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EDO CORPORATION
PROXY STATEMENT
Your proxy in the form enclosed is solicited by the Board of Directors of EDO
Corporation (the "Company"). Your proxy may be revoked by you at any time prior
to its use. The shares represented by the proxies received will be voted at the
1997 Annual Meeting of Shareholders to be held on April 22, 1997, or any
adjournment thereof, in accordance with specifications as are made therein or,
if no such specifications are made, in accordance with the recommendations of
the Board of Directors.
Directors are elected by a plurality of the votes cast at the Annual Meeting.
The affirmative vote of a majority of the votes cast is generally required for
approval of each other matter to be submitted to a vote of the shareholders.
Approval of plans under which stock may be issued to directors or employees
requires the affirmative vote of a majority of the shareholders entitled to
vote. Shares represented by proxies that withhold authority to vote for a
nominee for election as a director, or t hat reflect abstentions or "broker
non-votes" will be counted only as shares that are present and entitled to vote
on the matter for the purposes of determining the presence of a quorum. "Broker
non-votes" are shares represented at the meeting held by brokers or nominees as
to which (i) instructions have not been received from the beneficial owners or
persons entitled to vote, and (ii) the broker or nominee does not have the
discretionary voting power on a particular matter. Neither proxies that
withhold au thority (without naming an alternative nominee), abstentions nor
broker non-votes will be counted as votes cast at the Annual Meeting.
Therefore, such proxies will not have any effect on the outcome of voting on
any of the matters to be considered at the meeting. Under the rules of the New
York Stock Exchange, brokers may vote on each of the three proposals on the
agenda for this year's Annual Meeting since such proposals are considered
discretionary items under such rules.
March 4, 1997 is the record date for the determination of shareholders entitled
to vote at the Annual Meeting. On the record date, there were outstanding
6,146,766 Common Shares and 67,832 ESOP Convertible Preferred Shares Series A
(the "ESOP Preferred Shares"), constituting all of the outstanding voting
securities of the Company. Each Common Share is entitled to one vote, and each
ESOP Preferred Share is entitled to 12.3 votes, voting together as one class.
The mailing address of the principal executive offices of the Company is 14-04
111th Street, College Point, New York 11356-1434. This Proxy Statement and the
accompanying Notice of Annual Meeting of Shareholders and form of proxy are
being mailed on or about March 21, 1997 to shareholders of record on the record
date.
Proposal 1: ELECTION OF DIRECTORS
Three directors whose regular terms of office expire at the 1997 Annual Meeting
have been nominated for reelection to the Company's Board of Directors (the
"Board") to hold office until 2000. The names of the three nominees, their
ages, the years they have been directors of the Company, their principal
occupations over the past five years, their current positions with the Company
(where applicable) and other directorships held by them in public companies are
set forth below. The shares represent ed by all proxies received will be voted
for these nominees, except to the extent authority to do so is withheld as
provided in the form of proxy enclosed. If any such nominee should be unable or
unwilling to serve (an event not now anticipated), all proxies received will be
voted for the individual, if any, as shall be designated by the Board to
replace such nominee.
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Nominees for Election as Directors to Hold Office Until the 2000 Annual Meeting
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Director Principal Occupation and Certain
Name Age Since Other Directorships
- - -------------------------------------------------------------------------------
Robert E. 52 1995 Mr. Allen is Managing Director of Redding
Allen Consultants (a management consulting firm).
Robert 58 1995 Mr. Alvine is Chairman, President and CEO of I-Ten
Alvine Management Corp. (an investment, mergers and
acquisitions, and management company) and was,
prior to 1995, also a principal of Charterhouse
Group International, Inc. (an investment and
management holding company), Chairman and CEO of
Charter Power Systems Inc. (a worldwide power
systems company), and Vice Chairman and CEO of
A.P. Parts Manufacturing Co. (manufacturer of auto
and truck exhaust systems). He is a director of
Jackson Laboratories and the Wildlife Conservation
Society.
Michael J. 57 1982 Mr. Hegarty is a director and the Executive Vice
Hegarty President and Chief Operating Officer of Flushing
Financial Corporation (a federal chartered savings
bank). Until 1995, he was Vice President-Finance,
Treasurer and Secretary of the Company.
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The names of the remaining six directors of the Company, whose terms of office
will continue after the 1997 Annual Meeting, and certain information about them
are set forth below.
Directors Whose Terms of Office Will Expire at the 1999 Annual Meeting
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Director Principal Occupation and Certain
Name Age Since Other Directorships
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Frank A. 62 1982 Mr. Fariello is Chairman of the Board (since 1997),
Fariello President (since 1993) and Chief Executive Officer
(since 1994) of the Company. Until 1993, he was
Executive Vice President of the Company.
Robert M. 58 1992 Mr. Hanisee is Managing Director of Trust Company
Hanisee of the West (an investment management company).
He is a director of Delfin Systems and Illgen
Simulation Technology Inc.
George A. 64 1995 Mr. Strutz is President of Clopay Corporation (a
Strutz, Jr. manufacturer and marketer of specialty plastic
films and building products).
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Directors Whose Terms of Office Will Expire at the 1998 Annual Meeting
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Director Principal Occupation and Certain
Name Age Since Other Directorships
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Mellon C. 66 1995 1995 Mr. Baird is Chairman, President and CEO of
Baird Delfin Systems (an information systems, products
and services company). He is a director of
Software Spectrum, Inc.
George M. 62 1995 Mr. Ball is Chairman of Philpott, Ball & Company
Ball (an investment banking firm). He is a director of
Juno Lighting Inc. and BB Walker Company.
Joseph F. 71 1992 Mr. Engelberger is Chairman of Helpmate Robotics
Engelberger Inc. (a robotics manufacturing company).
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THE BOARD OF DIRECTORS AND ITS COMMITTEES
During the fiscal year ended December 31, 1996: the Board met seven times; the
Board's Audit Committee, consisting of Messrs. Allen, Engelberger and Hanisee,
met twice; and the Board's Compensation Committee, consisting of Messrs.
Alvine, Baird, Ball (until March), Brittain (until March) and Strutz (since
March), met six times.
The Audit Committee reviews and approves audit plans of independent auditors.
In reviewing the results of the auditors' activities, the Audit Committee also
meets privately with the auditors. It reviews the annual consolidated financial
statements of the Company, considers other matters in relation to the internal
and external auditing of the Company's accounts, reviews services other than
audit services performed by outside auditors, and recommends to the Board the
selection of outside auditors .
The Compensation Committee reviews and approves compensation of the Company's
corporate officers, administers the Company's stock option and long-term
incentive plans, and recommends to the Board compensation of directors.
A Nominating Committee, consisting of Messrs. Brittain (until March), Fariello
and Hanisee, is responsible for selecting candidates for vacant director
positions. It did not meet in 1996. The Nominating Committee will consider
nominees recommended by shareholders. Recommendations should be submitted to
the Secretary of the Company.
Directors who are employees of the Company receive no additional compensation
for their services as directors or chairmen. The compensation paid non-employee
directors or chairmen is as follows: to each director, $18,000 annually and
$900 for each meeting of the Board or its committees attended; and to a
director serving as chairman of a committee, $1,500 for each meeting of the
committee attended.
In January 1997, upon recommendation of the Compensation Committee, the Board
revised the compensation plan for directors to further align their interests
with those of the Company's shareholders. Pursuant to this revised plan, a
minimum of one-half of a director's retainer is paid in Common Shares valued at
the end of each quarter. Directors may also defer all of their remaining cash
compensation in the form of interest-bearing cash, or stock units which are
valued at the close of the quarter, credited with dividends declared during the
deferral period and paid out in Common Shares or cash at the end of the
deferral period at the then fair market value of Common Shares. In addition,
subject to the approval of the 1997 Non-Employee Director Stock Option Plan
(the "1997 NEDSOP") by the shareholders at the 1997 Annual Meeting of
Shareholders, non-employee directors receive an annual grant of 2,000 options
for Common Shares which vest upon receipt. Directors receive a one-time grant
of 2,000 immediately exercisable options (which immediate exercisability
results from a change adopted in January 1997 to the 1996 Long-Term Incentive
Plan) for Common Shares upon initial election as a director. If the 1997 NEDSOP
is approved, non-employee directors will receive another one-time grant of
3,000 immediately exercisable options for Common Shares upon initial election
as director (and all current non-employee directors have received such a
grant). Pursuant to a change in the Company's bylaws, newly elected dire ctors
are required to own, or acquire within one month of election, at least 1,000
(previously 100) Common Shares.
The Company had a plan pursuant to which a director who retired with at least
twelve years of service on the Board and had not been an officer or an employee
of the Company for at least twelve years prior to retirement received an annual
benefit until death of 75% of the annual retainer paid to the director prior to
retirement. Effective January 1997, but subject to approval by the shareholders
at the 1997 Annual Meeting of Shareholders of the 1997 NEDSOP, this retirement
plan has been terminated. Pursuant to the termination, the following directors
received the indicated number of immediately exercisable options under the 1997
NEDSOP: Mr. Hanisee, 16,000 options, and Messrs. Allen, Alvine and Ball, 10,000
options each, as consideration for the termination of their actuarially
determined accrued interest under the retirement plan. If the 1997 NEDSOP is
not approved by the shareholders at the 1997 Annual Meeting of Shareholders,
the above 46,000 options will be cancelled and the director retirement plan
will not terminate, but the Company has made no determination what further
action it would take, if any, with respect to the retirement plan.
Directors who are not employees of the Company may receive additional
compensation for undertaking special assignments outside the normal scope of
their duties as directors. Philpott, Ball & Company, of which Mr. Ball is
Chairman, performed investment banking services for the Company during 1996 and
received $96,000 in compensation for such services.
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SECURITIES OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The table below shows the number of Common Shares beneficially owned, as of
March 4, 1997, by the Company's directors, by the Company's executive officers
named in the Summary Compensation Table and by the Company's directors and
executive officers as a group. No director or executive officer of the Company
owns any of the Company's 7% Convertible Subordinated Debentures Due 2011.
EDO Common Shares
- - -------------------------------------------------------------------------------
Number of Shares Percent
Name (See Notes 1-4) of Class
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Robert E. Allen .................................... 19,000 ........... *
Robert Alvine ...................................... 22,500 ........... *
Mellon C. Baird .................................... 6,000 ........... *
George M. Ball ..................................... 17,000 ........... *
Joseph F. Engelberger .............................. 7,000 ........... *
Frank A. Fariello .................................. 243,328 ........... 3.8%
William J. Frost ................................... 39,626 ........... *
Marvin D. Genzer ................................... 48,866 ........... *
Robert M. Hanisee .................................. 36,010 ........... *
Michael J. Hegarty ................................. 94,114 ........... 1.5%
Ira Kaplan ........................................ 116,798 ........... 1.8%
Kenneth A. Paladino ................................ 41,632 ........... *
George A. Strutz, Jr. .............................. 9,065 ........... *
All Directors and Executive Officers as a Group .... 752,004 ...........11.6%
- - -------------------------------------------------------------------------------
* Less than 1%.
- - -------------------------------------------------------------------------------
Notes:
1. Certain family members of Messrs. Fariello and Genzer and of persons
included in the category "all directors and executive officers as a group" also
own and vote 1,175, 1,120 and 2,295 Common Shares, respectively. Each of the
above individuals disclaims beneficial ownership of these Common Shares.
2. The amounts indicated include the following numbers of restricted Common
Shares under the Company's 1996 Long-Term Incentive Plan, and, as of December
31, 1996, Common Shares, and Common Shares into which ESOP Preferred Shares are
convertible, actually owned or allocated to certain individuals and the group
under the Company's Employee Stock Ownership Plan: Mr. Fariello, 124,474
shares; Mr. Frost, 21,826 shares; Mr. Genzer, 26,116 shares; Mr. Kaplan, 61,090
shares; Mr. Paladino, 30,932 shares; and all directors and executive officers
as a group, 202,128 shares.
3. The amounts indicated include the following numbers of Common Shares as to
which certain individuals and all directors and executive officers as a group
share voting and investment power: Mr. Fariello, 7,885 shares; Mr. Genzer, 630
shares; Mr. Strutz, 4,065 shares; and all directors and executive officers as a
group, 12,580 shares. Except as described in Note 1 above, each of these
individuals has sole voting and investment power with respect to all other
Common Shares beneficially owned.
4. The amounts indicated include the following numbers of Common Shares which
each individual and all directors and executive officers as a group have the
right to acquire within 60 days upon exercise of options granted pursuant to
the Company's 1996 Long-Term Incentive Plan and 1997 NEDSOP: Messrs. Allen,
Alvine and Ball, 15,000 shares each; Messrs. Baird, Engelberger and Strutz,
5,000 shares each; Mr. Fariello, 83,000 shares; Mr. Frost, 17,800 shares; Mr.
Genzer, 21,000 shares; Mr. Hanisee, 21,000 shares; Mr. Hegarty, 45,000 shares;
Mr. Kaplan, 41,500 shares; Mr. Paladino, 8,200 shares; and all directors and
executive officers as a group, 320,400 shares. If Proposal 2 is not approved by
the shareholders, the group amount indicated above will be reduced by 24,000
and each of the eight non-employee director amounts will be reduced by 3,000
representing the one-time grant of 3,000 immediately exercisable stock options
made to each of the eight non-employee directors under the 1997 NEDSOP. The
group amount will be further reduced by 46,000 and the amounts for Messrs.
Allen, Alvine, Ball and Hanisee will be reduced by 10,000, 10,000, 10,000 and
16,000, respectively, representing the options granted to these outside
directors as consideration for the termination of each such director's
actuarially determined accrued interest in the director's retirement plan as
noted under "The Board of Directors and its Committees" in this Proxy
Statement.
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COMPENSATION OF EXECUTIVE OFFICERS
EXECUTIVE COMPENSATION
The following table summarizes the total compensation of the Chief Executive
Officer and each of the four most highly compensated executive officers whose
total compensation exceeds $100,000 (the "named Executive Officers") for the
fiscal years ending December 31, 1996, 1995 and 1994.
Summary Compensation Table
- - -------------------------------------------------------------------------------
Annual Long-Term
Compensation Compensation
---------------- ----------------------
Securities All
Name Restricted Underlying Other
and Stock Options/ Compen-
Principal Salary Bonus Awards1 SARs sation2
Position Year ($) ($) ($) (#) ($)
- - ------------------- ---- ------------------ ---------------------- -------
Frank A. Fariello 1996 286,700 147,500 222,400 0 11,694
Chairman of the 1995 253,274 127,000 0 0 3,250
Board, President 1994 224,630 0 0 50,000 1,095
and Chief Execu-
tive Officer
William J. Frost 1996 114,389 35,000 55,600 0 8,372
Vice President- 1995 105,704 33,000 0 0 2,310
Administration 1994 94,016 0 0 8,000 779
Marvin D. Genzer 1996 121,391 28,600 55,600 0 4,472
Vice President, 1995 116,385 33,000 0 0 2,559
General Counsel 1994 112,008 0 8,000 6,638
and Secretary
Ira Kaplan 1996 168,265 72,500 125,100 0 10,572
Executive Vice 1995 147,773 67,000 0 0 3,250
President and
Chief Operating
Officer
Kenneth A. 1996 122,315 40,700 83,400 0 4,472
Paladino 1995 93,446 34,500 0 10,000 2,157
Vice President-
Finance and
Treasurer
- - -------------------------------------------------------------------------------
1. The number and value of the aggregate restricted stock holdings at the end
of 1996 for Messrs. Fariello, Frost, Genzer, Kaplan and Paladino were
respectively: 74,250 shares, $529,031; 14,000 shares, $99,750; 18,000 shares,
$128,250; 29,500 shares, $210,188; and 15,000 shares, $106,875. Dividends are
paid on restricted stock.
2. Amounts reflect the value of the Company's contributions to the named
Executive Officers' Employee Stock Ownership Plan accounts. In addition, the
amounts for Messrs. Fariello, Frost Genzer and Kaplan for 1996, 1996, 1994 and
1996, respectively, include $7,222, $3,900, $5,736 and $6,200, respectively,
representing one-time gains for the purchases of their Company cars at book
value, which was less than fair market value.
- - -------------------------------------------------------------------------------
The following table provides the aggregate number and total value of exercised
and unexercised options of the named Executive Officers for fiscal year 1996
under the Company's 1996 Long-Term Incentive Plan.
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
- - -------------------------------------------------------------------------------
Number of Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End FY-End
(#) ($)
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
- - -------------------------------------------------------------------------------
Frank A. Fariello 83,000/25,000 93,100/92,125
William J. Frost 17,800/4,000 14,740/14,740
Marvin D. Genzer 21,000/4,000 15,130/14,980
Ira Kaplan 41,500/7,500 27,938/27,638
Kenneth A. Paladino 7,700/7,500 5,793/16,553
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Pension and Retirement Plans
Pension Plan Table
- - -------------------------------------------------------------------------------
Final Average
Base Annual Years of Credited Service at Retirement
Compensation 5 10 15 20 25 30 35
- - -------------------------------------------------------------------------------
100,000 8,500 17,000 25,500 34,000 42,500 51,000 59,500
150,000 12,750 25,500 38,250 51,000 63,750 76,500 89,250
200,000 17,000 34,000 51,000 68,000 85,000 102,000 119,000
250,000 21,250 42,500 63,750 85,000 106,250 127,500 148,750
300,000 25,500 51,000 76,500 102,000 127,500 153,000 178,500
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The Pension Plan table above shows the estimated annual benefits, based on
straight life annuity, payable upon retirement under the Company's
non-contributory Employees Pension Plan (the "Pension Plan") and the Company's
non-qualified Supplemental Retirement Benefit Plan (the "SRBP") to individuals
in specified compensation and years of service classifications. The figures set
forth above are before deduction of Social Security benefits.
Benefits payable under the Pension Plan are based on (i) the average of an
employee's five highest consecutive years' compensation (annual salary as of
January 1 of each year, not the total annual salary shown in the Summary
Compensation Table, excluding bonus) out of the employee's final ten years of
employment with the Company prior to retirement, and (ii) the number of years
of credited service. As of January 1, 1997, Messrs. Fariello, Frost, Genzer,
Kaplan and Paladino had completed, respect ively, 32, 27, 28, 35 and 6 years of
credited service under the Pension Plan.
Under the Company's SRBP, employees will receive from the Company any amount by
which their benefits earned under the Pension Plan exceed the limitations
imposed by the Internal Revenue Code. For any participant whose employment
actually or constructively terminates within three years following a Change of
Control (as defined in the SRBP), vesting would accelerate; and all accrued
benefits either would become automatically payable in a lump sum based on
present value or, at the discretion of the Compensation Committee, would be
funded under a third party arrangement intended to insure payment of such
benefits in the future.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors (the "Committee") is
composed entirely of outside directors. One of the Committee's functions is to
determine the compensation of the Company's executive officers.
The Committee's overall objectives in establishing the compensation of the
Company's executive officers are to: enhance shareholder value; attract and
retain talented, experienced, qualified individuals, critical to the long-term
success of the Company, by providing compensation competitive to that offered
by comparable competitors; align the interests of executive officers with the
long-term interests of shareholders by providing award opportunities that can
result in ownership of the Company's Common Shares; and increase the portion of
executive compensation based on the Company's performance.
The Committee achieves these objectives by providing executive officers with
total compensation packages comprised of three elements: short-term
compensation, intermediate-term compensation, and long-term stock option
compensation.
Short-Term Compensation
Base salary is primarily set in accordance with competitive comparable base
salaries paid by a set of peer group companies as verified by an outside
agency. Decisions on base salary are also subjectively based on the Company's
performance when compared to others in the industry, the Company's pursuit of
new product initiatives, and recognition of the Company's performance in
industry reports.
Annual Incentive Compensation Awards ("AICAs") for executive officers are
primarily a function of the Company's operational results for the year in
accordance with an established plan. The plan provides for the establishment,
by the Committee, of specific target performance criteria. These performance
criteria are set in accordance with the strategic objectives of the Company and
individual business units at the beginning of each year and include, but are
6
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not limited to financial criteria, such as corporate and business unit
earnings, return on capital employed, cash flow, revenue growth and
subjectively-based individual qualitative goals. The Committee also reserves
the right to exercise its subjective discretion in amending any AICA based on
overall corporate considerations at the time of the award.
AICAs were paid to executive officers based on the achievement of performance
goals established for 1996. Mr. Fariello's combined salary and bonus for 1996
was $53,926 more than for 1995, reflecting the improvement in the Company's
performance.
Executive officers' compensation also includes, in addition to participation in
Company-wide plans generally available to all employees, certain benefits
comparable to those of other businesses in the Company's industry, such as a
supplemental pension and other items as reported collectively in the Summary
Compensation Table.
Intermediate-Term Compensation
Intermediate-term incentive awards had, in the past, been considered every
three years with the last award being in 1992. In 1995, they were scheduled for
reconsideration, however, it was decided, based on the performance of the
Company, not to make any awards.
In 1996, the shareholders approved the adoption of the 1996 Long-Term Incentive
Plan. Under this and prior similar shareholder approved plans, subjective
awards of performance units and stock can be made, including contingent awards
of Performance Shares and restricted Common Shares. Restricted Common Shares
have been generally awarded at the beginning of a performance period and convey
to the executive officer receiving the award all the rights of share ownership,
including voting rights and di vidends as may be paid to common shareholders.
In 1996, the Committee granted restricted Common Shares to executive officers,
which shares vest only if the executive officer remains with the Company for
the duration of the performance period. They may vest sooner if certain
consolidated earnings criteria are met.
Long-Term Stock Option Compensation
In accordance with the 1996 Long-Term Incentive Plan, Common Share options are
ordinarily awarded to executive officers at market price and become exercisable
incrementally over a number of years and remain exercisable for additional
years thereafter. The Company did not award any stock options to any executive
officer under the Company's 1996 Long-Term Incentive Plan in 1996.
With respect to the one million dollar cap on deductibility under Section 162
of the Internal Revenue Code, the Company does not presently believe that the
compensation of its executive officers will approach such level. As a result,
the Company has not established a policy with respect to Section 162. In
addition, the Committee is planning to increase the portion of executive
compensation based on performance, which will further serve to reduce the
likelihood of reaching the Section 162 cap.
Members of the Committee:
Robert Alvine (Chairman)
Mellon C. Baird
George A. Strutz, Jr.
Compensation Committee Interlocks and Insider Participation
Until March 1996, the members of the Board of Directors' Compensation Committee
were Messrs. Alvine, Ball, Baird and Brittain. Since that date the members have
been Messrs. Alvine, Baird and Strutz. Mr. Ball is Chairman of Philpott, Ball &
Company, which performed investment banking services for the Company during
1996 and received $96,000 in compensation for such services.
Comparison of Five-Year Cumulative Return
The following graph shows a five-year comparison of cumulative total returns on
the Company's Common Shares, based on the market price of the Common Shares,
with the cumulative total return of companies in the Standard & Poors 500 Index
and the Value Line Aerospace/Defense Group.
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- - -------------------------------------------------------------------------------
Note
The printed copy of the Proxy Statement contains a Performance Graph comparing
EDO Corporation, S&P 500 Index and Value Line Aerospace/Defense Group. The
Performance Graph shows the Cumulative Return in dollars (vertical axis) for a
period of five years (horizontal axis) based on an initial investment of
$100.00 on December 31, 1991. The table below contains the data used to plot
the Performance Graph. The title and footnotes are identical to those contained
in the printed Proxy Statement.
Comparison of Five-Year Cumulative Total Return*
EDO Corporation, Standard & Poors 500 Index
and Value Line Aerospace/Defense Group
(Performance Results through 12/31/96)
- - -------------------------------------------------------------------------------
Dollars
----------------------------------------------
1991 1992 1993 1994 1995 1996
------ ------ ------ ------ ------ ------
EDO CORPORATION 100.00 97.33 108.13 56.61 83.87 119.51
STANDARD AND POOR'S 500 100.00 107.79 118.66 120.56 165.78 204.32
VALUE LINE AEROSPACE/DEFENSE 100.00 114.47 147.63 156.62 247.60 319.84
Assumes $100 invested on December 31, 1991 in EDO Corporation Common Shares,
Standard & Poors 500 Index and Aerospace/Defense Group.
* Cumulative total return assumes reinvestment of dividends.
- - -------------------------------------------------------------------------------
Executive Life Insurance Plan
The Company maintains an Executive Life Insurance Plan (the "ELIP") for key
employees, including the named Executive Officers, funded by Company-owned life
insurance policies on the participants. In accordance with individual
participant elections, preretirement death, disability and retirement benefits
are available either (i) as a permanent life insurance policy equivalent to two
times base annual salary, or (ii) for at least 15 years, an annuity option
equivalent in value to a percentage no greater than 40% of the participant's
base annual salary (as base annual salary is defined in the ELIP). Generally,
the ELIP may be terminated at any time unilaterally by the Company. Special
provisions, however, would apply following a Change of Control (as defined in
the ELIP): vesting would accelerate, and payments would be automatically
payable or would be funded under a third party arrangement intended to insure
payment.
Executive Termination Agreements
The Company is a party to Executive Termination Agreements with Messrs.
Fariello and Genzer which provide for severance benefits in the event
employment terminates within three years following a Change in Control (as
defined in the Agreements) unless termination is on account of death, normal
retirement or termination for cause. These Agreements provide basic severance
benefits which include an amount equal to three times the sum of: (i) the
executive officer's annual base salary; plus (ii) either (a) 20% of the
executive officer's base salary, or (b) the highest percentage of base salary
paid as a bonus to the executive officer over the prior three years, whichever
is greater. The Agreements also provide for the payment of legal fees incurred
by the executive officers to enforce their rights under the Agreements and for
additional compensation to take into account the effect of any excise tax on
executive officers' net benefits under the Agreements and the Company's other
benefit plans.
1996 Long-Term Incentive Plan
The Company maintains the 1996 Long-Term Incentive Plan (the "LTIP") for
executive officers and other key employees of the Company and its subsidiaries.
Pursuant to the LTIP, the Company can grant the following types of awards: (1)
Nonstatutory and Incentive Stock Options; (2) Stock Appreciation Rights; (3)
Restricted Shares; (4) Performance Shares and Performance Units; and/or (5)
stock in lieu of other cash compensation. Each of these awards may be granted
8
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alone, in conjunction with or in tandem with other awards under the LTIP
and/or cash awards outside the LTIP.
The LTIP provides that, except as provided below, in the event of a Change in
Control: (i) all SARs will become immediately exercisable; (ii) the
restrictions and deferral limitations applicable to outstanding Performance
Share, Restricted Share, and Performance Unit Awards will lapse and the shares
in question will fully vest; and (iii) each Option shall be canceled in
exchange for cash in an amount equal to the excess of the highest price paid
(or offered) for Common Shares during the preceding 60 day period over the
exercise price for such Option. Notwithstanding the foregoing, if the Committee
determines that the grantee of such award will receive a new award (or have his
prior award honored) in a manner which preserves its value and eliminates the
risk that the value of the award will be forfeited due to involuntary
termination, no acceleration of exercisability or vesting, lapse of restriction
or deferral limitations, or cash settlement will occur as a result of a Change
in Control.
INSURANCE FOR INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company renewed its directors' and officers' liability insurance policy
effective August 12, 1996 for a term ending on December 31, 1997. This policy
insures the directors and corporate and business unit officers of the Company
and its subsidiaries against certain liabilities they may incur in the
performance of their duties, and the Company against any obligation to
indemnify such individuals against such liabilities. The policy was issued by
Chubb Group of Insurance Companies for a premium for the above term of
$207,900.
Proposal 2: PROPOSAL TO APPROVE THE EDO CORPORATION
1997 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
INTRODUCTION
At the Annual Meeting, shareholders will be asked to approve the 1997
Non-Employee Director Stock Option Plan (the "Plan"), which has been adopted by
the Board of Directors of the Company. The purpose of the Plan is to increase
director share ownership to further align director interests with those of the
Company's shareholders.
The following summary of the Plan is qualified in its entirety by reference to
the complete text of the Plan, which is attached to this Proxy Statement as
Appendix A. Capitalized terms not separately defined herein have the meanings
set forth in the Plan.
ADMINISTRATION OF THE PLAN
The Compensation Committee will administer the Plan. Eligible Directors who
receive Awards under the Plan are those persons who are serving as members of
the Board and who are not employees of the Company.
SHARES AVAILABLE FOR ISSUANCE
The maximum number of the Company's Common Shares that may be issued pursuant
to Stock Options granted under the Plan is 150,000. The maximum number of Stock
Options that may be the subject of any Annual Grant to an Eligible Director in
any single calendar year is 2,000 (subject to adjustment as described below).
The maximum number of Stock Options that may be the subject of any Initial
Grant to an Eligible Director, as a one-time grant, is 3,000. The number of
Stock Options that have been granted as a one-time Special Grant is 46,000.
The Common Shares underlying the Stock Options granted under the Plan may be
unissued Common Shares or treasury shares. It is expected that, when available,
treasury shares will be used. If Stock Options that are the subject of any
Award granted under the Plan are not exercised or are returned to the Company,
the underlying shares will be available for future Stock Option grants. If a
merger, consolidation, recapitalization or similar corporate event occurs, the
Committee may adjust the number of shares that may be issued under the Plan in
the future and the number of shares and the exercise price, if applicable,
under all outstanding grants to preserve or to prevent the enlargement of the
benefits made available under the Plan. As of March 4, 1997, the closing price
of the Common Shares on the New York Stock Exchange was $7.50.
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GRANTS UNDER THE PLAN
The Plan provides for automatic grants of nonstatutory Stock Options. These
Stock Options may contain any terms that the Committee determines are
consistent with the Plan. The exercise price of any Stock Option will be the
Fair Market Value of the Common Shares on the date of grant. Except to the
extent provided in the immediately preceding sentence, the Company will receive
no consideration with respect to the grant of any Stock Option other than the
performance of services by the Eligible Director.
The term of each Stock Option will be fixed by the Committee but may not exceed
ten years from the date of grant. Each Stock Option will become exercisable in
full on the date the Stock Option is granted.
On the date a non-employee director is first elected to be a member of the
Board of Directors, such director shall receive an Initial Grant of 3,000 Stock
Options. All current non-employee directors have received an Initial Grant. On
each succeeding January 1 of each year following the year in which such
Eligible Director received an Initial Grant, an Annual Grant of 2,000 Stock
Options is made to such Eligible Director. All Stock Options generally remain
exercisable until the earlier to occur of (i) the tenth anniversary of the
date of grant or (ii) the third anniversary of the date the director ceases to
be a member of the Board.
CHANGE IN CONTROL PROVISIONS
The Plan provides that in the event of a Change in Control, each Stock Option
shall be canceled in exchange for cash in an amount equal to the excess of the
highest price paid (or offered) for Common Shares over the exercise price for
such Stock Option.
EFFECT ON AWARDS OF TERMINATION OF SERVICE
In the event an Eligible Director's participation on the Board is terminated by
reason of Retirement, Disability or death, any Stock Option held by the
Eligible Director may thereafter be exercised in full for the earlier of three
years following the date of termination or the date the Stock Option otherwise
expires.
OTHER INFORMATION
Awards under the Plan may not be transferred other than to family members
except by will or the laws of descent and distribution. The Board may terminate
or suspend the Plan at any time but the termination or suspension will not
adversely affect any vested Awards then outstanding under the Plan. Unless
terminated by action of the Board, the Plan will continue in effect through
December 31, 2006, but Awards granted under the Plan on or prior to that date
will continue in effect until they expire in accordance with their terms. Any
proceeds received by the Company for shares under the Plan will be used for
general corporate purposes.
NEW PLAN BENEFITS
Set forth below is a summary of the initial Awards that the Committee has made
subject to the approval of the Plan by shareholders.
EDO Corporation 1997 Non-Employee Director Stock Option Plan
- - -------------------------------------------------------------------------------
Name and Position Number of Stock Options1
- - -------------------------------------------------------------------------------
Robert E. Allen 13,000
Robert Alvine 13,000
Mellon C. Baird 3,000
George M. Ball 13,000
Joseph F. Engelberger 3,000
Robert M. Hanisee 19,000
Michael J. Hegarty 3,000
George A. Strutz, Jr. 3,000
- - -------------------------------------------------------------------------------
1. Represents a one-time Initial Grant to each Eligible Director of 3,000 Stock
Options and the one-time Special Grant to Messrs. Allen, Alvine, Ball and
Hanisee described herein under "Security Ownership of Directors and Executive
Officers." All of the above grants were at an exercise price of $7.125.
- - -------------------------------------------------------------------------------
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FEDERAL INCOME TAX CONSEQUENCES
Under currently applicable Federal income tax law, an Eligible Director will
receive no taxable income upon the grant of a Stock Option. When an Eligible
Director exercises a Stock Option, the excess of the Fair Market Value of the
Common Shares on the date of exercise over the exercise price paid will be
ordinary income to the Eligible Director, and the Company will be allowed a
Federal income tax deduction in the same amount.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of a majority of the shares outstanding and entitled to
vote is required to approve the Plan.
The Board of Directors recommends a vote FOR the approval of the Plan.
Proposal 3: SELECTION OF AUDITORS
KPMG Peat Marwick LLP are currently the certified public accountants serving as
the Company's independent auditors. During 1996, KPMG Peat Marwick LLP audited
the accounts of the Company and its subsidiaries and also provided other
professional services to the Company in connection with Securities and Exchange
Commission filings.
Upon recommendation of the Audit Committee, the Board has appointed KPMG Peat
Marwick LLP as the independent auditors for 1997. The shareholders will be
asked to ratify this action by the Board.
It is anticipated that one or more representatives of KPMG Peat Marwick LLP
will be present at the Annual Meeting to answer shareholder questions and to
make a statement, if they desire to do so.
PRINCIPAL SHAREHOLDERS
The table below contains certain information with respect to the only
beneficial owners known to the Company, based upon publicly available
documents, as of March 4, 1997, of more than 5% of the Common Shares.
- - -------------------------------------------------------------------------------
Name and Address Amount of EDO Percent of
of Beneficial Owner Common Shares Class
- - -------------------------------------------------------------------------------
EDO Corporation 300,325 and 67,832 14.3%
Employee Stock Ownership Plan ESOP Preferred
14-04 111th Street, Shares convertible
College Point, NY 11356 into 678,320 (1)
- - -------------------------------------------------------------------------------
1. Represents Common Shares and ESOP Preferred Shares held by the trust
established to fund the EDO Corporation Employee Stock Ownership Plan (the
"ESOP trust"), all of which Common Shares and ESOP Preferred Shares are held
for the benefit of the participants under such Plan. Under the terms of the
Plan, Common Shares and ESOP Preferred Shares which have been allocated to the
account of a participant are required to be voted in accordance with the
direction of such participant. Common Shares and ESOP Preferred Shares which
are not so allocated are deemed to be allocated solely for the purpose of
determining how such Common Shares and ESOP Preferred Shares are to be voted.
In addition, Common Shares and ESOP Preferred Shares so allocated or deemed to
be allocated, as to which no directions are given, are voted in the same
proportion as those Common Shares and ESOP Preferred Shares as to which voting
instructions have been received. Each ESOP Preferred Share is entitled to 12.3
votes on all matters presented to holders of Common Shares, voting together as
one class. The Company believes that the Plan is not the beneficial owner of
such Common Shares and ESOP Preferred Shares, as the trustee under the ESOP
trust has no voting or investment power with respect to such Common Shares and
ESOP Preferred Shares.
- - -------------------------------------------------------------------------------
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to
the Company pursuant to Rule 16a-3(e) of the Securities Exchange Act of 1934,
as amended (the "Act"), during its most recent fiscal year and Form 5 and
amendments thereto furnished to the Company with respect to its most recent
fiscal year, and certain written representations provided to the Company, there
was no person who, at any time during the fiscal year, was a director, officer,
11
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beneficial owner of more than ten percent of any class of equity securities of
the Company or any other person subject to Section 16 of the Act with respect
to the Company because of the requirements of Section 30 of the Investment
Company Act or Section 17 of the Public Utility Holding Company Act that failed
to file on a timely basis, as disclosed in the above forms, reports required by
Section 16(a) of the Act during the most recent fiscal year or prior fiscal
years.
OTHER MATTERS
The Board knows of no other business to be brought before the Annual Meeting
other than as set forth above. If any other business should properly come
before the Annual Meeting, it is the intention of the persons named in the
enclosed form of proxy to vote such proxies in accordance with their best
judgment on such matters.
SHAREHOLDER PROPOSALS
Shareholder proposals for the 1998 Annual Meeting of Shareholders must be
received at the principal executive offices of the Company, addressed to Marvin
D. Genzer, Secretary, EDO Corporation, 14-04 111th Street, College Point, New
York 11356-1434, no later than November 22, 1997, in order to be considered for
inclusion in the Company's Proxy Statement for such Meeting.
MISCELLANEOUS
The cost of preparing and mailing this Proxy Statement and the accompanying
Notice of Annual Meeting of Shareholders, and the enclosed form of proxy will
be borne by the Company. In addition to solicitation by mail, proxies may be
solicited in person or by telephone, telegraph, e-mail or facsimile by
directors, officers and employees of the Company, without extra compensation
and at the Company's expense. The Company has also retained D. F. King & Co.,
Inc. to assist in such solicitations, at an estimated cost of $6,500 plus
out-of-pocket expenses. The Company will also request bankers and brokers to
solicit proxies from their customers, where appropriate, and will reimburse
them for reasonable expenses.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1996, INCLUDING FINANCIAL STATEMENTS, AS FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION, HAS BEEN PROVIDED TO ALL RECORD OR BENEFICIAL HOLDERS
OF COMMON SHARES OR ESOP PREFERRED SHARES ENTITLED TO VOTE AT THE ANNUAL
MEETING. ADDITIONAL COPIES WILL BE FURNISHED ON WRITTEN REQUEST, WITHOUT
CHARGE, TO ANY RECORD OR BENEFICIAL HOLDER OF COMMON SHARES OR ESOP PREFERRED
SHARES. SUCH REQUESTS SHOULD BE ADDRESSED TO EDO CORPORATION, 14-04 111TH
STREET, COLLEGE POINT, NEW YORK 11356-1434, ATTENTION: MARVIN D. GENZER,
SECRETARY.
By order of the Board of Directors,
Marvin D. Genzer
Secretary
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Appendix A
EDO CORPORATION
1997 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. PURPOSE
The purpose of the EDO Corporation 1997 Non-Employee Director Stock Option Plan
is to increase director share ownership to further align director interests
with those of the Company's shareholders.
2. DEFINITIONS
"Annual Grant" shall mean an annual Stock Option grant for 2,000 shares to an
Eligible Director as provided in Section 5(b).
"Award" shall mean an Initial Grant, Special Grant and/or Annual Grant under
Section 5 of the Plan.
"Board" shall mean the Board of Directors of the Company.
"Cause" shall mean (i) the willful failure by an Eligible Director to perform
substantially Board or committee duties (other than due to physical or mental
illness), (ii) the Eligible Director engaging in serious misconduct that is
injurious to the Company, or (iii) the Eligible Director having been convicted
of, or entered a plea of nolo contendere to, a crime that constitutes a felony.
"Change in Control" shall mean the occurrence of any of the following events:
(i) a majority of the members of the Board at any time cease for any reason
other than due to death or disability to be persons who were members of the
Board twenty-four months prior to such time (the "Incumbent Directors");
provided that any director whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority of the
members of the Board then still in office who are Incumbent Directors shall be
treated as an Incumbent Director; or
(ii) any "person" including a "group" (as such terms are used in Sections 13(d)
and 14(d)(2) of the Exchange Act, but excluding the Company, any employee
benefit plan of the Company, any employee of the Company or any group of which
any of the foregoing is a member) is or becomes the "beneficial owner" (as
defined in Rule 13(d)(3) of the Exchange Act), directly or indirectly,
including, without limitation, by means of a tender or exchange offer, of
securities of the Company representing 30% or more of the combined voting power
of the Company's then outstanding securities; or
(iii) the shareholders of the Company shall approve a definitive agreement (x)
for the merger or other business combination of the Company with or into
another corporation immediately following which merger or combination (A) the
stock of the surviving entity is not readily tradable on an established
securities market, (B) a majority of the directors of the surviving entity are
persons who (1) were not directors of the Company immediately prior to merger
and (2) are not nominees or representatives of the Company, or (C) any
"person" including a "group" (as such terms are used in Sections 13(d) and
14(d)(2) of the Exchange Act, but excluding the Company, any employee benefit
plan of the Company, any employee of the Company or any group of which any of
the foregoing is a member) is or becomes the "beneficial owner" (as defined in
Rule 13(d)(3) of the Exchange Act), directly or indirectly of 30% or more of
the securities of the surviving entity or (y) for the direct or indirect sale
or other disposition of all or substantially all of the assets of the Company;
or
(iv) any other event or transaction that is declared by resolutions of the
Board to constitute a Change in Control for purposes of the Plan.
A-1
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Notwithstanding the foregoing, a "Change in Control" shall not be deemed to
occur in the event the Company files for bankruptcy, liquidation or
reorganization under the United States Bankruptcy Code.
"Change in Control Price" shall mean the highest price per share paid or
offered in any bona fide transaction related to a Change in Control, as
determined by the Committee.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Committee" shall mean the Compensation Committee of the Board, or such other
Board committee as may be designated by the Board to administer the Plan.
"Common Shares" shall mean the Common Shares, par value $1.00 per share, of the
Company.
"Company" shall mean EDO Corporation, including any Subsidiary, and any
successor thereto.
"Disability" shall mean if the Committee determines, based on medical evidence,
that the Eligible Director is disabled, mentally or physically, and is,
therefore, unable to continue his or her services to the Company.
"Eligible Director" shall mean a person who is serving as a member of the Board
and who is not an employee of the Company.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Fair Market Value" shall mean, on any date, the closing sales price of a
Common Share, as reported for such day on the New York Stock Exchange
(consolidated trading).
"Initial Grant" shall mean a one-time Stock Option grant for 3,000 shares
awarded to an Eligible Director as of the Effective Date of the Plan and to an
Eligible Director elected to the Board after such Effective Date.
"Plan" shall mean the EDO Corporation 1997 Non-Employee Director Stock Option
Plan, as amended from time to time.
"Retirement" shall mean an Eligible Director's retirement from service from the
Board.
"Special Grant" shall mean the number of Stock Options listed in Section 5(c)
whose cash value is calculated to represent reasonable consideration for the
present value of an actuarially determined accrued benefit under the Eligible
Director's retirement plan which Eligible Director's retirement plan shall
become discontinued as of the date of approval of this Plan by the
shareholders.
"Stock Option" shall mean a stock option which is not qualified under Section
422 of the Code and that is granted to each Eligible Director pursuant to
Section 5.
"Subsidiary" shall mean any corporation of which the Company owns directly or
indirectly fifty percent (50%) or more of the total combined voting power of
all classes of stock of such corporation and any other business organization,
regardless of form, in which the Company possesses directly or indirectly fifty
percent (50%) or more of the total combined equity interests in such
organization.
3. ADMINISTRATION
The Plan shall be administered by the Committee which shall consist of at least
two directors of the Company chosen by the Board, each of whom is a
"non-employee director" within the meaning of Rule 16(b) of the Exchange Act.
The Committee shall have the responsibility of construing and interpreting the
A-2
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Plan and of establishing and amending such rules and regulations as it deems
necessary or desirable for the proper administration of the Plan. Any decision
or action taken or to be taken by the Committee, arising out of or in
connection with the construction, administration, interpretation and effect of
the Plan and of its rules and regulations, shall to the maximum extent
permitted by applicable law, be within its absolute discretion (except as
otherwise specifically provided herein) and shall be conclusive and binding
upon all directors participating in the Plan and their successors in interest.
Notwithstanding the foregoing, neither the Committee nor the Board shall have
any discretion regarding whether an Eligible Director receives a Stock Option
under Section 5, or, except as expressly provided in this Plan, regarding the
terms of any such Stock Option, including, without limitation, the timing of
grant and the number of shares subject to any such Stock Option.
4. MAXIMUM AMOUNT OF SHARES AVAILABLE FOR AWARDS
(a) Shares Available for Issuance
The maximum number of Common Shares in respect of which Awards may be made
under the Plan shall be a total of 150,000 Common Shares. Common Shares may be
made available from the authorized but unissued shares of the Company or from
shares held in the Company's treasury and not reserved for some other purpose.
Common Shares subject to any Award which are canceled or forfeited for any
reason without delivery of such Common Shares shall again be available for
award under this Plan.
(b) Adjustment for Corporate Transactions
In the event that the Committee shall determine that any stock dividend,
extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination, exchange, exchange of shares,
warrants or rights offering to purchase Common Shares at a price substantially
below Fair Market Value, or other similar event affects the Common Shares such
that an adjustment is required to preserve, or to prevent enlargement of, the
Awards made under the Plan, then the Committee may, in such manner as the
Committee may deem equitable, adjust any or all of (i) the number and kind of
shares subject to outstanding Stock Options to the nearest whole number and
(ii) the exercise price with respect to any such Award.
5. TERMS OF STOCK OPTION GRANTS
(a) Initial Grant
An Initial Grant shall be made to each Eligible Director serving on the Board
on the Effective Date of the Plan and to each Eligible Director elected to the
Board after the Effective Date of the Plan on the date of such election. The
exercise price per share of the Initial Grant shall equal the Fair Market Value
on the date of grant.
(b) Annual Grant
An Annual Grant shall be made to each Eligible Director serving on the Board
during the term of the Plan on January 1 of each year following the year in
which such Eligible Director received an Initial Grant. The exercise price per
share of the Annual Grant shall equal the Fair Market Value on the date of
grant.
(c) Special Grant
A Special Grant shall be made to each Eligible Director serving on the Board on
the Effective Date of the Plan who has an actuarially determined accrued
benefit under the Eligible Director's retirement plan which Eligible Director's
retirement plan shall become discontinued as of the date of approval of this
Plan by the shareholders. The exercise price per share of the Special Grant
shall equal the Fair Market Value on the date of grant. The amount of the
Special Grant to such Eligible Directors is as follows: Messrs. Allen, Alvine
and Ball, 10,000 Stock Options each, and Mr. Hanisee, 16,000 Stock Options.
A-3
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(d) Exercise
Each Stock Option shall become exercisable immediately upon grant and shall
remain exercisable until the earlier to occur of (i) the tenth anniversary of
the date of grant or (ii) a time provided in Section 5(e) after the date the
Eligible Director ceases to be a member of the Board. The Committee may impose
such conditions with respect to the exercise of Stock Options as it shall deem
appropriate, including, without limitation, any conditions relating to the
application of Federal or state securities laws. No shares shall be delivered
pursuant to any exercise of Stock Option unless arrangements satisfactory to
the Committee have been made to assure full payment of the option price
therefor. Without limiting the generality of the foregoing, payment of the
option price may be made in cash or its equivalent or, if and to the extent
permitted by the Committee, by exchanging Common Shares owned by the optionee
(which are not the subject of any pledge or other security interest), or by a
combination of the foregoing, provided that the combined value of all cash and
cash equivalents and the Fair Market Value of any such Common Shares so
tendered to the Company, valued as of the date of such tender, is at least
equal to such option price.
(e) Termination of Service
A Stock Option shall be exercisable following the termination of an Eligible
Director's participation on the Board only to the extent provided in this
Section 5(e). If an Eligible Director's participation on the Board terminates
due to such director's (i) death, (ii) Disability, or (iii) Retirement with the
consent of the Committee, all Stock Options shall be exercisable by such
director or, in the case of death or Disability, such director's estate or
legal guardian, for the earlier of three years from the date of such event or
the expiration of the Stock Option term(s).
If an Eligible Director's service on the Board is terminated for Cause, all
Stock Options held by such Eligible Director shall immediately terminate.
6. CHANGE IN CONTROL
In the event of a Change in Control, each Stock Option shall promptly be
canceled in exchange for a payment in cash of an amount equal to the excess of
the Change in Control Price over the exercise price for such Stock Option.
7. GENERAL PROVISIONS
(a) Withholding
Should an amount realized or recognized by an Eligible Director in connection
with the exercise of a Stock Option subject the Company to tax withholding
requirements under Federal, state, local or foreign law, such Eligible Director
shall be required to make the necessary arrangements to satisfy the Company's
obligation, if any, to withhold any tax with respect to such amount.
(b) Awards
Each Award hereunder shall be evidenced in writing. The written agreement shall
be delivered to the Eligible Director and shall incorporate the terms of the
Plan by reference and specify the terms and conditions thereof and any rules
applicable thereto.
(c) Nontransferability
No Award shall be assignable or transferable except by will or the laws of
descent and distribution, and except to the extent required by law, no right or
interest of any Eligible Director shall be subject to any lien, obligation or
liability of the Eligible Director; provided, however, Awards may be
transferred to a member of the Eligible Director's immediate family or to a
trust or similar vehicle for the benefit of such immediate family members
A-4
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(collectively, the "Permitted Transferees"). Except as otherwise expressly
provided in this Plan, all rights with respect to Awards granted to an Eligible
Director under the Plan shall be exercisable during the Eligible Director's
lifetime only by such Eligible Director or, if applicable, the Permitted
Transferees.
(d) Construction of the Plan
The validity, construction, interpretation, administration and effect of the
Plan and of its rules and regulations, and rights relating to the Plan, shall
be determined solely in accordance with the laws of the State of New York
without reference to its conflict of law rules.
(e) Effective Date
The Effective Date of this Plan is January 1, 1997. The Plan will become
effective as of that date provided that the Plan receives the approval, within
12 months of its approval by the Board, of the holders of a majority of the
outstanding Common Shares entitled to vote. If such approval is not
forthcoming, the Plan and all Awards shall be null and void. No Awards may be
granted under the Plan after December 31, 2006.
A-5
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Appendix B
The printed copy of the Proxy Statement contains a Performance Graph comparing
EDO Corporation, Standard and Poor's 500 and Value Line Aerospace/Defense
Group. This Performance Graph is described and interpreted in tabular form in
this electronic filing.
