assistance with the Company's response to a
comment letter from the SEC, and services related to the change of auditors
late in fiscal 2005. In fiscal 2004 the audit-related fees related
primarily to the audit of the pension plan for the Company's UK subsidiary,
fees related to the Company's S-8 registration statement and other meetings
with the auditors. The tax fees are for the filing of the Company's tax
returns in both the United States and the United Kingdom and in both years
also include fees for tax advice on employee benefits.
All of the above fees were approved by the Audit Committee before the
respective engagements were undertaken. The Company has not adopted pre-
approval policies and procedures relating to non-audit services.
The fees billed by Vitale Caturano, an independent member of Baker
Tilly International, in 2005 include fees billed by independent Baker Tilly
International members in the United Kingdom and France relating to the
audits of United Kingdom and French subsidiaries of the Company.
DEADLINE FOR STOCKHOLDER PROPOSALS FOR 2007 ANNUAL MEETING
In order for a stockholder proposal to be considered for inclusion in
the Company's proxy materials for the annual meeting in 2007, it must be
received by the Company at 155 Northboro Road, Southborough, Massachusetts
01772, Attention: Treasurer, no later than August 29, 2006.
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. The
shareholder group comprised of Paul D. Sonkin, Hummingbird Management LLC
and related entities filed late a report covering one purchase of shares.
OTHER BUSINESS
The Board of Directors does not know of any business which will come
before the meeting except the matters described in the notice. If other
business is properly presented for consideration at the meeting, the
enclosed proxy authorizes the persons named therein to vote the shares in
their discretion.
Dated December 27, 2005
APPENDIX 1
Revised effective July 26, 2005
TECH/OPS SEVCON, INC
CHARTER
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
PURPOSE:
The principal purpose of the Audit Committee is to assist the Board of
Directors in fulfilling its responsibility to oversee the Company's
accounting and financial reporting processes and audits of the Company's
financial statements, including by reviewing the financial reports and other
financial information provided by the Company, the Company's disclosure
controls and procedures and internal accounting and financial controls, and
the annual independent audit process.
In discharging its oversight role, the Audit Committee is granted all
responsibilities and authority required by SEC Rule 10A-3, including without
limitation the authority to investigate any matter brought to its attention,
with full access to all books, records, facilities and personnel of the
Company, and the authority to engage independent counsel and other advisers,
as the Committee determines necessary to carry out its duties.
The outside auditor is ultimately accountable to the Board and the
Committee, as representatives of the stockholders. In this connection, the
Committee, as a committee of the Board, shall be directly responsible for
the appointment, compensation and oversight of the work of the outside
auditor in preparing or issuing an audit report or related work, including
resolving any disagreements between Management and the outside auditor
regarding financial reporting.
The Committee shall receive direct reports from the outside auditor. The
Committee shall be responsible for overseeing the independence of the
outside auditor and for approving all auditing services and permitted non-
audit services provided by the outside auditor.
The Committee will annually assess its own performance and review and assess
the adequacy of this charter and recommend any changes to the Board.
MEMBERSHIP AND TERM OF APPOINTMENT:
The Audit Committee shall consist of not less than three Directors. A
chairperson and the Committee members shall be elected annually by the
affirmative vote of at least a majority of the independent Directors.
All Committee members shall be independent Directors:
- Who have no material relationship to the Company that may interfere
with the exercise of their independent judgment;
- Who do not receive, directly or indirectly, any consulting, advisory
or other compensatory fee from the Company, other than in the member's
capacity as a member of the Board or any of its committees;
- Who are not "affiliated persons" (as defined by applicable law or
regulation) of the Company or any subsidiary, other than as members of
the Board or any of its committees; and
- Who are financially literate.
In addition, at least one member of the Committee will have accounting or
related financial management expertise, and, to the extent practicable, be
an "audit committee financial expert" as that term is defined by the SEC.
QUORUM AND VOTING:
At the meetings of the Audit Committee, the presence of a majority of all
members shall be necessary to constitute a quorum for the transaction of
business, and the affirmative vote of a majority of all members shall be
necessary to take any action. The responsibilities of the committee may, to
the extent permitted by applicable law and Amex rules, be delegated to one
or more members of the committee.
RULES:
The Audit Committee may adopt such rules and regulations, not inconsistent
with law nor with the provisions of the Certificate of Incorporation or the
By-Laws, or of any applicable resolution of the Board of Directors, for the
calling and holding of meetings of the Committee and for the transaction of
business at such meetings, as the Committee may deem necessary and desirable.
The Committee shall keep regular minutes of its proceedings, and shall
report the same to the next meeting of the Board of Directors.
RESOURCES AND AUTHORITY:
The Audit Committee shall be provided with the necessary resources,
including staff and administrative support and periodic education, by the
Company to effectively discharge its duties and responsibilities assigned
by the Board of Directors. The Audit Committee shall have the discretion
to institute investigations of improprieties or suspected improprieties,
including the standing authority to retain special counsel or other staff,
with full access to all books, records, facilities and personnel of the
Company. The Audit Committee shall have full authority to approve funding
by the Company for the payment of compensation to outside auditors and any
independent counsel or other advisors retained by the Committee.
KEY RESPONSIBILITIES:
The Audit Committee's role is one of oversight, and it is recognized that
Management is responsible for preparing the Company's financial statements,
and that the outside auditor is responsible for auditing those financial
statements.
The common recurring activities of the Committee in carrying out its
oversight role shall include the following functions, which are set forth
as a guide and may be varied and supplemented from time to time as
appropriate under the circumstances.
- The Committee shall meet at least quarterly and shall call special
meetings, as circumstances require. When appropriate, the Audit
Committee shall meet with legal counsel to discuss legal matters that
may have an impact on the Company's financial statements.
- The Committee shall periodically discuss with Management and the
outside auditor the quality and adequacy of the Company's internal
controls, including any significant deficiencies in the design or
operation of those controls which could adversely affect the Company's
ability to record, process, summarize and report financial data and any
fraud, whether or not material, that involves Management or other
employees who have a significant role in the Company's internal
controls, and discuss with the outside auditor how the Company's
financial systems and controls compare with industry practices.
- The Committee shall discuss with Management and the outside auditor,
and shall have final authority over, the Company's internal auditing
function, including responsibilities, budget and staffing, and shall
receive such reports as it may request directly from the principal
internal auditor.
- The Committee shall periodically review the adequacy and effectiveness
of the Company's disclosure controls and procedures.
- The Committee shall review with Management and the outside auditor the
audited financial statements to be included in the Company's Annual
Report on Form 10-K and the Annual Report to Stockholders, and shall
review and consider with the outside auditor the matters required to be
discussed by Statements on Auditing Standards No. Numbers 61
Communication with Audit Committees and 90 Audit Committee
Communications.
- If necessary, the Committee shall review as a whole, or through the
Committee chair, with the outside auditor, prior to filing with the
SEC, the Company's interim financial information to be included in
the Company's Quarterly Reports on Form 10-Q and the matters required
to be discussed by SAS Nos. 61 and 90.
- The Committee shall periodically review with Management and the outside
auditor the quality, as well as acceptability, of the Company's
accounting policies, and discuss with the outside auditor how the
Company's accounting policies compare with those in the industry and
all alternative treatments of financial information within generally
accepted accounting principles that have been discussed with
Management, the ramifications of use of such alternative disclosures
and treatments, and the treatment preferred by the outside auditor.
- The Committee shall periodically discuss with the outside auditor
whether all material correcting adjustments identified by the outside
auditor in accordance with generally accepted accounting principles and
the rules of the SEC are reflected in the Company's financial
statements.
- The Committee shall review with Management and the outside auditor any
material financial or other arrangements of the Company which do not
appear on the Company's financial statements, and any transactions or
courses of dealing with third parties that are significant in size or
involve terms or other aspects that differ from those that would likely
be negotiated with independent parties, and which arrangements or
transactions are relevant to an understanding of the Company's
financial statements.
- The Committee shall review with Management and the outside auditor the
Company's critical accounting policies and practices.
- The Committee shall review with the outside auditor all material
communications between the outside auditor and Management, such as any
management letter or schedule of unadjusted differences.
- The Committee shall request from the outside auditor annually a formal
written statement delineating all relationships between the auditor and
the Company consistent with Independence Standards Board Standard 1 -
Independence Discussions with Audit Committees and such other
requirements as may be established by the Public Company Accounting
Oversight Board, discuss with the outside auditor any such disclosed
relationships and their impact on the outside auditor's independence,
and take appropriate action regarding the independence of the outside
auditor.
- The Committee shall periodically review and evaluate the qualifications
and performance of the outside auditor, including obtaining annual
reports on the outside auditor's quality control procedures, any
material issues raised by the most recent internal quality control and
peer reviews of the outside auditor and any inquiry or investigation by
governmental or professional authorities within the preceding five
years respecting any independent audits carried out by the outside
auditor, and any steps taken to deal with such issues.
- The Committee shall review and discuss with Management the Company's
policies with respect to earnings press releases and earnings guidance,
including the use of pro forma information, to be provided by the
Company publicly or to analysts and ratings agencies.
- The Committee shall discuss with Management the Company's major
financial risk exposures and the steps Management has taken to monitor
and control such exposures.
- On an ongoing basis, the Committee shall conduct an appropriate review
of, and report to the Board with respect to, all proposed related-
party transactions with the Company where the amount involved exceeds
$60,000. All such transactions shall be subject to prior approval by
the Committee. "Related-party transactions" shall be defined in
accordance with the broadest applicable Amex, SEC or statutory
definition then in effect, and generally shall include transactions
between the Company and Company Directors; executive officers;
nominees for election as director; stockholders; or their respective
affiliates or immediate family members.
- The Committee shall approve the engagement of the outside auditor and
shall approve, in advance, all audit services and all permitted non-
audit services to be provided to the Company by the outside auditor
(subject to any de minimus exception permitted by SEC rules), taking
into account whether such non-audit services are compatible with
maintaining the outside auditor's independence. The Committee may
designate an individual Committee member to pre-approve audit and
permissible non-audit services, provided that such approvals be
presented to the full Committee at the next scheduled meeting.
- The Committee shall recommend to the Board whether, based on the
reviews and discussions referred to above, the financial statements
should be included in the Company's Annual Report on Form 10-K.
COMPLAINT PROCEDURES
Any issue of significant financial misconduct shall be brought to the
attention of the Committee for its consideration. In this connection, the
Committee shall establish procedures for (i) the receipt, retention and
treatment of complaints received by the Company regarding accounting,
internal accounting controls or auditing matters and (ii) the confidential,
anonymous submission by employees of the Company of concerns regarding
questionable accounting or auditing matters.
The existence and nature of the reporting procedures shall be communicated
to all employees and, to the extent appropriate, to agents of the Company.
It shall be a violation of the code of ethics to intimidate or impose any
form of retribution on any employee or agent who utilizes such reporting
system in good faith to report suspected violations (except that appropriate
action may be taken against such employee or agent if such individual is one
of the wrongdoers).
(FORM OF PROXY CARD) APPENDIX II
TECH/OPS SEVCON, INC.
Proxy Solicited by the Board of Directors for Annual Meeting
of Stockholders to be held January 24, 2006.
The undersigned, revoking all prior proxies, appoints
Marvin G. Schorr, 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 24, 2006 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.
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_____
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
Nominees:
Rosenberg O
Start O
\__\ FOR ALL
NOMINEES
\__\ WITHOLD AUTHORITY
FOR ALL NOMINEES
\__\ FOR ALL EXCEPT (See instructions below)
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: ?
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.
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.
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.
1