December 6, 1999
Dear Shareholder Member:
You are cordially invited to attend the Company's annual meeting at
10:00 a.m., local time, on Tuesday, January 18, 2000 in the Auditorium
of our Rockford, Illinois, plant. Registration for the meeting will be
in the Atrium located at the rear of the plant. We invite you to join
members of our management team for an informal social period from 9:00
a.m. to 9:45 a.m. The formal meeting will begin promptly at 10:00 a.m.
Parking is available directly behind the plant. A map is enclosed with
this notice.
Please complete and return your proxy card now whether or not you plan
to attend.
Sincerely yours,
WOODWARD GOVERNOR COMPANY
John A. Halbrook
Chairman, Board of Directors
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
January 18,2000
The annual meeting of the shareholder members of Woodward Governor
Company will be held in the Company's Auditorium, 5001 North Second
Street, Rockford, Illinois, on Tuesday, January 18, 2000, at 10:00
a.m., local time. At the meeting we will:
1. Elect three directors to serve for a term of three years
each; and
2. Transact other business that properly comes before the
meeting.
Shareholders who owned Woodward stock at the close of business on
November 22, 1999 are entitled to vote at the meeting.
You will notice that this year we have changed the format of the proxy
statement to make it easier to understand. The Securities and Exchange
Commission is encouraging companies to write documents for investors in
plain English and we support this effort.
We look forward to seeing you at the meeting.
Sincerely,
Carol J. Manning
Corporate Secretary
December 6, 1999
YOUR VOTE IS IMPORTANT
Even if you plan to attend the meeting in person, please date, sign,
and return your proxy in the enclosed envelope, or vote via telephone
or the internet now. Prompt response is helpful and your cooperation
will be appreciated.
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
Tuesday, January 18, 2000
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
Our Board of Directors is soliciting your proxy to vote at our annual
meeting of shareholder members (or at any adjournment of the meeting).
This proxy statement summarizes the information you need to know to
vote at the meeting.
We began mailing this proxy statement and the enclosed proxy card on or
about December 6, 1999 to all shareholders entitled to vote. The
Woodward Governor Company Annual Report, which includes our financial
statements, is being sent with this proxy statement.
Date, time and place of meeting:
Date: January 18, 2000
Time: 10:00 a.m.
Place: 5001 North Second Street
Rockford, Illinois
Record Date Information
Shareholders who owned Woodward common stock at the close of business
on the record date, November 22, 1999, are entitled to vote at the
meeting. As of the record date, there were approximately 11,274,223
shares outstanding.
Each share of Woodward common stock that you own entitles you to one
vote, except for the election of directors. Since three directors are
standing for election, you will be entitled to three director votes for
each share of stock you own. Of this total, you may choose how many
votes you wish to cast for each director.
Voting Your Proxy
This year, Woodward is offering shareholders the opportunity to vote by
mail, by phone or via the internet. Instructions to use these methods
are set forth on the enclosed proxy card.
If you vote by phone or via the internet, please have your proxy or
voting instruction card available. The control number appearing on
your card is necessary to verify your vote. A phone or internet vote
authorizes the named proxies in the same manner as if you marked,
signed and returned the card by mail. Voting by phone and via the
internet are valid proxy voting methods under Delaware law and Woodward
Bylaws.
If you properly fill in your proxy card and send it to us in time to
vote, one of the individuals named on your proxy card (your "proxy")
will vote your shares as you have directed. If you sign the proxy card
but do not make specific choices, your proxy will follow the Board's
recommendations and vote your shares:
"FOR" the election of the Board's nominees to the Board of
Directors
If any other matter is presented at the meeting, your proxy will
vote in accordance with his or her best judgment. At the time this
proxy statement went to press, we knew of no other matters to be acted
on at the meeting.
Revoking Your Proxy
You may revoke your proxy by:
sending in another signed proxy card with a later date,
notifying our Secretary in writing before the meeting that you
have revoked your proxy, or
voting in person at the meeting.
Giving your Proxy to Someone Other than Individuals Designated on
the Card
If you want to give your written proxy to someone other than
individuals named on the proxy card:
cross out individuals named and insert the name of the individual
you are authorizing to vote, or
provide a written authorization to the individual you are
authorizing to vote along with your proxy card.
Quorum Requirement
A quorum of shareholders is necessary to hold a valid meeting.
The presence, in person or by proxy, at the meeting of holders of
shares representing a majority of the votes of the common stock
entitled to vote constitutes a quorum. Abstentions and broker non-
votes are counted as present for establishing a quorum. A broker non-
vote occurs when a broker votes on some matters on the proxy card but
not on others because he is not permitted to vote on that item absent
instruction from the beneficial owner of the shares and no instruction
is given.
Vote Necessary for Action
Directors are elected by a plurality vote of shares present at the
meeting, meaning that the three director nominees receiving the most
votes will be elected.
Other action is by an affirmative vote of the majority of shares
present at the meeting. Abstentions and broker non-votes will be
treated as unvoted in matters other than director elections.
BOARD OF DIRECTORS
Structure
Our Board of Directors is divided into three classes for purposes
of election. One class is elected at each annual meeting of
shareholders to serve for a three-year term.
Directors elected at the 2000 Annual Meeting of Shareholders will
hold office for a three-year term expiring in 2003 or when their
successors are elected. Other directors are not up for election at
this meeting and will continue in office for the remainder of their
terms.
If a nominee is unavailable for election, proxy holders will vote
for another nominee proposed by the Board.
Proposal 1 -- Election of Directors
Directors Up for Election at This Meeting for Terms Expiring in
2003:
J. Grant Beadle, 66, is retired Chairman and Chief Executive
Officer of Union Special Corporation, a manufacturer of industrial
sewing machines. Other directorships: William Blair Mutual
Funds, Inc. Mr. Beadle has been a director of the Company since 1988.
Lawrence E. Gloyd, 67, is Chairman and Chief Executive Officer of
CLARCOR Inc., Rockford, Illinois, a manufacturer of filtration and
consumer packaging products. Other directorships: AMCORE Financial,
Inc., CLARCOR Inc. and Thomas Industries, Inc. Mr. Gloyd has been a
director of the Company since 1994.
J. Peter Jeffrey, 66, retired in January 1995 as Vice President of
Development at Father Flanagan's Boys' Home in Boys Town, Nebraska.
Mr. Jeffrey has been a director of the Company since 1981.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" THE NOMINEES PRESENTED IN PROPOSAL 1.
Directors Remaining in Office Until 2002
John A. Halbrook, 54, is Chairman and Chief Executive Officer of
the Company. Other directorships: AMCORE Financial, Inc. Mr.
Halbrook has been a director of the Company since 1991.
Rodney O'Neal, 46, is Vice President of Delphi Automotive Systems
and President of its division, Delphi Interior Systems, a supplier of
automotive interior systems. Mr. O'Neal was elected a director of the
Company by the Board of Directors on April 28, 1999.
Michael T. Yonker, 57, retired in June 1998 as President and Chief
Executive Officer of Portec, Inc., which had operations in the
construction equipment, materials handling and railroad products
industries. Other directorships: Modine Manufacturing Company, Inc.
Mr. Yonker has been a director of the Company since 1993.
Directors Remaining in Office Until 2001
Vern H. Cassens, 67, is retired Senior Vice President and Chief
Financial Officer of the Company. Mr. Cassens has been a director of
the Company since 1977.
Carl J. Dargene, 69, is Chairman of the Board of AMCORE Financial,
Inc., Rockford, Illinois. Other directorships: AMCORE Financial, Inc.
and CLARCOR Inc. Mr. Dargene has been a director of the Company since
1990.
Thomas W. Heenan, 68, is a retired partner in the law firm of
Chapman and Cutler, Chicago, Illinois. Mr. Heenan has been a director
of the Company since 1986.
Lou L. Pai, 52, is Chairman and Chief Executive Officer of Enron
Energy Systems, a provider of energy outsource solutions. Mr. Pai was
elected a director of the Company by the Board of Directors on July 22,
1999.
Board Meetings and Committees
The Board of Directors met five times during
1999; all directors attended more than 75% of the aggregate of the
total meetings of the Board of Directors and all committees of the
Board on which they served.
Audit Committee
J. Peter Jeffrey, chairman
J. Grant Beadle
Vern H. Cassens
Thomas W. Heenan
Michael T. Yonker
The Audit Committee recommends the engagement of independent
accountants to audit Woodward's books, reviews the scope and approach
of both the annual independent audit and internal audits, and reviews
Woodward's system of internal accounting controls. The Committee held
two meetings during 1999.
Compensation Committee
Carl J. Dargene, chairman
J. Grant Beadle
Lawrence E. Gloyd
Thomas W. Heenan
Michael T. Yonker
The Compensation Committee recommends the base compensation of
Woodward's officers and key personnel, and evaluates the performance of
and reviews the results of the annual member evaluation for those
individuals. The Committee held five meetings during 1999.
Executive Committee
John A. Halbrook, chairman
J. Grant Beadle
Carl J. Dargene
Lawrence E. Gloyd
The Executive Committee exercises all the powers and authority of
the Board of Directors in the management of the business when the Board
is not in session and when in the opinion of the Chairman the matter
should not be postponed until the next scheduled Board meeting. The
Committee may declare cash dividends. The Committee may not authorize
certain major corporate actions such as amending the Certificate of
Incorporation, amending the Bylaws, adopting an agreement of merger or
consolidation or recommending the sale, lease or exchange of
substantially all of Woodward's assets. The Committee held one meeting
during 1999.
Selection Committee
J. Grant Beadle, chairman
Carl J. Dargene
John A. Halbrook
Thomas W. Heenan
The Selection Committee recommends qualified individuals to fill
any vacancies on the Board. The Committee held three meetings during
1999.
No procedures have been established for the Selection Committee to
consider nominees recommended by shareholder members.
Stock Option Committee
Michael T. Yonker, chairman
J. Grant Beadle
Lawrence E. Gloyd
The Stock Option Committee administers the Company's Long-Term
Incentive Compensation Plan, determining and taking all action,
including granting of all incentives to eligible working members, in
accordance with the terms of the Plan. The Committee held one meeting
during 1999.
All actions by committees are reported to the Board at the next
scheduled meeting and are subject to approval and revision by the
Board. No legal rights of third parties may be affected by Board
revisions.
Director Qualifications
The Company's Bylaws provide that:
each director shall retire on September 30th following his
seventieth birthday unless approved otherwise by the Board,
no person may serve as a director unless he or she agrees to be
guided by the philosophy and concepts expressed in our Constitution,
and
Woodward must receive adequate notice regarding nominees for
directors. A copy of the notice requirement in Section 2.8 is attached
as Exhibit A.
Director Compensation
We do not pay directors who are also Woodward officers additional
compensation for their service as directors. In 1999, compensation for
non-employee directors included the following:
a monthly retainer of $1,850
Board and Committee members receive $1,000* for each meeting
attended
Committee chairmen receive $1,350 for each Committee meeting
attended
expenses of attending Board and Committee meetings
*Prior to May 1, 1999, the fee was $900 for each Board and
Committee meeting attended.
Pursuant to Outside Director Stock Purchase Agreements entered
into by Mr. O'Neal and Mr. Pai, we sold Treasury Shares at the closing
price on the dates of purchase. In payment of the purchase price, non-
interest bearing notes were signed and will be repaid by application of
each director's monthly retainer. The amount of indebtedness
outstanding at November 22, 1999: Mr. O'Neal, $98,029 and Mr. Pai,
$103,597.
Compensation Committee Interlocks and Insider Participation
Mr. Dargene, Chairman of the Board of AMCORE Financial, Inc. and a
Woodward director, serves as chairman of the Company's Compensation
Committee. In the ordinary course of its business, Woodward maintains
a normal commercial banking relationship with AMCORE Bank N.A.,
Rockford, a wholly-owned subsidiary of AMCORE Financial, Inc. The
maximum amount of borrowings outstanding at any time during 1999
reached $7,850,000. Interest has been charged at floating rates based
on standard market indices. Mr. Halbrook, Chairman and Chief Executive
Officer and a director of Woodward, serves on the Board of Directors of
AMCORE Financial, but does not serve on its Compensation Committee.
SHARE OWNERSHIP OF MANAGEMENT
The following table shows how much Woodward stock is owned, as of
November 22, 1999, by each director, each executive officer named in
the Summary Compensation Table, and all directors and executive
officers as a group.
<TABLE>
Ownership of Common Stock
<CAPTION>
<S> <C> <C>
Name Number Percent
J. Grant Beadle 5,956 0.05
Stephen P. Carter 82,859 (1) 0.73
Vern H. Cassens 87,890 (1) 0.78
Carl J. Dargene 8,436 0.07
Lawrence E. Gloyd 6,292 0.06
John A. Halbrook 261,883 (1) 2.32
Thomas W. Heenan 18,836 0.17
J. Peter Jeffrey 6,524 0.06
Charles F. Kovac 36,432 (1) 0.32
Gary D. Larrew 47,103 (1) 0.42
Rodney O'Neal 4,553 0.04
Lou L. Pai 4,496 0.04
C. Phillip Turner 114,596 (1) 1.02
Michael T. Yonker 6,036 0.05
All directors and executive
officers as a group 735,757 (1) 6.53
</TABLE>
(1) Includes the maximum number of shares which might be
deemed to be beneficially
owned under rules of the Securities and Exchange Commission,
including some duplication. Includes options to purchase shares of
Common Stock as follows: Mr. Carter 79,210; Mr. Cassens 44,880; Mr.
Halbrook 249,075; Mr. Kovac 34,499; Mr. Larrew 40,154 and Mr. Turner
87,408. Also includes shares (does not include fractional shares)
allocated to participant accounts of executive officers under the
Woodward Governor Company Member Investment and Stock Ownership Plan.
The Plan directs the Trustee to vote the shares allocated to
participant accounts under the Woodward Stock Plan portion of the Plan
as directed by such participants and to vote all allocated shares for
which no timely instructions are received in the same proportion as
the allocated shares for which instructions are received.
Section 16(a) Beneficial Ownership Reporting Compliance
Based upon a review of our records, all reports required to be
filed pursuant to Section 16(a) of the Securities Exchange Act of 1934
(the "Exchange Act") were filed on a timely basis.
PERSONS OWNING MORE THAN FIVE PERCENT OF WOODWARD STOCK
(As of November 22, 1999)
<TABLE>
<S> <C> <C>
Ownership of Common Stock
Principal Holders Number Percent
Woodward Governor Company
Profit Sharing Trust
5001 North Second Street
Rockford, Illinois 61125-7001 2,224,325 (1) 19.73%
Royce & Associates, Inc.
Royce Management Company
Charles M. Royce
1414 Avenue of the Americas
New York, New York 10019 801,196 (2) 7.11%
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, Maryland 21202 649,000 (3) 5.76%
</TABLE>
(1) Shares owned by the Woodward
Governor Company Profit Sharing Trust are held in
its Member Investment and Stock Ownership Plan (the "Plan").
Vanguard Fiduciary Trust serves as Trustee of the Profit Sharing Trust.
Of the total shares held in the Profit Sharing Trust, 1,918,237 shares
of Common Stock are allocated to participant accounts and the rest of
the shares will be allocated to participants as the principal and
interest on the current outstanding loan to the Plan are repaid. The
Plan directs the Trustee to vote the shares allocated to participant
accounts under the Woodward Stock Plan portion of the Plan as directed
by such participants and to vote all allocated shares for which no
timely instructions are received in the same proportion as the
allocated shares for which instructions are received. The remaining
shares in the Plan are voted by the Trustee as directed by the Plan's
Administrative Committee. In the event of a tender or exchange offer,
participants have the right individually to decide whether to tender or
exchange shares in their account. The Plan directs the Trustee to
tender or exchange all allocated shares for which no timely
instructions are received in the same proportion as the allocated
shares with respect to which it does receive directions. The remaining
unallocated shares are tendered or exchanged by the Trustee as directed
by the Plan's Administrative Committee.
(2) Royce & Associates, Inc. has advised the Company that it
has sole investment
power and sole voting power for 777,696 shares; Royce Management
has sole investment power and sole voting power for 23,500 shares.
(3) T. Rowe Price Associates, Inc. has advised the Company that
it has sole
dispositive power for the entire holding of 649,000 shares and has
sole voting power for 201,000 shares. These securities are owned by
various individual and institutional investors which T. Rowe Price
serves as investment adviser with power to direct investments and/or
sole power to vote the securities. For purposes of the reporting
requirements of the Exchange Act, T. Rowe Price is deemed to be a
beneficial owner of such securities; however, T. Rowe Price expressly
disclaims that it is, in fact, the beneficial owner of such securities.
COMMON STOCK PERFORMANCE
The following Performance Graph compares Woodward's cumulative
total return on its Common Stock for a five-year period (September 30,
1995 to September 30, 1999) with the cumulative total return of the S&P
Composite 500 Stock Index and the S&P Machinery Diversified Index.
TOTAL RETURN TO SHAREHOLDERS
(A DESCRIPTION OF THE GRAPHICAL MATERIAL APPEARS ON PAGE 22)
Assumes that the value of the investment in Woodward's Common
Stock and each index was $100 on September 30, 1994 and that all
dividends were reinvested.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee reviews and administers Woodward's
compensation program. This program includes guidelines to recognize
achievement of both Company and individual performance goals as an
integral part of the compensation program for key management personnel.
A total market-based compensation for key management positions
recognizing experience and competence level is determined through the
use of salary surveys; this process establishes a target total
compensation for the individual. Woodward's stock performance is not
specifically considered in determining base compensation.
Base Compensation
Actual compensation components:
60% to 85% of target total cash compensation for the position
total "at risk" compensation of at least 15%, but not more than
40%
greater position responsibility is assigned greater risk
Base compensation, other than that of Woodward's Chairman and
Chief Executive Officer, is determined by reviewing his
recommendations, which are based on:
executive compensation reviews prepared by outside compensation
consultants
individual performance based on experience, responsibilities,
management and leadership abilities, and job performance
The Compensation Committee's determination of base compensation
for fiscal 1999 was designed to accomplish two goals:
to offer competitive compensation to attract, retain and motivate
a high-quality senior management team
to link total annual cash compensation to individual performance
Annual Incentive Compensation
The Compensation Committee consults with the Chairman and Chief
Executive Officer regarding eligibility of executive officers and key
management worker members for participation in this program,
determining the appropriate performance goals and confirming attainment
or lack thereof.
If certain minimum target results are not achieved, no annual
incentive will be paid. If targeted levels are attained, annual
incentive levels range from 18% of base salary to a practical maximum
of approximately 67% of base salary of participants. However, given
outstanding performance, there is no formal maximum.
Determination based on:
overall financial performance of the Company or individual groups
or operating units
achievement of short-term objectives
direct individual performance
Stock Options
The Woodward Governor Company 1996 Long-Term Incentive
Compensation Plan (the "Plan") was established to further Woodward's
long-term growth and profitability by offering long-term incentives to
certain key management worker members. By providing an equity position
in the Company, we believe their interests will be better aligned with
those of our shareholders.
Provisions of the Plan:
authorization to grant both incentive and nonqualified stock
options
award based on Woodward's performance and the participant's
present and potential contributions to that performance
option price of shares is determined at the date of the grant and
will not be less than the fair market value as quoted on the Nasdaq
National Market on that date
In fiscal 1999, 76 worker members participated in the Plan.
Compensation of the Chairman and Chief Executive Officer
The compensation of John A. Halbrook, Woodward's Chairman and
Chief Executive Officer, was determined in the same manner as for all
other executive officers. Mr. Halbrook's base salary in 1999 was
$415,506, a rate that put 40% of his target compensation at risk.
Mr. Halbrook's incentive compensation for 1999 of $696,226 was
entirely based on total Company performance as measured by shareholder
value created. Shareholder value created was measured by combined
increased earnings, improvement in utilization of receivables,
inventory, and investment in capital assets.
Mr. Halbrook was also granted options to purchase 35,000 shares of
Woodward Governor Company Common Stock.
Compensation Committee: Carl J. Dargene, Chairman
J. Grant Beadle
Lawrence E. Gloyd
Thomas W. Heenan
Michael T. Yonker
EXECUTIVE COMPENSATION
The following table sets forth a summary for the last three fiscal
years of the cash and non-cash compensation paid to John A. Halbrook,
Woodward's Chairman and Chief Executive Officer, and to each of the
other four most highly compensated executive officers.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Long-Term
Compensation
Annual Compensation Awards
Other Securities
Annual Underlying All Other
Name and Principal Position Year Salary (1) Bonus (2) Compensation Options (#) Compensation (3)
John A. Halbrook 1999 $415,506 $696,226 $34,867 50,000 $46,316
Chairman and Chief 1998 392,002 138,062 31,622 79,515 43,600
Executive Officer 1997 373,412 161,608 36,713 53,600 41,148
C. Phillip Turner 1999 214,994 219,519 32,813 20,000 31,675
Vice President 1998 191,100 168,422 28,630 24,828 28,552
Aircraft Engine Systems 1997 175,812 81,235 32,286 17,600 26,139
Charles F. Kovac 1999 195,000 107,761 14,285 18,000 24,200 (4)
Vice President 1998 168,517 24,317 12,102 5,739 20,973
Industrial Controls 1997 146,588 40,815 12,707 8,800 18,125
Stephen P. Carter 1999 190,008 233,484 15,003 18,000 23,996
Vice President, Chief 1998 160,212 69,650 12,333 27,610 19,808
Financial Officer 1997 137,904 62,945 12,875 17,600 17,185
and Treasurer
Gary D. Larrew 1999 149,267 43,756 18,272 18,000 21,236
Vice President 1998 130,494 52,208 15,694 7,414 17,989
Business Development 1997 118,690 40,993 17,402 4,000 14,540
</TABLE>
(1) No executive officer received personal benefits valued at
more than either 10% of cash compensation or $50,000.
(2) Includes amounts deferred pursuant to the Unfunded Deferred
Compensation Plan No. 2.
(3) Company contributions to the Member Investment and Stock
Ownership Plan, Retirement Income Plan and Unfunded Deferred
Compensation Plans are as follows:
<TABLE>
Member Investment and Stock Ownership Plan
<CAPTION>
<S> <C> <C> <C>
Officer 1999 1998 1997
Mr. Halbrook $13,000 $13,000 $12,739
Mr. Turner 13,524 13,491 12,058
Mr. Kovac 13,563 13,029 10,459
Mr. Carter 13,563 12,229 9,840
Mr. Larrew 11,862 9,926 7,350
</TABLE>
<TABLE>
Retirement Income Plan
<CAPTION>
<S> <C> <C> <C>
Officer 1999 1998 1997
Mr. Halbrook $ 8,480 $ 8,320 $ 8,160
Mr. Turner 12,160 12,000 11,840
Mr. Kovac 7,840 7,680 6,651
Mr. Carter 8,000 7,579 6,390
Mr. Larrew 9,375 8,063 7,190
</TABLE>
<TABLE>
Unfunded Deferred Compensation Plan
<CAPTION>
<S> <C> <C> <C>
Officer 1999 1998 1997
Mr. Halbrook $24,836 $22,280 $20,249
Mr. Turner 5,992 3,061 1,206
Mr. Kovac 2,797 263 0
Mr. Carter 2,343 0 0
Mr. Larrew 0 0 0
</TABLE>
Under a plan closed in 1971, Mr. Turner is eligible for an annual
benefit of $283 at normal retirement.
(4) Mr. Kovac resigned as Vice President of the Company and general manager of
Industrials Controls on November 8, 1999 and as a member of the
Company effective December 6, 1999. In connection with his
resignation, the Company entered into a separation agreement with Mr.
Kovac. In addition to the amounts set forth in Footnote (3), the
Company agreed on a separation payment of $220,000 and further agreed
to cover ancillary benefits for an amount not to exceed $32,000, which
included COBRA medical and insurance benefits and outplacement,
counseling and legal services in addition to regular member benefits
accrued in fiscal year 2000.
Transitional Compensation Agreements
In September 1999, Woodward approved transitional compensation
agreements with Messrs. Halbrook, Carter and Turner that become
operative only upon a change in control or other specified event. For
purposes of these agreements, a change in control occurs if:
any person, entity, or group (with certain exceptions) becomes the
beneficial owner of 15% or more of the outstanding shares of Woodward
common stock; or
there is a change in a majority of the Board during any two-year
period other than by election or nomination by a vote of two-thirds of
the Board members as of the beginning of the period; or
Woodward's shareholders approve a merger, consolidation, sale of
assets or share exchange resulting in our shareholders owning less than
51% of the combined voting power of the surviving corporation following
the transaction; or
our shareholders approve a liquidation or dissolution.
Following a change in control, Woodward will continue to employ the
executive for a maximum period of two years in substantially the same
position, for substantially the same compensation and benefits. If the
executive's employment is terminated by Woodward (other than for cause
or due to death or disability), or the executive terminates with good
reason (as defined in the agreement), he or she receives an amount
(payable in a lump sum) equal to 300% of each of (1) the executive's
annual base salary, (2) highest annual bonus in the last three years,
and (3) the sum of the Member Investment and Stock Ownership Plan,
Retirement Income Plan and Unfunded Deferred Compensation Plan annual
contributions made or credited for the benefit of the executive.
Member benefits shall be continued at Woodward's expense for a period
of three years after the date of termination. Outplacement services
will be provided at Woodward's expense as well as tax preparation
services for the executive's taxable year in which the termination
occurred.
If the benefits and amount payable to the executives are subject to
federal excise tax, the executive officers will also be entitled to
receive an additional payment so that they will receive (on a net
basis) the same amount that they would have received absent the
applicability of the excise tax.
STOCK OPTIONS
The following table shows stock options granted during 1999 under the
Woodward Governor Company 1996 Long-Term Incentive Compensation Plan to
the individuals named in the Summary Compensation Table:
<TABLE>
OPTION GRANTS IN FISCAL YEAR 1999
Individual Grants
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Number of % of Total Potential Realizable Value
Securities Options at Assumed Annual Rates of
Underlying Granted to Stock Price Appreciation
Options Employees For Option Term (3)
Granted in Fiscal Exercise Expiration
Name (1) Year Price (2) Date 5%($) 10%($)
John A. Halbrook 50,000 25.00% $22.00 11/16/2008 $691,784 $1,753,117
C. Phillip Turner 20,000 10.00% $22.00 11/16/2008 276,714 701,247
Charles F. Kovac 18,000 9.00% $22.00 11/16/2008 249,042 631,122
Stephen P. Carter 18,000 9.00% $22.00 11/16/2008 249,042 631,122
Gary D. Larrew 18,000 9.00% $22.00 11/16/2008 249,042 631,122
</TABLE>
(1) Consists of non-qualified options issued for a ten-year term.
(2) Closing price of Common Stock as reported on the Nasdaq National Market
as of the dates of grant.
(3) The potential realizable value is calculated based on the term of
the option at its time of grant (ten years). It is calculated assuming
that the stock price on the date of grant appreciates at the indicated
annual rate compounded annually for the entire term of the option
and the option is exercised and sold on the last day of its term
for the appreciated stock price. No gain to the optionee is
possible unless the stock price increases over the option term.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides information on option exercises in 1999 by
the individuals named in the Summary Compensation Table and the value
of their unexercised options at September 30, 1999.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Number of Securities Value of
Shares Underlying Unexercised Unexercised
Acquired Value Options at In-the-Money Options
on Exercise Realized Fiscal Year-End(#) at Fiscal Year-End ($)
Name (#) ($) Exercisable Exercisable
John A. Halbrook 0 $0.00 214,075 $481,347.28
C. Phillip Turner 0 $0.00 72,408 167,032.54
Charles F. Kovac 0 $0.00 34,499 81,831.88
Stephen P. Carter 0 $0.00 66,210 103,131.80
Gary D. Larrew 0 $0.00 32,154 81,413.62
</TABLE>
CERTAIN TRANSACTIONS
See "Compensation Committee Interlocks and Insider Participation."
INDEPENDENT PUBLIC ACCOUNTANTS
In 1999, PricewaterhouseCoopers LLP served as Woodward's independent
public accountants. The Board intends to reappoint them for the fiscal
year ending September 30, 2000. We anticipate a representative from
PricewaterhouseCoopers LLP will be present at the annual meeting and
available to answer appropriate questions.
SHAREHOLDER PROPOSALS
If you want to submit a proposal for possible inclusion in our proxy
statement for the 2001 Annual Meeting of Shareholders, you must ensure
your proposal is received by us on or before August 11, 2000.
If you intend to present a proposal to shareholders, but do not want it
included in the proxy statement, management's proxies for that meeting
will be entitled to exercise their discretionary authority on that
proposal unless we receive notice of your proposal no later than
October 25, 2000. Even if we receive proper notice before October 25,
2000, the proxies may still exercise their discretionary authority on
the proposal by telling shareholders about the proposal and how they
intend to vote on it, unless you solicit proxies for the proposal as
required by Rule 14a-4(c)(2) under the Exchange Act.
OTHER MATTERS
Woodward is soliciting this proxy on behalf of its Board of Directors.
This solicitation is being made by mail, but also may be made by
telephone or in person. The Company will pay the regular charge of
brokers and other nominees who hold shares of record for forwarding
proxy material to the beneficial owners of such shares.
We do not know of any matters to be acted upon at the meeting other
than those discussed in this statement. If any other matter is
presented, proxy holders will vote on the matter in their discretion.
By Order of the Board of Directors
WOODWARD GOVERNOR COMPANY
Carol J. Manning
Corporate Secretary
December 6, 1999
EXHIBIT A
SECTION 2.8 OF THE BYLAWS REQUIRING WRITTEN NOTICE
SECTION 2.8 NOMINATIONS FOR DIRECTOR. Nominations for election to the
Board of Directors may be made by the Board of Directors or by any
stockholder entitled to vote for the election of directors. Nominations
other than those made by the Board of Directors shall be made by notice
in writing, delivered or mailed by registered or certified United
States mail, return receipt requested, postage prepaid, to the
Secretary of the Corporation, not less than 20 days nor more than 50
days prior to any meeting of stockholders called for the election of
directors; provided, however, if less than 21 days' notice of the
meeting is given to stockholders, such written notice shall be
delivered or mailed, as prescribed, not later than the close of
business on the seventh day following the day on which the notice of
meeting was mailed to the stockholders. Each such written notice shall
contain the following information:
(a) The name and residence address of the stockholder making the
nomination;
(b) Such information regarding each nominee as would have been
required to be
included in a proxy statement filed pursuant to the proxy
rules of the Securities and Exchange Commission had the
nominee been nominated by the Board of Directors; and
(c) The signed consent of each nominee to serve as a member of
the Board of
Directors if elected, and the signed agreement of each
nominee that if elected he or she will be guided by the
philosophy and concepts of human and industrial association
of the Corporation as expressed in its Constitution in
connection with the nominee's service as a member of the
Board of Directors.
Unless otherwise determined by the Chairman of the Board of Directors
or by a majority of the directors then in office, any nomination which
is not made in accordance with the foregoing procedure shall be
defective, and any votes which may be cast for the defective nominee
shall be disregarded.
ANNUAL MEETING OF SHAREHOLDERS OF
WOODWARD GOVERNOR COMPANY
January 18, 2000
PROXY VOTING INSTRUCTIONS
TO VOTE BY MAIL
Please date, sign and mail your proxy card in the envelope provided as
soon as possible.
TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
Please call toll-free 1-800-PROXIES and follow the instructions. Have
your control number and the proxy card available when you call.
TO VOTE BY INTERNET
Please access the web page at "www.voteproxy.com" and follow the on-
screen instructions. Have your control number available when you
access the web page.
YOUR CONTROL NUMBER IS ______________________
Please Detach and Mail in the Envelope Provided
_X_ PLEASE MARK VOTES
AS IN THIS EXAMPLE
1. ELECTION OF DIRECTORS __ __ __ 2. In their discretion,
the proxies
are authorized to vote upon
such
other matter as may properly
come
J. Grant Beadle before the meeting.
Lawrence E. Gloyd
J. Peter Jeffrey) A majority of said attorneys
or proxies who are present at
INSTRUCTIONS: To withhold authority the meeting shall have, and may
to vote for any individual nominee, exercise, all of the powers of
mark the "For All Except" box all said attorneys or proxies
and strike a line through the hereunder.
nominee's name in the list provided
above. Your shares will be voted PLEASE MARK, SIGN, DATE AND RETURN THIS
for the remaining nominees. PROXY CARD USING THE ENCLOSED ENVELOPE.
Signature__________________ Signature if held jointly ______________
Dated ________
NOTE: Please sign exactly as name appears hereon. When shares are
held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as
such. If a corporation, please sign in full corporate name by
President or other authorized officer. If a partnership, please sign
in partnership name by authorized person.
PROXY PROXY
WOODWARD GOVERNOR COMPANY
Proxy for Annual Meeting of the Shareholders - January 18, 2000
Solicited by the Board of Directors
The undersigned hereby appoints J. Grant Beadle, Vern H. Cassens and
John A. Halbrook, as the undersigned's proxy, with full power of
substitution, to represent and to vote, as designated on the reverse
side, all the undersigned's common stock in the Woodward Governor
Company at the Annual Meeting of Shareholders to be held on Tuesday,
January 18, 2000, and at any adjournment thereof, with the same
authority as if the undersigned were personally present.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDERS. IF NO SPECIFICATION IS MADE,
THIS PROXY WILL BE VOTED IN THE DISCRETION OF THE NAMED PROXIES ON ALL
MATTERS. THE BOARD FAVORS A VOTE "FOR" THE ELECTION OF THE NOMINEES TO
THE BOARD OF DIRECTORS.
<TABLE>
<CAPTION>
TOTAL RETURN TO SHAREHOLDERS
<S> <C> <C> <C> <C> <C> <C>
Starting
Basis
Description 1994 1995 1996 1997 1998 1999
Woodward Governor Company $100.00 $ 85.30 $126.38 $193.77 $131.52 $148.22
S&P 500 $100.00 $129.74 $156.12 $219.27 $239.10 $305.18
S&P Mach Div $100.00 $110.69 $144.41 $202.38 $145.25 $191.76
</TABLE>
Assumes that the value of the investment in the Company's Common Stock
and each index was $100 on September 30, 1994 and that all dividends
were reinvested.
