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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 1999 Annual Meeting of Shareholders to be held on April 27, 1999, 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.
Shares represented by proxies that withhold authority to vote for a nominee for
election as a director, or that 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 authority (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 two proposals on the
agenda for this year's Annual Meeting since such proposals are considered
discretionary items under such rules.
March 1, 1999 is the record date for the determination of shareholders entitled
to vote at the Annual Meeting. On the record date, there were outstanding
6,642,268 Common Shares and 60,641 ESOP Convertible Cumulative 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 60
East 42nd Street, Suite 5010, New York, NY 10165. This Proxy Statement and the
accompanying Notice of Annual Meeting of Shareholders and form of proxy are
being mailed on or about March 17, 1999 to shareholders of record on the record
date.
Proposal 1: ELECTION OF DIRECTORS
Three directors whose regular terms of office expire at the 1999 Annual Meeting
have been nominated for reelection to the Company's Board of Directors (the
"Board") to hold office until 2002. One director who was elected by the Board
of Directors in January, 1999 to serve until the next election of directors,
has been nominated for reelection to serve the remaining two years of Mr.
Joseph F. Engelberger's term. Mr. Engelberger will be retiring at the next
election of directors pursuant to the Company's By-laws. The names of the
four 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 represented 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 2001 and 2002 (as indicated) Annual Meeting
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Director Principal Occupation and Eeperience for the Past
Name Age Since Five Years, and Certain Other Directorships
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Frank A. 64 1982 Mr. Fariello is Chairman of the Board (since 1997)
Fariello and Chief Executive Officer (since 1994) of the
(Until 2002) Company. Until 1998, he was also President of
the Company.
Robert M. 60 1992 Mr. Hanisee is Managing Director of Trust Company
Hanisee of the West (an investment management company).
(Until 2002) He is a director of Titan Corporation and
Illgen Simulation Technology Inc.
George A. 66 1995 Mr. Strutz is President and CEO of Strutz and
Strutz, Jr. Company, Inc., a consulting and management
(Until 2002) advisory company. Until 1997, he was President
and CEO of Clopay Corporation (a manufacturer and
marketer of specialty plastic films and building
products).
James M. 57 1999 Mr. Smith is President and CEO of AIL Systems Inc.,
Smith (an aerospace and defense company).
(Until 2001)
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The names of the remaining five directors of the Company, whose terms of office
will continue after the 1999 Annual Meeting, and certain information about them
are set forth below.
Directors Whose Terms of Office Will Expire at the 2001 Annual Meeting
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Director Principal Occupation and Eeperience for the Past
Name Age Since Five Years, and Certain Other Directorships
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Mellon C. 68 1995 Mr. Baird is, since 1998, Senior Vice President of
Baird Titan Corporation and President and CEO of Titan
Technologies and Information Systems Corporation
(an information systems, products and services
company, a wholly-owned subsidiary of Titan
Corporation) and was, until 1998, Chairman,
President and CEO of Delfin Systems when it was
purchased by Titan Corporation. He is a director of
Software Spectrum, Inc. and Hawker Pacific
Aerospace Corporation.
George M. 64 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.
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Directors Whose Terms of Office Will Expire at the 2000 Annual Meeting
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Director Principal Occupation and Eeperience for the Past
Name Age Since Five Years, and Certain Other Directorships
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Robert E. 54 1995 Mr. Allen is Managing Director of Redding
Allen Consultants, Inc. (a management consulting firm).
Robert 60 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), and Vice Chairman and
CEO of A.P. Parts Manufacturing Co. (manufacturer
of auto and truck exhaust systems).
Michael J. 59 1982 Mr. Hegarty is a director and the President and
Hegarty CEO of Flushing Financial Corporation (a federal
chartered savings bank) and was, until 1998, its
Executive Vice President and Chief Operating
Officer. Until 1995, he was Vice President-Finance,
Treasurer and Secretary of the Company.
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THE BOARD OF DIRECTORS AND ITS COMMITTEES
During the fiscal year ended December 31, 1998: the Board met eight times; the
Board's Audit Committee, consisting of Messrs. Allen, Engelberger, Hanisee and
(since January, 1999) Hegarty, met twice; the Board's Compensation Committee,
consisting of Messrs. Alvine, Baird and Strutz, met eight times; and the
Board's Nominating Committee, consisting of Messrs. Fariello, Ball and
Hanisee, met twice.
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 Audit Committee has also been
appointed by the Board to oversee the Company's Y2K compliance program.
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.
The Nominating Committee is responsible for selecting candidates for vacant
director positions. 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 chairs. The compensation paid non-employee
directors or chairs 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 chair of a committee, $1,500 for each meeting of the committee
attended.
A minimum of one-half of a director's retainer is paid in Common Shares valued
at the end of each quarter. Directors may 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,
non-employee directors receive an annual grant of 2,000 options for Common
Shares which vest upon receipt. Non-employee directors receive a one-time
grant of 5,000 options for Common Shares upon initial election as a director.
2,000 of such options are exercisable after 6 months of date of grant and 3,000
of such options are immediately exercisable. Newly elected directors are
required to own, or acquire within 60 days of election, at least 1,000 Common
Shares.
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 1998 and
received $136,000 in compensation for such services.
3
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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 1, 1999, 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
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Number of Shares Percent
Name (See Notes 1-4) of Class
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Robert E. Allen .................................... 26,650 ........... *
Robert Alvine ...................................... 30,124 ........... *
Mellon C. Baird .................................... 11,824 ........... *
George M. Ball ..................................... 22,824 ........... *
Joseph F. Engelberger**............................. 12,824 ........... *
Frank A. Fariello .................................. 291,305 ........... 4.2%
William J. Frost ................................... 47,533 ........... *
Marvin D. Genzer ................................... 56,332 ........... *
Robert M. Hanisee .................................. 43,464 ........... *
Michael J. Hegarty ................................. 73,764 ........... 1.1%
Ira Kaplan ......................................... 139,516 ........... 2.0%
Kenneth A. Paladino ................................ 53,857 ........... *
James M. Smith ..................................... 4,000 ........... *
George A. Strutz, Jr. .............................. 19,135 ........... *
All Directors and Executive Officers as a Group .... 833,152 .......... 12.0%
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* Less than 1%
** Mr. Engelberger will be submitting his resignation at the 1999 Annual
Meeting of Shareholders pursuant to the applicable provisions of the Company's
By-laws.
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 1,175,640 and 1,815 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, 1998, 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, 156,308
shares; Mr. Frost, 25,733 shares; Mr. Genzer, 30,062 shares; Mr. Kaplan, 69,308
shares; Mr. Paladino, 37,657 shares; and all directors and executive officers
as a group, 319,068 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, 10,135 shares; and all directors and executive officers as
a group, 18,650 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, 19,000 shares each; Messrs. Baird, Engelberger and Strutz,
9,000 shares each; Mr. Fariello, 98,000 shares; Mr. Frost, 21,800 shares; Mr.
Genzer, 25,000 shares; Mr. Hanisee, 25,000 shares; Mr. Hegarty, 9,000 shares;
Mr. Kaplan, 49,000 shares; Mr. Paladino, 13,200 shares; Mr. Smith, 3000 shares;
and all directors and executive officers as a group, 328,000 shares.
4
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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 $100,000 (the "named Executive Officers") for the
fiscal years ending December 31, 1998, 1997 and 1996.
Summary Compensation Table
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Annual Long-Term
Compensation Compensation
---------------- ----------------------
Securities All
Name Restricted Underlying Other
and Stock Options/ Compen-
Principal Salary Bonus Awards1 SARs sation2
Position Year ($) ($) ($) (#) ($)
- ------------------- ---- ------------------ ---------------------- -------
Frank A. Fariello 1998 338,163 174,000 258,750 14,500 5,601
Chairman of the 1997 315,277 162,000 266,000 19,000 4,605
Board and Chief 1996 286,700 147,500 222,400 0 11,694
Executive Officer
William J. Frost 1998 126,832 38,000 25,875 5,000 5,589
Vice President- 1997 118,952 31,000 21,000 1,500 4,480
Administration 1996 114,389 35,000 55,600 0 8,372
and Assistant
Secretary
Marvin D. Genzer 1998 139,609 42,000 25,875 6,000 5,601
Vice President, 1997 127,294 32,000 21,000 1,500 4,540
General Counsel 1996 121,391 28,600 55,600 0 4,472
and Secretary
Ira Kaplan 1998 218,853 88,000 120,750 8,750 5,601
President and 1997 195,741 79,000 157,500 11,250 4,605
Chief Operating 1996 168,265 72,500 125,100 0 10,572
Officer
Kenneth A. 1998 147,504 37,000 51,750 6,000 5,601
Paladino 1997 128,656 37,000 105,000 7,500 9,335
Vice President- 1996 122,315 40,700 83,400 0 4,472
Finance and
Treasurer
- -------------------------------------------------------------------------------
1. The number and value of the aggregate restricted stock holdings at the end
of 1998 for Messrs. Fariello, Frost, Genzer, Kaplan and Paladino were
respectively: 142,250 shares, $1,191,344; 20,000 shares, $167,500; 24,000
shares, $201,000; 59,000 shares, $494,125; and 36,000 shares, $301,500.
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 and Kaplan for 1996 include $7,222,
$3,900, and $6,200, respectively, and the amount for Mr. Paladino for 1997
includes $4,730, representing one-time gains for the purchases of their Company
cars at book value, which was less than fair market value.
The following table provides the aggregate number and total value of exercised
and unexercised options of the named Executive Officers for fiscal year 1998
under the Company's 1996 Long-Term Incentive Plan.
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
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Number of Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End FY-End
(#) ($)
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
- -------------------------------------------------------------------------------
Frank A. Fariello 108,000/33,500 288,275/26,125
William J. Frost 21,800/6,500 48,055/2,063
Marvin D. Genzer 23,000/9,500 40,195/12,053
Ira Kaplan 49,000/20,000 96,225/15,469
Kenneth A. Paladino 12,700/16,000 28,953/18,955
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5
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Option/SAR Grants in Last Fiscal Year
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Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation
Individual Grants for Option Term
- -------------------------------------------------------------------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise
Options/ Employees or Base
SARs Granted in Fiscal Price Expiration 5% 10%
Name (#) Year ($/Sh) Date ($) ($)
- -------------------------------------------------------------------------------
Frank A.
Fariello 14,500 17.1% 8.625 1/26/08 78,650 199,320
William J.
Frost 5,000 5.9% 8.625 1/26/08 27,120 68,730
Marvin D.
Genzer 6,000 7.1% 8.625 1/26/08 32,550 82,480
Ira
Kaplan 8,750 10.3% 8.625 1/26/08 47,460 120,280
Kenneth A.
Paladino 6,000 7.1% 8.625 1/26/08 32,550 82,480
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Pension and Retirement Plans
Pension Plan Table
- -------------------------------------------------------------------------------
Final
Average
Base
Annual
Compensation Years of Credited Service at Retirement
-------------------------------------------------------------------
5 10 15 20 25 30 35 40
- -------------------------------------------------------------------------------
$100,000 $ 8,500 $17,000 $25,500 $ 34,000 $ 42,500 $ 51,000 $ 59,500 $ 67,000
150,000 12,750 25,500 38,250 51,000 63,750 76,500 89,250 100,500
200,000 17,000 34,000 51,000 68,000 85,000 102,000 119,000 134,000
250,000 21,250 42,500 63,750 85,000 106,250 127,500 148,750 167,500
300,000 25,500 51,000 76,500 102,000 127,500 153,000 178,500 201,000
350,000 29,750 59,500 89,250 119,000 148,750 178,500 208,250 234,500
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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, 1999, Messrs. Fariello, Frost, Genzer,
Kaplan and Paladino had completed, respectively, 34, 29, 30, 37 and 8 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.
6
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Short-Term Compensation
Base salary is primarily set in accordance with competitive comparable base
salaries paid by a set of peer group companies and national studies 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
not limited to financial criteria, such as corporate and business unit
earnings, return on capital employed, cash flow and 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 1998. Mr. Fariello's combined salary and bonus for 1998
was $34,886 more than for 1997, 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
Under the 1996 Long-Term Incentive Plan 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 dividends as may be
paid to Common Shareholders.
In 1998, 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
after three years and remain exercisable for additional years thereafter. The
Company awarded stock options to executive officers under the Company's 1996
Long-Term Incentive Plan in 1998.
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.
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.
7
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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, 1993. 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 12/31/98)
- -------------------------------------------------------------------------------
Dollars
----------------------------------------------
1993 1994 1995 1996 1997 1998
------ ------ ------ ------ ------ ------
EDO CORPORATION 100.00 52.35 77.56 110.52 137.44 133.36
STANDARD AND POORS 500 100.00 101.60 139.71 172.18 229.65 294.87
AEROSPACE/DEFENSE GROUP 100.00 108.86 168.02 229.59 277.71 261.45
Assumes $100 invested on December 31, 1993 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. Preretirement death, disability and
retirement benefits are available, for at least 15 years, as 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, Kaplan 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
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,
8
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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 the grantee's 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 December 31, 1998 for a term ending on December 31, 2000. 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
Great American Insurance Company for a premium for the above term of $166,000.
Proposal 2: SELECTION OF AUDITORS
KPMG LLP are currently the certified public accountants serving as the
Company's independent auditors. During 1998, KPMG 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 LLP as
the independent auditors for 1999. The shareholders will be asked to ratify
this action by the Board.
It is anticipated that one or more representatives of KPMG 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 1, 1999, of more than 5% of the Common Shares.
- -------------------------------------------------------------------------------
Name and Address Amount of EDO Percent of
of Beneficial Owner Common Shares Class
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EDO Corporation 247,943 and 60,641 12.2%
Employee Stock Ownership Plan ESOP Preferred
60 East 42nd Street, Suite 5010, Shares convertible
New York, NY 10165 into 606,410 (1)
Loomis, Sayles & Company, L.P. 7% Convertible Subordinated 13.2%
One Financial Center, Debentures due 2011
Boston, MA 02111 convertible into 1,011,455
David L. Babson and Company Inc.(2) 742,900 11.2%
One Memorial Drive
Cambridge, MA 02142
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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.
2. David L. Babson, in its capacity as investment adviser, may be deemed the
beneficial owner of these common shares which are owned by numerous investment
counselling clients.
9
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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,
except for Mr. Michael J. Hegarty, a director of the Company, who filed his
Form 4 with the SEC related to his exercise of expiring Company stock options
14 days late due to an administrative error by the Company, there was no person
who, at any time during the fiscal year, was a director, officer, 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 2000 Annual Meeting of Shareholders submitted
pursuant to rule 14a-8 under the Act must be received at the principal
executive offices of the Company, addressed to Marvin D. Genzer, Secretary, EDO
Corporation, 60 East 42nd Street, Suite 5010, New York, NY 10165, no later than
November 18, 1999, in order to be considered for inclusion in the Company's
Proxy Statement for such meeting. Shareholder proposals for the 2000 Annual
Meeting of Shareholders submitted other than pursuant to rule 14a-8 under the
Act must be received by the Secretary at the principal executive offices of the
Company no later than February 1, 2000 to be considered at 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, 1998, 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, 60 East 42nd
Street, Suite 5010, New York, NY 10165, attention: Marvin D. Genzer,
Secretary.
By order of the Board of Directors,
Marvin D. Genzer
Secretary
10
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Appendix
The printed copy of the Proxy Statement contains a Performance Graph comparing
EDO Corporation, Standard and Poors 500 and Value Line Aerospace/Defense
Group. This Performance Graph is described and interpreted in tabular form in
this electronic filing.
