<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
EG&G, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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<PAGE> 2
[EG&G Logo]
NOTICE OF ANNUAL MEETING
AND
PROXY STATEMENT 1998
EG&G, INC., CORPORATE OFFICES, 45 WILLIAM STREET, WELLESLEY, MASSACHUSETTS 02181
<PAGE> 3
NOTICE OF ANNUAL MEETING
To the Stockholders of EG&G, Inc.:
The Annual Meeting of the Stockholders of EG&G, Inc., will be held at the
Sheraton Needham Hotel, 100 Cabot Street, Needham, Massachusetts, on Tuesday,
April 28, 1998, at 10:30 a.m., to consider and act upon the following:
1. A proposal to fix the number of Directors at eleven and to elect eleven
nominees for Director for terms of one year each; and
2. Such other matters, including one stockholder proposal, as may properly come
before the Meeting or any adjournment thereof.
The Board of Directors has no knowledge of any other business to be
transacted at the Meeting.
The Board of Directors has fixed the close of business on February 27,
1998, as the record date for the determination of stockholders entitled to
receive this notice and to vote at the Meeting.
All stockholders are cordially invited to attend the Meeting.
By Order of the Board of Directors
/s/ Murray Gross
MURRAY GROSS, Clerk
March 6, 1998
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RETURN ENCLOSED PROXY CARD
Whether or not you expect to attend this Meeting, I urge you to complete, date,
and sign the enclosed proxy card and to mail it promptly in the enclosed
envelope. No postage is required if mailed in the United States. Prompt response
is important and your cooperation will be appreciated. If the envelope is lost,
return the card to Boston EquiServe, L.P., Attention: Proxy Department, Post
Office Box 9381, Boston, Massachusetts 02205-9381.
<PAGE> 4
PROXY STATEMENT
This Proxy Statement has been prepared to provide the stockholders of EG&G,
Inc. with information pertaining to the matters to be voted on at the EG&G,
Inc., Annual Meeting of Stockholders to be held on Tuesday, April 28, 1998 at
10:30 a.m., at the Sheraton Needham Hotel, 100 Cabot Street, Needham,
Massachusetts, and at any adjournment of that Meeting. The date of this Proxy
Statement is March 6, 1998, the approximate date on which the Proxy Statement
and form of Proxy were first sent or given to stockholders. EG&G, Inc. is
sometimes referred to in this Proxy Statement as "EG&G" or the "Company." EG&G,
Inc. Common Stock, $1 par value per share (the only outstanding EG&G security
with voting power), is referred to as the "Common Stock."
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF EG&G. You
are requested to sign and return your proxy card promptly. You have the right to
revoke your proxy and change your vote at any time prior to its exercise at the
Meeting by filing written notice with the Clerk of EG&G or by signing and
delivering a new proxy card bearing a later date. IT IS IMPORTANT TO SIGN AND
RETURN YOUR PROXY CARD. It helps to establish a quorum so that the Meeting may
be held, and it permits your votes to be cast in accordance with your
directions.
The expenses connected with soliciting proxies will be borne by EG&G. The
Company expects to pay brokers, nominees, fiduciaries, and other custodians
their reasonable expenses for forwarding proxy materials and annual reports to
principals and obtaining their voting instructions. The Company has engaged
Kissel-Blake Inc., of New York City, to assist in soliciting proxies from
brokers, nominees, fiduciaries, and custodians and has agreed to pay
Kissel-Blake Inc. $7,500 and out-of-pocket expenses for such efforts. In
addition to the use of the mails, certain Directors, officers, and employees may
solicit proxies in person or by use of communications media.
The stock transfer books of EG&G will not be closed; however, the Board of
Directors has fixed the close of business on February 27, 1998, as the record
date for determining the stockholders entitled to receive notice and to vote
their shares at the Annual Meeting. On the record date, there were 45,354,112
shares of Common Stock outstanding and entitled to vote. Each share of Common
Stock carries with it the right to cast one vote, with no cumulative voting. The
presence at the Annual Meeting, in person or by proxy, of a majority of the
shares of Common Stock issued and outstanding on the record date constitutes a
quorum.
The two items being presented for stockholder action are set forth on your
proxy card and each of them is discussed in detail on the following pages.
Shares represented by proxy will be voted at the Meeting in accordance with your
instructions, as indicated on the proxy card.
The first item on the proxy card is a proposal to fix the number of
Directors at eleven and to elect eleven Directors for terms of one year each.
You are provided the opportunity for granting, or withholding, authority to vote
your shares to fix the number of Directors at eleven and to elect the eleven
nominees by marking the appropriate box on the proxy card. Should you desire to
withhold authority to vote for specific nominees, please identify the exceptions
in the appropriate space provided on the proxy card. Your shares will be voted
as you indicate. IF YOU SIGN AND RETURN YOUR PROXY CARD AND MAKE NO INDICATION
CONCERNING ITEM NO. 1 ON THE PROXY CARD, YOUR SHARES WILL BE VOTED "FOR" FIXING
THE NUMBER OF DIRECTORS AT ELEVEN AND ELECTING THE NOMINEES NAMED IN THIS PROXY
STATEMENT.
The second item is a stockholder proposal that the stockholders of the
Company urge the EG&G Board of Directors to arrange for the prompt sale of the
Company to the highest bidder. With respect to Item No. 2, you are provided the
opportunity to vote for or against adopting the proposal or to
EG&G, Inc., Corporate Offices
45 William St., Wellesley, Massachusetts 02181
(781)237-5100
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abstain from voting. Your shares will be voted as you indicate, or not voted if
you abstain. IF YOU DO NOT MAKE AN INDICATION CONCERNING THIS ITEM, YOUR SHARES
WILL BE VOTED "AGAINST" ITEM NO. 2.
Management does not anticipate a vote on any other proposal at the Annual
Meeting. In the event, however, that another proposal is properly brought before
the Meeting, your shares will be voted in accordance with the discretion of the
named proxies.
EG&G's Annual Report to Stockholders for 1997 has already been mailed to
its stockholders or is enclosed herewith. It should not be considered either as
part of this Proxy Statement or as incorporated herein by reference.
VOTES REQUIRED
The affirmative vote of the holders of a plurality of the votes cast at the
Meeting is required for the election of each of the eleven Directors. The
affirmative vote of the holders of a majority of the shares of Common Stock
present or represented at the Meeting and voting on the matter is required for
fixing the number of Directors at eleven and the approval of the stockholder
proposal to be voted upon.
Shares of Common Stock represented by executed proxies received by the
Company will be counted for purposes of establishing a quorum at the Meeting,
regardless of how or whether such shares are voted on any specific proposal.
Shares which abstain from voting as to a particular matter, and shares held by
nominee record holders who did not receive specific instructions from the
beneficial owners of such shares and thus are not voted with respect to a
particular matter, will not be counted as shares voting on such matter.
Accordingly, absentions and nominee "non-votes" will have no effect on the
voting for either the election of Directors or the approval of the stockholder
proposal.
ITEM NO. 1
ELECTION OF DIRECTORS
The Articles of Organization and By-Laws of EG&G provide that the number of
Directors, not less than three nor more than thirteen, shall be fixed by the
stockholders. The Articles of Organization and By-Laws, as amended in 1996,
provide that at each Annual Meeting of Stockholders, commencing with the Annual
Meeting of Stockholders in 1996, the successors of the Directors whose terms
expire in that year shall be elected for a one-year term. There are, at present,
eleven Directors of the Company. The terms of all eleven of the Directors expire
at this year's Annual Meeting.
The Board of Directors has declared it advisable that the number of
Directors be fixed at eleven and has nominated the following persons for
election as Directors for one-year terms expiring at the Annual Meeting in 1999:
<TABLE>
<S> <C>
TAMARA J. ERICKSON GRETA E. MARSHALL
JOHN B. GRAY MICHAEL C. REUTTGERS
KENT F. HANSEN GREGORY L. SUMME
JOHN F. KEANE JOHN LARKIN THOMPSON
JOHN M. KUCHARSKI G. ROBERT TOD
NICHOLAS A. LOPARDO
</TABLE>
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" FIXING
THE NUMBER OF DIRECTORS AT ELEVEN AND FOR ELECTING THE
ELEVEN NOMINEES NAMED ABOVE FOR TERMS OF ONE YEAR EACH.
It is intended that the shares represented by proxies will be voted to fix
the number of Directors at eleven and for the election of the eleven nominees
(unless one or more of the nominees is unwilling or unable to serve) for terms
of one year each, unless a contrary instruction is indicated on the proxy cards.
The Board of Directors knows of no reason why any nominee should be unable or
unwilling to serve, but if such should be the case, the persons named as proxies
in the Proxy may vote for the election of a substitute. In no event will shares
represented by proxies be voted for more than eleven nominees. To apprise you of
the qualifications of the Directors, we are including information concerning the
nominees.
NOMINEES FOR DIRECTOR FOR A ONE-YEAR TERM EXPIRING IN 1999
TAMARA J. ERICKSON: Age 43; Principal Occupation: Independent consultant
specializing in corporate strategy and technology management. Elected a Member
of the Board of Directors of EG&G since 1995. Member of the Audit Committee and
the Nominating Committee of the Board of Directors.
Ms. Erickson is the co-author of the book, Third Generation R&D: Managing the
Link to Corporate Strategy, published in 1991. From 1995 to 1996, she was a
Senior Vice President of Arthur D. Little, Inc., a consulting company with which
she had been associated since 1978. From 1991 to 1995, Ms. Erickson served as a
Managing Director of Arthur D. Little, Inc. with direct line management
responsibility for all the firm's management consulting business in North
America, including strategy and organization, information systems, and
operations management consulting services. Ms. Erickson holds a BA degree in
Biological Sciences from the University of Chicago and an MBA from Harvard
Business School. She is a Director of Allergan, Inc., Irvine, California.
JOHN B. GRAY: Age 70; Principal Occupation: Retired President and Director of
Dennison Manufacturing Company, a subsidiary of Avery Dennison Corporation, a
diversified manufacturer serving worldwide markets for office products,
industrial systems, packaging, and pressure-sensitive base materials. Mr. Gray
has been a Member of the Board of Directors of EG&G since 1983 and is a Member
of the Executive Committee and the Nominating Committee and Chairman of the
Corporate Governance Committee of the Board of Directors.
Mr. Gray joined Dennison Manufacturing Company in 1951, where he held a number
of production and general management positions. He was elected a Vice President
of that Company in 1968, Senior Vice President in 1972, Executive Vice President
in 1979, and President in 1986. Mr. Gray served as President of Dennison
Manufacturing Company from 1986 until his retirement in 1991. He served as a
Director of Dennison Manufacturing Company from 1968 to 1991. Mr. Gray received
an AB degree from Harvard University in 1949 and an MBA degree from Harvard
Business School in 1951. He also serves as a Director of the Liberty Mutual
Insurance Companies, Liberty Financial Co., the Stackpole Corporation, the New
England Shelter for Homeless Veterans and the Executive Service Corps of New
England. Mr. Gray is a Trustee of Wentworth Institute of Technology and the New
England Aquarium.
KENT F. HANSEN: Age 66; Principal Occupation: Professor of Nuclear Engineering
at the Massachusetts Institute of Technology, Cambridge, Massachusetts. Director
of EG&G since 1979. Chairman of the Nominating Committee and a Member of the
Audit Committee and the Corporate Governance Committee of the Board of
Directors.
Kent F. Hansen, a Professor of Nuclear Engineering at the Massachusetts
Institute of Technology, first joined the M.I.T. faculty as an Assistant
Professor in 1961. He is a former research scholar of M.I.T., from which he
graduated in 1953 with a degree in physics. Dr. Hansen also received his Sc.D.
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degree in nuclear engineering from that institution. An authority in the field
of nuclear reactor physics, reactor safety analysis, and nuclear fuel
management, Dr. Hansen is the author of many scientific and technical
publications and the co-author of a book entitled "Numerical Methods of Reactor
Analysis." A former director of the American Nuclear Society, Dr. Hansen has
served as consultant to several electric utilities and nuclear reactor
manufacturers, to the Department of Energy, and to the Nuclear Regulatory
Commission. Dr. Hansen was nominated by former President Carter in 1977 to serve
as a commissioner of the Nuclear Regulatory Commission. In 1978, Dr. Hansen
received the American Nuclear Society's Arthur Holly Compton Award for
outstanding contributions to education in the fields of nuclear science and
engineering. Dr. Hansen was Chairman of the Board of Directors of Stone &
Webster, Inc. from August 1995 to May 1997. He is currently Lead Director of
Stone & Webster, Inc. He is also a Member of the National Academy of
Engineering.
JOHN F. KEANE: Age 66; Principal Occupation: President and Chief Executive
Officer and Director of Keane, Inc., a public corporation based in Boston,
Massachusetts, that designs, develops and maintains computer software for
corporations and hospitals. Member of the Board of Directors of EG&G since 1997.
Member of the Compensation and Stock Option Committee and the Corporate
Governance Committee of the Board of Directors.
Mr. Keane founded Keane, Inc., in 1965. Prior to starting the company, Mr. Keane
worked for IBM, and was a marketing and management consultant for Arthur D.
Little. He is a graduate of Harvard University and received his MBA from Harvard
Business School. Mr. Keane is an active member of ITAA (Information Technology
Association of America), and the national computer software and services trade
association, having previously served as Chairman of that organization, and is a
member of the Mass High Tech Council. He presently serves as a Trustee of the
Massachusetts Software Council, Inc. He is a member of the Governor's Council on
Economic Growth and Technology, is a member of the Board of The Center for
Quality of Management, and serves on the Board of Overseers of Beth Israel
Deaconess Medical Center. In 1994, Mr. Keane became Chairman of the Board of
Governors of the New England Aquarium. Mr. Keane is also a Director of Brock
International.
JOHN M. KUCHARSKI: Age 62; Principal Occupation: Chairman of the Board and Chief
Executive Officer of EG&G. Mr. Kucharski has been a Director of the Company
since 1986 and is a Member of the Executive Committee of the Board of Directors.
Mr. Kucharski joined EG&G, Inc. in 1972 when Challenger Research, Inc., a firm
he co-founded in 1965, was acquired by EG&G. Mr. Kucharski was elected a Vice
President of the Company in 1979, a Senior Vice President in 1982, and Executive
Vice President in 1985. He was promoted to the position of President and Chief
Operating Officer in 1986, was named to the position of Chief Executive Officer
in 1987, and elected Chairman of the Board in 1988. Mr. Kucharski received a BS
degree in electrical engineering from Marquette University in 1958 and a JD
degree from George Washington University in 1965. He is a Director of Nashua
Corporation, New England Electric System, State Street Boston Corporation, and
Eagle Industry Co., Ltd. He serves on the Board of Trustees of Marquette
University and George Washington University.
NICHOLAS A. LOPARDO: Age 51; Principal Occupation: Vice Chairman of State Street
Bank and Trust Company and Chairman and Chief Executive Officer of State Street
Global Advisors, the Bank's investment management group. Member of the Board of
Directors of EG&G since 1996. Chairman of the Audit Committee and a Member of
the Benefit Plans Investment Committee of the Board of Directors.
Mr. Lopardo joined the Asset Management Division of State Street Bank and Trust
Company in January 1987. In September of 1990, he was promoted to Executive Vice
President of the Bank and Chief Executive Officer of State Street Global
Advisors with responsibility for the Company's investment management businesses.
Mr. Lopardo is also a member of the Senior Executive Group at State Street Bank
and Trust Company, which is responsible for setting the policy direction of the
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Bank. Prior to joining State Street Bank and Trust Company, Mr. Lopardo served
as Senior Vice President of sales, marketing and pension advisory services with
Equitable Life Assurance Society in New York. Mr. Lopardo has over 28 years of
experience in the pension industry, having served in a variety of roles with
Equitable related to pension marketing, client relationships, and Equitable's
pension investment advisory services. He is a 1968 graduate of Susquehanna
University with a BS in marketing and management and is a member of the Board of
Directors of the University and the Investment Property and Finance, and
Executive Committee of that Board. He is also Chairman of the Advisory Board of
the Weis Business School at Susquehanna University and Chairman of the Board of
the Landmark School, the premier secondary school for dyslexic students. Mr.
Lopardo is also a Board Member of the Boston Stock Exchange and of the Whitehead
Institute for Biomedical Research. He currently holds positions on the
Wellspring Resources, LLC, Fleet Center Premium Seat Advisory Board, American
Bankers Association Investment & Trust Services Advisory Board, and Mansion
House Group, Ltd. Board in Hong Kong.
GRETA E. MARSHALL, CFA: Age 60; Principal Occupation: Principal and founder of
The Marshall Plan, a financial investment company. Director of EG&G since 1990.
Chairman of the Benefit Plans Investment Committee and a Member of the
Compensation and Stock Option Committee of the Board of Directors.
Ms. Marshall manages The Marshall Plan, a financial investment company she
founded in 1988, with offices in Concord, Massachusetts and Incline Village,
Nevada. She has thirty-five years of experience in financial analysis, research,
and investment. From 1974 to 1984, she was Director, Investments, Deere &
Company, Moline, Illinois. She was President of Baybanks Investment Management
in 1984 and 1985 and Investment Manager of the California Public Employees
Retirement System from 1985 to 1988. Ms. Marshall is a member of the Board of
Directors of Hyseq, Inc. Ms. Marshall holds Bachelor of Arts and Master of
Business Administration degrees from the University of Louisville. She is a
Member of the Editorial Board of CFA Digest, a member of the Candidate
Curriculum Committee and a Trustee of the AIMR Investment Management Workshop.
Ms. Marshall is also a Trustee of the Financial Accounting Foundation.
MICHAEL C. RUETTGERS: Age 55; Principal Occupation: President and Chief
Executive Officer and Director of EMC Corporation, a company based in Hopkinton,
Massachusetts, specializing in information storage and retrieval. Member of the
Board of Directors of EG&G since 1997. Member of the Audit Committee and the
Nominating Committee of the Board of Directors.
Mr. Ruettgers became President and Chief Executive Officer of EMC Corporation in
January 1992. From 1989 to 1991 Mr. Ruettgers held the positions of President
and Chief Operating Officer. He joined the company in 1988 as Executive Vice
President of Operations and Customer Service. Before joining EMC Corporation,
Mr. Ruettgers spent much of his career with Raytheon Company. During his 13
years at Raytheon, Mr. Ruettgers played a key role in the Patriot Missile
program while at Raytheon's Missile Systems Division. In 1981 he joined
Boston-based Keane, Inc., a software development company where he was Senior
Vice President. Following his work with Keane, Inc., Mr. Ruettgers became Chief
Operating Officer of Technology Financial Services where he advised companies
such as IBM, AT&T and the regional Bell operating companies. Mr. Ruettgers holds
a BS from Idaho State University and an MBA from Harvard Business School. He is
a Director of Commonwealth Energy Systems.
GREGORY L. SUMME: Age 41; Principal Occupation: President and Chief Operating
Officer of EG&G. Member of the Board of Directors of EG&G in January of 1998.
Member of the Corporate Governance Committee.
Mr. Summe was named President and Chief Operating Officer of EG&G and elected to
the Company's Board of Directors in January of 1998. Until recently, Mr. Summe
was President of AlliedSignal's $2.1 billion Automotive Products Group. Prior to
being appointed President of AlliedSignal's Automotive Products Group in 1997,
Mr. Summe served as President of Aerospace Engines (1995 to 1997) and as
President of General Aviation Avionics (1993 to 1995). Before
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joining AlliedSignal, he was the general manager of commercial motors at General
Electric (1992 to 1993) and was a partner at McKinsey & Co., Inc. (1983 to
1992). He started his career as a semiconductor design engineer at Mostek. Mr.
Summe holds B.S. and M.S. degrees in electrical engineering from the University
of Kentucky and the University of Cincinnati, and an M.B.A. from the Wharton
School at the University of Pennsylvania.
JOHN LARKIN THOMPSON: Age 67; Principal Occupation: Of Counsel to Nutter,
McClennen & Fish, a Boston, Massachusetts law firm. Director of EG&G since 1986.
Member of the Benefit Plans Investment Committee and the Corporate Governance
Committee of the Board of Directors.
Mr. Thompson served as President and Chief Executive Officer of Blue Cross &
Blue Shield of Massachusetts, Inc. from 1988 to his retirement in 1992. He
served as President of Blue Shield of Massachusetts, Inc. and Blue Cross of
Massachusetts, Inc. from 1970 and 1987, respectively, until December 30, 1988
when those two companies merged. Prior to his service with Blue Cross and Blue
Shield, Mr. Thompson was an associate and then partner with the Boston law firm
of Palmer & Dodge. He holds a Bachelor of Science degree from Villanova
University, a Master of Science degree from Columbia University Graduate School
of Business, and a Juris Doctor (cum laude) from Boston University School of Law
and is a Member of the Massachusetts and Boston Bar Associations. Mr. Thompson
retired from the United States Naval Reserve in 1976 as a Commander. He is a
Trustee and former Chairman of the New England Aquarium, Director and former
Chairman of the Artery Business Committee, and Trustee of Emmanuel College. He
also served as Chairman of the United Way of Massachusetts Bay and Chairman of
the Massachusetts Port Authority. He currently serves as a Director of several
other civic and charitable organizations.
G. ROBERT TOD: Age 58; Principal Occupation: President and Chief Operating
Officer and Director of the CML Group, Inc., a specialty marketing company.
Director of EG&G since 1984. Member of the Executive Committee and the
Nominating Committee and Chairman of the Compensation and Stock Option Committee
of the Board of Directors.
Mr. G. Robert Tod is a 1961 graduate of Rensselaer Polytechnic Institute with a
Bachelor's degree in Mechanical Engineering and a 1967 graduate of the Harvard
Business School MBA Program. Mr. Tod is co-founder of the CML Group, Inc. and
has served as its President and Chief Operating Officer from 1969 to the
present. Mr. Tod is a Director of SCI Systems, Inc. and U.S. Trust Corp. and is
a Trustee of Rensselaer Polytechnic Institute and of Emerson Hospital.
INFORMATION RELATIVE TO THE BOARD OF DIRECTORS
AND CERTAIN OF ITS COMMITTEES
A formal Audit Committee of the Board of Directors was created in 1971. The
present Committee, which met five times in 1997, is composed of four Directors
- -- Messrs. Lopardo (Chairman), Hansen and Ruettgers and Ms. Erickson.
The responsibilities of the Audit Committee are (1) to recommend the
particular persons or firm to be employed by the Company as its independent
auditor; (2) to consult with the persons so chosen to be the independent auditor
with regard to the plan of audit; (3) to review, in consultation with the
independent auditor, its report of audit or proposed report of audit, and the
accompanying management letter, if any; and (4) to consult periodically with the
independent auditor with regard to the adequacy of internal controls and, if the
Committee so chooses, to consult with the internal auditors, the Chief Financial
Officer, the Corporate Controller, the Treasurer and other officers and
employees as the Committee may deem appropriate.
The Compensation and Stock Option Committee of the Board of Directors,
which met three times in 1997, is composed of three Directors -- Messrs. Tod
(Chairman) and Keane and Ms. Marshall. The Committee reviews and approves the
salaries and incentive compensation of the Chairman of the Board, the Chief
Executive Officer, the President, and the Executive and Senior Vice Presidents.
The Committee also reviews and approves the management incentive plans of the
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Company and its subsidiaries, administers the stock option plans adopted by the
Company, and reviews and approves such other employment and compensation matters
as it deems necessary and proper.
The Corporate Governance Committee of the Board of Directors, which met
four times in 1997, is composed of five Directors -- Messrs. Gray (Chairman),
Hansen, Keane, Summe and Thompson. The Committee examines and defines the Board
of Directors' role in corporate governance, formulates policy to deal with and
be responsive to shareholder concerns, and formulates guidance, for management
action, to deal with evolving social issues, both internal and external to the
organization.
A Nominating Committee of the Board of Directors was created in 1991. The
present Committee, which met five times in 1997, is composed of five Directors
- -- Messrs. Hansen (Chairman), Gray, Ruettgers and Tod, and Ms. Erickson. The
Committee establishes criteria for nomination or renomination as a Director,
develops procedures for the nomination or renomination process, and identifies
and recommends candidates for nomination to the Board of Directors. Any
stockholder desiring to submit a candidate for consideration by the Nominating
Committee should send sufficient biographical data and background information
concerning the candidate to enable a proper judgment as to the candidate's
qualifications, together with any other relevant information, to: Chairman of
the Nominating Committee, c/o EG&G, Inc., 45 William Street, Wellesley, MA
02181.
A Benefit Plans Investment Committee of the Board of Directors was created
in October of 1991. The present Committee, which met once in 1997, is composed
of three Directors -- Ms. Marshall (Chairman) and Messrs. Lopardo and Thompson.
The Committee reviews the investment of funds held in the Company's employee
benefit plans.
The Board of Directors also has an Executive Committee composed of three
Directors -- Messrs. Kucharski, Gray and Tod. The Committee, which acts as
needed during intervals between Board meetings, has been delegated with all the
powers of the Board except those powers which by law, the Articles of
Organization or the By-Laws of the Company, the Board of Directors is prohibited
from delegating. With the exception of the Executive Committee and the Corporate
Governance Committee, all Committees of the Board of Directors are comprised of
non-employee Directors.
MEETINGS
The Board of Directors met seven times in 1997. All Directors attended at
least 75 percent of the aggregate number of meetings of the Board of Directors
and the committees of the Board on which they respectively served.
DIRECTOR COMPENSATION
Directors who are employees of the Company receive no additional
compensation for their services as Directors. Directors who are not employees of
the Company are paid an annual retainer fee of $12,000 and $1,000 for each
meeting of the Board that they attend. Additionally, the Chairmen of the Audit,
Compensation and Stock Option, Corporate Governance, Nominating, and Benefit
Plans Investment Committees receive $4,000 per year and the other non-employee
members of these Committees receive $3,000 per year. All non-employee members of
these Committees receive $1,000 for each Committee meeting that they attend
unless the Committee meeting is held on the same day as a Board of Directors'
meeting, in which case, the Committee member receives $500.
The EG&G, Inc. 1990 Director Stock Plan provides that on each January 31,
non-employee Directors who served for the preceding calendar year shall receive
800 shares of Common Stock (with a pro-rated number of shares issued to
Directors who served for only a portion of such year). If a Director fails to
attend at least 75 percent of the aggregate number of meetings of the Board and
the committees on which the Director served during the preceding year, the
number of shares of Common Stock will be reduced to 400 shares and no shares
will be issued if a Director fails to attend at least 50 percent of such
meetings. In accordance with the Director Stock Plan, in February of
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1998, each of the seven non-employee Directors who served as Directors for the
entire 1997 calendar year received 800 shares of Common Stock, with a fair
market value to each such Director at that time of $19,550. Messrs. Keane and
Ruettgers, elected to the Board at the 1997 Annual Meeting, each received 600
shares of Common Stock, with a fair market value to each of them at that time of
$14,662.50. Messrs. Goldhammer and Pounds, who retired from the Board in April
of 1997, each received 200 shares with a fair market value to each of them at
that time of $4,887.50.
The Company terminated its Deferred Compensation Plan for non-employee
Directors effective December 31, 1995. The termination does not affect any
rights of non-employee Directors that had vested as of such termination date.
The Plan provided for an annual payment to be made by the Company to the
eligible Director or his or her estate in an amount equal to 100 percent of the
Director's annual retainer fee in effect at the time the Director's service on
the Board ceased due to death, retirement, or resignation. Under the Plan as
terminated, annual payments will be made to any non-employee Director in office
as of December 31, 1995, upon his or her death, retirement, or resignation from
the Board for the greater of five years or the number of years the Director had
served on the Board as of December 31, 1995.
The Company has established the EG&G, Inc. Directors Charitable
Contribution Program for certain non-employee Directors. To be eligible under
the program, the Director must be a non-employee Director with no previous
employment with the Company and have either been a member of the Company's Board
of Directors as of January 1, 1992 or have otherwise completed five years of
service on the Board. Under this program, the Company will contribute, upon the
death of an eligible Director, a total of $1,000,000 to one or more qualifying
charitable organizations named by the Director. The program is funded through a
life insurance policy on each such eligible Director, with the life insurance
proceeds payable to EG&G.
8
<PAGE> 12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table identifies the only persons known to the Company to be
beneficial owners of five percent or more of the outstanding shares of Common
Stock. The information in this table and the footnotes is taken from a Schedule
13G dated January 12, 1998, filed by The Regents of the University of California
and a Schedule 13G dated February 14, 1998, filed by FMR Corp. with the
Securities and Exchange Commission.
<TABLE>
<CAPTION>
AMOUNT AND
NAME AND ADDRESS NATURE PERCENT
OF BENEFICIAL OF BENEFICIAL OF
OWNER OWNERSHIP(1) CLASS
- --------------------------------------------------------------------------------------
<S> <C> <C>
The Regents of the University of California
300 Lakeside Drive
Office of the Treasurer
Oakland, CA 94612 3,343,000(2) 7.38%
FMR Corp.
82 Devonshire Street
Boston, MA 02109 5,854,661(3) 12.92%
</TABLE>
NOTES
(1) There are no shares included with respect to which such persons have a right
to acquire beneficial ownership.
(2) The Schedule 13G filed by The Regents of the University of California states
that it has sole voting power and sole dispositive power over 3,343,000
shares.
(3) The Schedule 13G filed by FMR Corp. states that FMR Corp. has sole
dispositive power with respect to 5,854,661 shares of which 5,303,200 shares
are held by various investment companies to which a wholly-owned subsidiary
of FMR Corp., Fidelity Management and Research Company, acts as investment
adviser and 551,461 are held by Fidelity Management Trust Company, a
wholly-owned subsidiary of FMR Corp., and has sole voting power and sole
dispositive power with respect to 520,561 shares held by Fidelity Management
Trust Company, which serves as investment manager of the institutional
account(s).
9
<PAGE> 13
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the number of shares of Common Stock owned of
record or beneficially (including unexercised stock options exercisable within
60 days) on February 2, 1998, (i) by each of the Directors and nominees for
Director individually, (ii) by each of the executive officers named in the
Summary Compensation Table, and (iii) by all of the executive officers,
Directors, and nominees for Director as a group. No Director, nominee for
Director, or executive officer of the Company owned any equity securities of the
Company other than Common Stock on that date.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME BENEFICIAL OWNERSHIP OF CLASS
- -----------------------------------------------------------------------------
<S> <C> <C>
John M. Kucharski 308,926(1)(2) *
Angelo D. Castellana 78,933(1)(2) *
John F. Alexander, II 57,724(1) *
Murray Gross 98,844(1) *
C. Michael Williams 76,846(1)(2) *
Tamara Erickson 1,600 *
John B. Gray 14,200 *
Kent F. Hansen 6,400 *
John F. Keane 1,600 *
Nicholas A. Lopardo 1,400 *
Greta E. Marshall 6,200 *
Michael C. Ruettgers 700 *
Gregory L. Summe 0 *
John Larkin Thompson 9,200 *
G. Robert Tod 11,400 *
All executive officers, Directors, and
nominees for Director of the Company as a
Group, 21 in number, including those listed
above(1)(2) 840,753(1)(2) 1.83%
</TABLE>
- ---------------
* Less than 1%
NOTES
(1) The amounts shown as beneficially owned by Messrs. Kucharski, Castellana,
Alexander, Gross and Williams, and by all executive officers, Directors, and
nominees for Director as a group, include 224,700, 69,200, 49,700, 67,400,
45,700 and 600,620 shares, respectively, which are obtainable within 60 days
after February 2, 1998 upon exercise of, and payment for, outstanding,
unexercised stock options.
(2) Owners of all shares shown have sole voting and investment power except
Messrs. Kucharski, Castellana and Williams and certain executive officers of
EG&G, not identified by name in the above Table, as a group, who share
investment and/or voting power over 32,226 shares, 4,422 shares, 21,546 and
2,358 shares, respectively. The number of shares stated as being owned
beneficially includes shares held beneficially by spouses, minor children,
and certain trusts; the inclusion of such shares in the Proxy Statement,
however, does not constitute an admission that the executive officers,
Directors, or nominees for Director are direct or indirect beneficial owners
of such shares.
10
<PAGE> 14
BOARD COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation and Stock Option Committee (the "Committee") of the Board
of Directors is composed of three independent outside Directors. The Committee's
report on executive compensation follows.
OVERALL PHILOSOPHY
The Company's overall executive compensation philosophy is based on the
premise that compensation should be aligned with and support the Company's
business strategy and long-term initiatives, enhance shareholder value and be
competitive with that offered by comparable companies. Under the guidance of the
Committee, compensation policies have been designed which link executive
compensation to the attainment of the Company's specific goals. These policies
also allow the Company to attract and retain those senior executives critical to
the long-term success of a highly diversified organization by providing a
competitive compensation package and recognizing and rewarding individual
contributions. The key elements of the Company's executive compensation are base
salary, annual incentive awards, and stock options.
BASE SALARY
Each year, the Committee reviews and establishes the base salary of the
Chief Executive Officer based on the Company's performance, as measured by a
combination of factors consisting principally of sales, earnings per share
growth, return on equity, return on capital (EVA(R)) and on a comparison to
executive compensation in other companies as revealed by the surveys referred to
below. The Committee also reviews, approves or modifies, as deemed appropriate
by the Committee, a salary plan recommended by the Chief Executive Officer and
the Vice President of Human Resources for the positions of President, Executive
Vice President and Senior Vice President. This plan, developed by the Human
Resources staff, is based on the performance of each such Officer while taking
into consideration the Company's performance as measured by the factors
described above.
Two national surveys are used to provide general overall guidance with
respect to compensation levels. The surveys show the varied percentile base and
total compensation for selected officer positions for companies comparable in
revenue size to EG&G. Generally, the compensation levels of EG&G officers are
comparable with those for similar positions within the companies included in the
above-mentioned surveys.
In accordance with the Company's policy to pay competitive salaries, the
base salaries of most officers were increased in 1995, 1996 and April 1997. Mr.
Kucharski's base salary was increased to $650,000 per year in January 1994 and
has remained at this level throughout 1995, 1996 and 1997. His recommendation
that he not receive a salary increase in 1997 has been accepted by the
Committee. For April 1998, the Committee has recommended a salary increase for
Mr. Kucharski to $700,000 per year.
INCENTIVE COMPENSATION
EG&G maintains an Economic Value Added ("EVA(R)") Incentive Plan (the
"Plan", or "EVA(R) Plan"), the purpose of which is to provide incentive
compensation to certain key employees. Mr. Kucharski and most officers,
including the other executive officers named in the Summary Compensation Table,
are participants in the EVA(R) Plan. Although the EVA(R) Plan is the primary
source of bonuses for officers, the Committee may award additional bonuses to
selected officers outside of the EVA(R) Plan in circumstances in which the
Committee determines that an additional bonus determined on a different basis is
appropriate.
Bonuses under the EVA(R) Plan are based on the additional shareholder value
created. For purposes of the Plan, shareholder value is created when the Company
earns a return in excess of the cost of the capital employed. EG&G calculates
its EVA(R) by taking its net operating profit after tax and
11
<PAGE> 15
subtracting a capital charge. The capital charge is the result of the capital
employed by the Company multiplied by the Company's weighted average cost of
capital.
Each EVA(R) Plan participant is assigned a target incentive, expressed as a
percentage of base salary ranging between 5% and 60%, which represents the
amount of the incentive award if EVA(R) performance targets are met. The EVA(R)
performance targets are generally based on the participant's business unit.
Performance targets for officers and other corporate participants are based on
consolidated performance. For General Managers and division participants,
performance targets are based on Division and consolidated performance. The
actual incentive award is determined by multiplying the target incentive by a
formula performance factor based upon actual EVA(R) performance compared to the
target performance. The performance factor will be greater than one if the
EVA(R) target is exceeded and will be less than one or even negative if the
EVA(R) target is not met. There is no cap and no floor on the incentive award.
The incentive awards declared in a year for certain employees may not be
completely paid out in the following year. Instead, a percentage of the annual
incentive awards of all Company officers, general managers, and certain highly
compensated employees remains in an "at risk" reserve account. With respect to
such employees, the Company will make distribution first, to the extent
possible, from the declared incentive and then the reserve balance. The
remaining portion, if any, of the declared incentive for the fiscal year will be
added to the incentive reserve and the remaining reserve balance will be carried
forward to the next fiscal year.
The prescribed distribution ratios for the incentive reserve for such
employees are:
<TABLE>
<S> <C>
1996 80%
1997 67%
1998 57%
1999 & Beyond 50%
</TABLE>
Amounts in the reserve account can be lost if performance in subsequent
years is so far below target that a negative award results. Thus, it is possible
for the reserve account to have a negative balance, although plan participants
are not required to reimburse the Company for negative balances in the reserve
account or for negative awards. In the case of retirement, disability or death,
the balance in the reserve account will be paid to the participant. The reserve
account will be forfeited (unless determined otherwise by the Company) in the
case of voluntary or involuntary termination and will be forfeited for breach of
any noncompetition agreement. If there is a Change in Control of the Company (as
defined in the EVA(R) Plan), the Plan will terminate and all positive balances
in reserve accounts will be distributed unless the Plan is continued on no less
beneficial terms to the participants.
Individual performance factors allow managers to adjust a participant's
final incentive awards up or down by 25% based upon their discretionary
assessment of performance. These adjustment factors are limited to participants
with target incentive percentages of 5% - 30% of salary.
In 1997, Mr. Kucharski's target bonus was 60% of base salary. His target
EVA(R) was based on consolidated performance. For 1997, the actual Consolidated
EVA(R) showed improvement over 1996 but was less than his target EVA(R). As a
result, he received an EVA(R) award of $214,500 which represents 55% of his
target bonus.
STOCK OPTIONS
Many studies indicate a correlation between employee stock ownership and
Company performance. Under the Company's Stock Option Plans, stock options are
granted to the Company's senior executives following guidelines established by
the Committee. These guidelines are based primarily on competitive industrial
practice as revealed by a long-term executive compensation survey covering a
large number of public companies in a variety of industries in which the Company
participates. The survey data show that the normal stock option award is a
multiple of base salary.
12
<PAGE> 16
Beginning in 1991, the Committee began to use the Black-Scholes option pricing
method as the basis for determining the value of the option grants. This method
takes into consideration a number of factors including the stock's volatility,
dividend rate, option term, and interest rates to estimate the option's present
value. Mr. Kucharski was granted an option of 75,000 shares in December 1997 for
performance in 1997 based on the survey data and the application of the
Black-Scholes option pricing method.
Stock options are classified as long-term incentives and are intended to
link the long-term interests of the executive with those of the stockholder.
Stock options will provide value to the optionee only when the price of EG&G
stock increases above the option price. All options are granted with an exercise
price equal to the fair market value on the date of the grant.
STOCK OWNERSHIP PROGRAM BY OFFICERS AND GENERAL MANAGERS
The Committee has determined that in order to further align management and
shareholder interests, EG&G stock ownership by EG&G officers and general
managers should be significant relative to each officer's and general manager's
base salary. The market value of EG&G stock expected to be owned by the
Company's officers and general managers is as follows:
<TABLE>
<S> <C>
CEO 2 times base salary
President and COO 1 1/2 times base salary
Executive Vice Presidents 1 1/2 times base salary
Senior Vice Presidents 1 1/2 times base salary
Other Officers 1 times base salary
General Manaers 1/2 times base salary
</TABLE>
Those officers who do not presently have such ownership are expected to
attain the ownership by the later of January 1, 2000 or four years after their
election to the specified officer position. General managers are expected to
attain the ownership by the later of January 1, 2001 or four years after their
appointment to the specified general manager position.
SECTION 162(m)
Section 162(m) of the Internal Revenue Code, which became effective January
1, 1994, generally limits the deductibility of annual compensation for certain
officers to $1 million. It is the general intention of the Committee to assure,
where appropriate, that officer compensation will meet the Section 162(m)
requirements for deductibility. However, the Committee reserves the right to use
its judgment to authorize compensation payments which may be in excess of the
limit when the Committee believes such payment is appropriate, after taking into
consideration changing business conditions or the officer's performance, and is
in the best interest of the stockholders. Last year the Committee recommended
that the EG&G, Inc. 1992 Stock Option Plan be amended and that the Plan as
amended be submitted for approval by the stockholders at the 1997 Annual Meeting
so that compensation attributable to option grants made under the Plan may be
deemed qualified performance-based compensation and therefore not subject to the
Section 162(m) $1 million deduction limit. The Plan as amended and approved by
the stockholders provides that the maximum number of shares with respect to
which options may be granted during a calendar year to any employee shall not
exceed 200,000. The Committee will review its policy concerning Section 162(m)
on a year by year basis.
COMPENSATION AND STOCK OPTION COMMITTEE
G. Robert Tod (Chairman)
Greta E. Marshall
John F. Keane
13
<PAGE> 17
STOCK PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total shareholder
return on the Company's Common Stock against the cumulative total return of the
S&P Composite-500 Stock Index and the S&P Technology-500 Index (name changed
from S&P High Technology Composite Index) for the period of five fiscal years
commencing January 4, 1993 and ended December 28, 1997.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
EG&G, INC. COMMON STOCK, S&P COMPOSITE-500 AND
S&P TECHNOLOGY-500 INDICES
TOTAL RETURN TO SHAREHOLDERS
REINVESTED DIVIDENDS
<TABLE>
<CAPTION>
Measurement Period S&P Technology-500
(Fiscal Year Covered) EG&G, Inc. S&P 500 Index Index
<S> <C> <C> <C>
Dec. 1992 100.00 100.00 100.00
Dec. 1993 96.05 110.08 123.01
Dec. 1994 76.42 111.53 143.37
Dec. 1995 135.72 153.45 206.51
Dec. 1996 115.86 188.68 292.98
Dec. 1997 123.17 251.63 369.43
</TABLE>
- ---------------
* Assumes that the value of the investment in EG&G, Inc. Common Stock and each
index was $100 on January 3, 1993 and that all dividends were reinvested.
14
<PAGE> 18
The following table sets forth information concerning the annual and
long-term compensation for services to the Company for the 1995, 1996, and 1997
fiscal years, of (i) the Company's chief executive officer during 1997, and (ii)
the other four most highly compensated executive officers of the Company for
1997 all of whom were serving as executive officers as of December 28, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL ---------------------------------
COMPENSATION AWARDS PAYOUTS
- --------------------------------------------------------------------------------------------------------------------
OTHER ALL
ANNUAL RESTRICTED SECURITIES OTHER
COMPEN- STOCK UNDERLYING LTIP COMPEN-
NAME AND SALARY BONUS SATION(2) AWARD(S) OPTIONS PAYOUTS SATION(4)
PRINCIPAL POSITION YEAR $ ($)(1) ($) ($) (#) ($) ($)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John M. Kucharski 1997 650,000 214,500 75,000 23,150
Chairman of the Board and 1996 650,000 234,000 150,000(3) 26,097
Chief Executive Officer 1995 650,000 491,400 0 30,714
Angelo D. Castellana 1997 276,543 76,049 75,000 10,588
Senior Vice President 1996 234,623 221,719 39,000(3) 11,305
1995 219,626 146,600 0 5,043
John F. Alexander, II 1997 254,225 69,912 100,000 5,280
Senior Vice President and 1996 208,876 62,663 80,000(3) 4,950
Chief Financial Officer 1995 164,520 82,918 0 4,950
Murray Gross 1997 251,004 69,026 40,000 10,367
Senior Vice President and 1996 245,614 70,219 42,000(3) 11,001
General Counsel 1995 230,984 116,416 0 12,342
C. Michael Williams 1997 250,016 68,754 0 183,517(5)
Vice President 1996 250,016 85,318 20,500(3) 12,622
(Retired 12/31/97) 1995 250,016 168,761 0 14,079
</TABLE>
NOTES
(1) This represents the amount of the declared award under the EVA(R) Plan. The
amounts actually paid to Messrs. Kucharski, Castellana, Alexander, Gross and
Williams under the EVA(R) Plan for 1997 were $184,767, $90,569, $54,757,
$56,933 and $61,587, respectively. The amounts actually paid to Messrs.
Kucharski, Castellana, Alexander, Gross and Williams under the EVA(R) Plan
for 1996 were $222,628, $168,196, $53,095, $62,646 and $79,777 respectively.
The amounts actually paid to Messrs. Kucharski, Castellana, Alexander, Gross
and Williams under the EVA(R) Plan for 1995 were $393,120, $117,280,
$66,334, $93,133 and $135,009. See Board Compensation Committee Report on
Executive Compensation.
(2) Perquisites and other personal benefits did not in the aggregate exceed the
lesser of $50,000 or 10 percent of the total of annual salary and bonus
reported in this table for any named executive officer.
(3) This number includes 75,000, 17,000, 30,000, 17,000 and 19,000 shares of
EG&G stock underlying options that were granted for Messrs. Kucharski,
Castellana, Alexander, Gross and Williams, respectively, in 1996 with
respect to performance in 1995.
(4) This column includes the actuarial benefit to the named executive officer of
the split-dollar life insurance policy established in 1991 and the Company's
contribution to the EG&G, Inc. Savings Plan. The actuarial benefit of the
split-dollar life insurance to Messrs. Kucharski, Castellana, Alexander,
Gross, and Williams is $17,870, $5,308, $0, $5,087 and $6,769 respectively.
The Company makes no contribution to the term life portion of the
split-dollar life insurance premium. The named executive officer contributes
an amount each year to the split-
15
<PAGE> 19
dollar life insurance policy equal to the cost of the term life insurance
under the policy. The amount reported in the column for 1997 for Messrs.
Kucharski, Castellana, Alexander, Gross and Williams includes $5,280 as the
Company's contribution to the EG&G, Inc. Savings Plan for each of the
aforementioned executives.
(5) In addition to the amounts specified in footnote (4) above, the amount
reported in this column for Mr. Williams includes $125,008 paid to him in
conjunction with his retirement and a payment of $46,460 representing the
balance in his EVA(R) Incentive Plan reserve account.
PENSION PLANS
EMPLOYEES RETIREMENT PLAN
The Company and its subsidiaries maintain several basic retirement plans
for the benefit of their employees, including officers. All of the executive
officers, including all of the five highest compensated executive officers,
participate in the EG&G, Inc., Employees Retirement Plan (the "Retirement
Plan"), the principal features of which are as follows.
Under the Retirement Plan, a participant will be entitled to receive an
annual payment equal to the sum of 0.85 percent of the participant's Final
Average Earnings (the average of the employee's base salary for the five
consecutive highest-salaried years out of the last ten years of credited service
with the Company) multiplied by the number of years of credited service with the
Company plus 0.75 percent of the excess of such earnings over the Social
Security Tax Base multiplied by the number of years of credited service (not in
excess of 35) with the Company. In no event will the accrued benefit payable at
normal retirement date be less than the frozen accrued benefit as of December
31, 1993 determined in accordance with terms of the Plan at that time.
Effective January 1, 1997, the Plan was amended to provide an additional
benefit for certain participants. The benefit is an amount equal to 1.6% of
Final Average Earnings multiplied by the years of credited service with the
Company times a ratio equal to a service credit divided by twenty-five (25)
times a ratio equal to the number of years of service with the Company since
January 1, 1994 divided by the projected number of years of service with the
Company from January 1, 1994 to the employee's Normal Retirement Date. The
amendment is currently under review by the IRS and is contingent upon IRS
approval.
All of the employees of EG&G, Inc. who participate in the Retirement Plan
are required to either complete five years of service or reach their normal
retirement date before they have a vested interest in the Retirement Plan.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
In addition to the Retirement Plan, the Company maintains the EG&G, Inc.
Supplemental Executive Retirement Plan (the "Supplemental Plan"), which provides
additional benefits for executive officers. Officers at the Vice Presidential
level and above, the General Counsel, the Corporate Controller, the Treasurer,
and others designated by the Board of Directors are eligible to receive benefits
under the Supplemental Plan when they have reached 55 years of age and completed
five years of service. In the event of a change of control as defined in the
Supplemental Plan, however, participants in the Supplemental Plan are eligible
to receive benefits regardless of age or years of service. If a participant dies
prior to attaining age 55, but after the completion of five years of service,
the participant's eligible spouse is entitled to receive a benefit in the form
of a 50 percent surviving spouse option commencing on the date the participant
would have attained age 55.
During 1997, the Company charged $1,302,705 as an expense and $1,890,690 as
income for the Supplemental Plan and made payments to retired officers and
beneficiaries in the amount of $659,873. While the Company is not required to
fund the Supplemental Plan, effective April 6, 1989,
16
<PAGE> 20
the EG&G, Inc. Non-Qualified Benefit Trust Agreement (the "Trust") was
established by and between EG&G, Inc. and The Boston Safe Deposit and Trust
Company. As of December 28, 1997, the Trust had a balance of $10,248,065. The
purpose of the Trust is to provide greater assurance of the receipt of
Supplemental Plan benefits. Amounts held in the Trust are subject to the claims
of the Company's general creditors in the event of the Company's insolvency or
bankruptcy.
The Supplemental Plan is administered by the Compensation and Stock Option
Committee of the Board of Directors. The Board of Directors may amend or
terminate the Supplemental Plan at any time; however, such amendment or
termination shall not reduce or eliminate the benefit payments currently being
made or the accrued plan benefit of any participant.
The Supplemental Plan provides an annual benefit payable at retirement
equal to (a)-(b)+(c):
(a) 0.85 percent of average total compensation (as defined below) for each year
of credited service, plus 0.75 percent of average total compensation in excess
of the Social Security Tax Base, less (b),
(b) 100 percent of the participant's benefit accrued at date of termination and
payable at normal retirement age under any Company-funded retirement plan, plus
(c),
(c) The reduction, if any, to the early retirement benefit payable from any
Company-funded retirement plan due to the limitations as set forth in Section
415(b) of the Internal Revenue Code of 1986.
The benefit payable under the Supplemental Plan, however, shall in no event
be less than (c) above.
Years of service after age 65 are not counted in determining benefits under
the Supplemental Plan, nor is any actuarial adjustment made as a result of
retirement before or after age 65. Average total compensation is the average of
a participant's total cash compensation for the highest-compensated consecutive
five years of credited service out of his last ten years of credited service
prior to age 65 (or his age at earlier termination of employment).
Messrs. Kucharski, Castellana, Gross and Williams have reached the minimum
age of eligibility for retirement under the Supplemental Plan. In combination
with the amounts payable under the Retirement Plan, Messrs. Kucharski,
Castellana, Gross and Williams would receive $401,275, $127,108, $89,765 and
$168,650, respectively, assuming they retired on the last day of 1997 and
received benefits in the form of a lifetime income. Mr. Williams retired from
the Company on December 31, 1997.
17
<PAGE> 21
PENSION PLAN TABLE(1)(2)
ANNUAL ESTIMATED BENEFITS
PROVIDED BY THE COMBINED EG&G, INC. EMPLOYEES RETIREMENT PLAN
AND
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
<TABLE>
<CAPTION>
FINAL YEARS OF SERVICE
AVERAGE ----------------------------------------------------
EARNINGS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- ----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1,000,000 $236,703 $315,604 $394,506 $473,407 $552,308
900,000 212,703 283,604 354,506 425,407 496,308
800,000 188,703 251,604 314,506 377,407 440,308
700,000 164,703 219,604 274,506 329,407 384,308
600,000 140,703 187,604 234,506 281,407 328,308
500,000 116,703 155,604 194,506 233,407 272,308
450,000 104,703 139,604 174,506 209,407 244,308
400,000 92,703 123,604 154,506 185,407 216,308
350,000 80,703 107,604 134,506 161,407 188,308
300,000 68,703 91,604 114,506 137,407 160,308
250,000 56,703 75,604 94,506 113,407 132,308
225,000 50,703 67,604 84,506 101,407 118,308
200,000 44,703 59,604 64,506 89,407 104,308
175,000 38,703 51,604 54,506 77,407 90,308
150,000 32,703 43,604 54,506 65,407 76,308
125,000 26,703 35,604 44,506 53,407 62,308
100,000 20,703 27,604 34,506 41,407 48,308
</TABLE>
NOTES
(1) For the purpose of calculating the amounts shown in the above table, it is
assumed that the participants in the specified ranges retired on December
31, 1997, and at age 65, and that all payments were made on a straight life
annuity basis. These payments are not subject to any deduction for Social
Security benefits.
(2) Messrs. Kucharski, Castellana, Alexander, Gross, and Williams have
respectively 32, 32, 15, 27 and 32 years of credited service under the
Retirement Plan and the Supplemental Plan. Compensation covered under the
Retirement Plan is limited to $160,000 for 1997; and the maximum benefit
payable under the Retirement Plan for 1997 is $125,000. Compensation covered
under the Supplemental Plan includes the Salary and Bonus (set forth in
footnote (1)) shown in the Summary Compensation Table.
EMPLOYMENT AND OTHER AGREEMENTS
Compensation in the form of salary to Messrs. Kucharski and Gross is paid
pursuant to three-year employment agreements with the Company dated November 1,
1993, automatically renewable for successive 3-year intervals, which provided
for minimum annual payments in 1997 of $650,000 and $251,000, respectively.
Compensation in the form of salary to Mssrs. Castellana, Alexander and Williams
is paid pursuant to one-year employment agreements with the Company dated
November 1, 1993, automatically renewable for successive 1-year intervals, which
provided for minimum annual payments in 1997 of $277,000, $254,000, and $250,000
respectively.
All of the employment agreements with the named executive officers contain
provisions that provide that in the event of a change in control of the Company,
the employment term shall be extended for a period of five (5) years from the
date of the change in control. Following a change in
18
<PAGE> 22
control, if the named executive is terminated without "cause" or resigns for
"good reason" (each as defined in the agreement), the named executive is
entitled to receive a severance payment equivalent to five (5) years of base
salary plus bonuses and continuation of certain benefits for five (5) years from
the date of termination.
Generally, a change in control will be deemed to have occurred in any of
the following circumstances:
1) the acquisition of 30% or more of the outstanding voting stock of the
Company by any person or entity;
2) during any period of two consecutive years, persons serving as
Directors of the Company and those replacements or additions approved
by a two-thirds vote of the Board, cease for any reason to constitute
a majority of the Board;
3) the stockholders of the Company approve a merger or consolidation in
which the voting securities of the Company outstanding immediately
prior thereto would end up representing 50% or less of the voting
power of the surviving entity; or
4) a plan for the complete liquidation or an agreement for the sale or
disposition of all or substantially all of the assets of the Company
is approved by the stockholders of the Company.
All of the employment agreements with the named executive officers, with
the exception of the employment agreements of Messrs. Kucharski and Gross,
contain provisions that provide that upon termination initiated by the Company
without cause, apart from a change in control situation, each executive would be
entitled to continuation of his or her salary, bonus, and employee benefits for
one (1) year from the date of termination. The employment agreements of Messrs.
Kucharski and Gross provide that they would be entitled to the continuation of
their salary, bonus, and employee benefits for three (3) years from the date of
termination.
19
<PAGE> 23
OPTION GRANTS
The following table sets forth information on grants made in 1997 of stock
options pursuant to the EG&G, Inc. 1992 Stock Option Plan to the officers
identified in the Summary Compensation Table. No stock appreciation rights were
granted during the last fiscal year.
OPTION GRANTS TABLE
OPTION GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
GRANT
DATE
INDIVIDUAL GRANTS VALUE(2)
- ----------------------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANT
UNDERLYING GRANTED TO EXERCISE DATE
OPTIONS EMPLOYEES PRICE PER PRESENT
GRANTED IN FISCAL SHARE(3) EXPIRATION VALUE(2)
NAME (#) YEAR ($) DATE ($)
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
John M. Kucharski 75,000 8.09% 19.1875 12/17/07 460,500
Angelo D. Castellana 75,000 8.09% 19.1875 12/17/07 460,500
John F. Alexander, II 100,000 10.79% 19.1875 12/17/07 614,000
Murray Gross 40,000 4.32% 19.1875 12/17/07 245,600
C. Michael Williams -- -- -- -- --
</TABLE>
NOTES
(1) All options granted by the Company in 1997 to the officers identified above
are non-statutory options and vest in 20% increments over a period of five
(5) years. The options become fully vested and immediately exercisable upon
the death of the optionee while in the employ of the Company; upon
termination of the optionee's employment due to permanent and total
disability or upon retirement at a Company-recognized retirement age; or
upon a change in control of the Company.
(2) The Black-Scholes option pricing model was chosen to estimate the grant date
present value of the options set forth in this table. The assumptions used
at the time of grant in December of 1997 included expected market
volatility of 26%, a 5.9% risk-free rate of return, a 2% dividend yield,
and a 7-year retention period.
(3) The exercise price is equal to the fair market value of the Common Stock as
determined by the closing price on the New York Stock Exchange-Composite
Transactions on December 17, 1997, the date of grant.
20
<PAGE> 24
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information with respect to option exercises
during 1997 and the number and value of unexercised options to purchase the
Company's Common Stock held by the officers named in the Summary Compensation
Table at the end of 1997. No stock appreciation rights were exercised during
1997 or were outstanding at the end of 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL
YEAR-END OPTION VALUE TABLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES FY-END FY-END
ACQUIRED VALUE (#) ($)
ON EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($)(1) UNEXERCISABLE UNEXERCISABLE(2)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John M. Kucharski 140,800 722,178 209,700/225,000 179,594/382,500
Angelo D. Castellana 3,400 14,769 66,800/112,200 141,175/179,950
John F. Alexander, II 1,300 7,056 44,300/170,000 78,431/244,375
Murray Gross 1,200 3,112 64,000/80,400 115,456/130,875
C. Michael Williams 35,600 159,588 45,700/24,000 33,919/51,150
</TABLE>
(1) Based on the fair market value determined on the date of exercise, less the
option exercise price.
(2) Based on the fair market value (determined by averaging the high and the low
selling price on the New York Stock Exchange-Composite Transactions) of the
Company's Common Stock on December 31, 1997 ($20.8125), less the option
exercise price.
ITEM NO. 2
STOCKHOLDER PROPOSAL THAT THE SHAREHOLDERS OF EG&G, INC. URGE THE
EG&G, INC. BOARD OF DIRECTORS TO ARRANGE FOR THE PROMPT SALE OF
EG&G, INC. TO THE HIGHEST BIDDER
Management has been advised that a stockholder (whose name and address and
Common Stock holdings will be supplied upon oral or written request to the Clerk
of the Company) intends to introduce a proposal at the Annual Meeting which
recommends that the shareholders of EG&G, Inc. urge the EG&G, Inc. Board of
Directors to arrange for the prompt sale of the Company to the highest bidder.
THE BOARD OF DIRECTORS' STATEMENT
IN OPPOSITION TO ITEM NO. 2
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL
FOR THE FOLLOWING REASONS:
The Board of Directors recognizes its fiduciary responsibilities and
endeavors to undertake these responsibilities in a manner which the Board
believes is in the best interests of the Company and its shareholders. A
superior return to shareholders is a principal goal of the Board and
21
<PAGE> 25
management. The Board periodically reviews with management the Company's
strategic and business plans and regularly evaluates actions that may be taken
to maximize shareholder value.
To this end, in late 1994 the Company announced a significant restructuring
and cost-savings program, the ramifications of which will continue until the
year 2000. The Board and management have taken numerous steps in pursuit of
long-term profit growth, including:
- Making substantial investments in core technologies and redeploying
assets with investment in new products, technologies and services
--EG&G was selected as a manufacturing partner of the new filmless x-ray
detector panels for GE Medical Corp.'s next generation of medical x-ray
equipment,
--A new marketing structure for Technical Services has resulted in
several new contracts during 1997,
--EG&G formed a joint venture with Mercedes Benz to manage the new,
state-of-the-art automotive test site in Germany;
- Streamlining and realigning the Company's business portfolio including
the divestitures of businesses which were no longer strategically
relevant;
- Improving the Company's focus on selected markets with a greater
presence in those markets;
- Maintaining a balanced portfolio of technical services for government
and commercial customers and commercial technology products such as
digital x-ray detector panels, airport security screening systems, and
computerized medical diagnostic equipment;
- Changing the infrastructure which eliminated a layer of management in
order to shorten lines of communication and broaden the Company's market
presence by creating larger, more dynamic and efficient business units
(EG&G went from 40 units in 1994 to 15 units in 1997); and
- Adopting a value-based (EVA(R)) management compensation and performance
measurement system with a principal corporate goal of achieving
shareholder returns that rank in the top quartile of the S&P 500 and
aligning the interests of shareholders and management.
It is the Board's opinion that, notwithstanding its non-binding nature,
adoption of the proposal would not increase shareholder value and could
seriously prejudice shareholders' financial interests by severely damaging: 1)
the Company's partnering efforts, a key component to the Company's long-term
strategy; 2) the Company's relationships with its current and potential
customers; and 3) the Company's relationship with its employees, as this
proposal fuels uncertainty in the workforce. The result could be an adverse
effect on the Company's ability to effectively compete in both the short and
long term. THEREFORE, FOR ALL OF THE REASONS STATED ABOVE, THE BOARD URGES
SHAREHOLDERS TO REJECT THE PROPOSAL.
TEXT OF STOCKHOLDER PROPOSAL
"RESOLVED, that the shareholders of EG&G, Inc. Corporation urge the EG&G,
Inc. Board of Directors to arrange for the prompt sale of EG&G, Inc. to the
highest bidder."
SUPPORTING STATEMENT OF STOCKHOLDER
MAXIMIZE VALUE RESOLUTION
The purpose of the Maximize Value Resolution is to give all EG&G, Inc.
shareholders the opportunity to send a message to the EG&G, Inc. Board that they
support the prompt sale of EG&G, Inc. to the highest bidder. A strong and/or
majority vote by the shareholders would indicate to the
22
<PAGE> 26
board the displeasure felt by the shareholders of the financial performance of
the company over many years and the drastic action that should be taken. Even if
it is approved by the majority of the EG&G, Inc. shares represented and entitled
to vote at the annual meeting, the Maximize Value Resolution will not be binding
on the EG&G, Inc. Board. The proponent however believes that if this resolution
receives substantial support from the shareholders, the board may choose to
carry out the request set forth in the resolution.
The prompt auction of EG&G, Inc. should be accomplished by any appropriate
process the board chooses to adopt including a sale to the highest bidder
whether in cash, stock, or a combination of both. It is expected that the board
will uphold its fiduciary duties to the utmost during the process.
The proponent further believes that if the resolution is adopted, the
management and the board will interpret such adoption as a message from the
company's stockholders that it is no longer acceptable for the board to continue
with its current management plan and strategies.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THIS
PROPOSAL
OTHER MATTERS
On December 17, 1997, the Board of Directors amended Article II, Section 5
of the By-Laws of the Company to create an exception to the mandatory
requirement that members of the Board of Directors retire at the age of 70.
Article II, Section 5, as amended, provides that "[e]xcept in special
circumstances specifically approved by the Board, a Director shall be deemed to
have retired at the annual meeting of stockholders following the date the
Director shall have attained the age of seventy."
At the meeting of the Board of Directors held on December 17, 1997, the
Board specifically exempted Mr. John Gray from the mandatory retirement
requirement of Article II, Section 5 of the Company's By-Laws until such further
time as the Board may determine.
The Board of Directors knows of no other business which will be presented
for consideration at the Meeting other than that described above. However, if
any other business should come before the Meeting, it is the intention of the
persons named in the Proxy to vote, or otherwise act, in accordance with their
best judgement on such matters.
SELECTION OF AUDITORS
On January 21, 1998, the Board of Directors selected the firm of Arthur
Andersen LLP, independent public accountants, to act as the Company's auditors
and to audit the books of the Company and its subsidiaries for 1998. Arthur
Andersen LLP is currently performing these duties and has done so continuously
since 1968.
Representatives of Arthur Andersen LLP have been invited to the Annual
Meeting and are expected to be present and will have an opportunity to make a
statement if they so desire. They are also expected to be available to respond
to appropriate questions from stockholders.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, Directors, and 10% stockholders to file initial reports of
ownership and reports of changes in ownership with the Securities and Exchange
Commission and the New York Stock Exchange. The Company has a program in place
to assist its officers and Directors in complying with the filing requirements
of Section 16(a). Executive officers, Directors, and 10% stockholders are
required by
23
<PAGE> 27
SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file. Based on a review of the copies of such forms furnished to the
Company and written representations from the Company's executive officers and
Directors, the Company believes that during the preceding year its executive
officers, Directors, and 10% stockholders have complied with all Section 16
filing requirements with two (2) exceptions. Daniel T. Heaney did not timely
report a transaction in Common Stock that occurred in November 1997, with
respect to his exercise of stock options representing 1,000 shares. In addition,
John F. Keane did not timely report a transaction in Common Stock that occurred
in December 1997, with respect to his purchase of 1,000 shares of Common Stock.
STOCKHOLDER PROPOSALS
In order to be considered for addition to the agenda for the 1999 Annual
Meeting of Stockholders and to be included in the Proxy Statement and form of
proxy, stockholder proposals should be addressed to the Clerk of the Company and
must be received at the Corporate Offices of EG&G no later than November 6,
1998.
By Order of the Board of Directors
/s/ Murray Gross
MURRAY GROSS, Clerk
Wellesley, Massachusetts
March 6, 1998
24
<PAGE> 28
The Annual Meeting of EG&G, Inc. stockholders will be held at 10:30 A.M. on
Tuesday, April 28, 1998, at the Sheraton Needham Hotel in Needham,
Massachusetts.
The Sheraton Needham Hotel is located at 100 Cabot Street, just off Route
128 (I-95) at Exit 19A (see directions below). It is 10 miles from downtown
Boston and 12 miles from Logan Airport. The hotel offers ample free parking and
shuttle service to Boston and Logan Airport. For more information, the hotel can
be reached by phone at (781) 444-1110, by fax at (781) 455-8617 or at
www.sheratonneedham.com.
FROM LOGAN AIRPORT:
As you are leaving the airport, follow the signs for Boston/Sumner Tunnel.
You want to go through the tunnel. Once you are through the tunnel follow the
signs for I-93/Route 3 South and the Mass Pike. Follow I-93/Route 3 South and
take the exit for Mass Pike West. About 3-4 miles down the road you will have to
pay a toll of 50c. From the Mass Pike you will take the exit for I-95/Rte. 128
South (it is the same highway, called two different names). You will have to pay
another 50c toll when exiting the Mass Pike. Follow I-95/Rte. 128 South to Exit
19A/Highland Ave.-Newton Highlands. This exit will bring you back over the
highway. Turn right at the Ground Round Restaurant. Take immediate left at Cabot
St. Follow signs to main entrance.
FROM RTE. 128 (I-95) NORTH OR SOUTH:
Take Exit 19A. This will put you on Highland Ave., heading East. Follow
Highland Ave. to 1st set of stop lights. Take right onto 2nd Ave. Take first
right off of 2nd Ave. at the Sheraton Needham Hotel sign. Follow driveway to
hotel. Parking garage will be on your right.
[MAP]
[EG&G logo(R)] is a registered trademark of EG&G, Inc.
EVA(R) is a registered trademark of Stern Stewart & Co.
<PAGE> 29
0886-PS-98
<PAGE> 30
EGG97 F DETACH HERE
EG&G, INC.
[Logo]
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS APRIL 28, 1998
The undersigned hereby appoints John M. Kucharski and Murray Gross, and each
of them, proxies with power of substitution to vote, as indicated below, for
and on behalf of the undersigned at the Annual Meeting of Stockholders of EG&G,
Inc., to be held at the Sheraton Needham Hotel, 100 Cabot Street, Needham,
Massachusetts on Tuesday, April 28, 1998, at 10:30 a.m., and at any adjournment
thereof hereby granting full power and authority to act on behalf of the
undersigned at said Meeting.
1. ELECTION OF DIRECTORS Authority to fix the number of Directors at eleven and
to elect Tamara J. Erickson, John B. Gray, Kent F.
Hansen, John F. Keane, John M. Kucharski, Nicholas A.
Lopardo, Greta E. Marshall, Michael C. Ruettgers,
Gregory L. Summe, John Larkin Thompson and G. Robert
Tod for terms of one year each.
SEE REVERSE SIDE. IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS'
RECOMMENDATIONS, JUST SIGN ON THE REVERSE SIDE. YOU NEED NOT MARK ANY BOXES.
-----------
SEE REVERSE
SIDE
-----------
<PAGE> 31
PLEASE MARK
[X] VOTES AS IN
THIS EXAMPLE.
THIS PROXY WHEN EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR FIXING THE NUMBER OF DIRECTORS
AT ELEVEN AND THE ELECTION OF DIRECTORS, AND AGAINST PROPOSAL 2.
<TABLE>
<S> <C> <C>
- ------------------------------------------ -------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR PROPOSAL 1. A VOTE AGAINST PROPOSAL 2.
- ------------------------------------------ -------------------------------------------
1. Election of Directors (see reverse).
FOR WITHHELD FOR AGAINST ABSTAIN
[ ] [ ] 2. Stockholder Proposal to urge EG&G [ ] [ ] [ ]
For, except vote withheld from the following nominee(s) Board of Directors to arrange for
sale of Company to highest bidder.
-------------------------------------
MARK HERE FOR ADDRESS CHANGE AND NOTE CHANGE [ ]
AT LEFT
Please sign exactly as your name appears hereon. Joint owners should
each sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
Signature: Date: Signature: Date:
--------------------------------- ------------- ----------------------------- --------------
</TABLE>
