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 240.14a-11(c) or 240.14a-12
WOODWARD GOVERNOR COMPANY
(Name of Registrant as Specified In Its Charter)
CAROL J. MANNING, CORPORATE SECRETARY
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ x ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
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):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] 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:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
December 6, 2001
Dear Shareholder Member:
You are cordially invited to attend the Company's annual meeting at 10:00 a.m.,
local time, on Wednesday, January 23, 2002 in the Auditorium of our Rockford,
Illinois, plant. Registration for the meeting will be in the Atrium located at
the rear of the plant. We invite you to join members of our management team for
an informal social period from 9:00 a.m. to 9:45 a.m. The formal meeting will
begin promptly at 10:00 a.m.
Parking is available directly behind the plant. A map is enclosed with this
notice.
Please complete and return your proxy card or vote via telephone or the Internet
as soon as possible whether or not you plan to attend.
Sincerely yours,
WOODWARD GOVERNOR COMPANY
John A. Halbrook
Chairman, Board of Directors
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JANUARY 23,2002
The annual meeting of the shareholder members of Woodward Governor Company will
be held in the Company's Auditorium, 5001 North Second Street, Rockford,
Illinois, on Wednesday, January 23, 2002, at 10:00 a.m., local time. At the
meeting we will:
1. Elect three directors to serve for a term of three years each;
2. Consider and act upon a proposal to adopt the Woodward
Governor Company 2002 Stock Option Plan, which constitutes an
amendment and restatement of the Woodward Governor Company
1996 Long-Term Incentive Compensation Plan; and
3. Transact other business that properly comes before the
meeting.
Shareholders who owned Woodward stock at the close of business on November 26,
2001 are entitled to vote at the meeting.
We look forward to seeing you at the meeting.
Sincerely,
Carol J. Manning
Corporate Secretary
December 6, 2001
YOUR VOTE IS IMPORTANT
Even if you plan to attend the meeting in person, please date, sign, and return
your proxy in the enclosed envelope, or vote via telephone or the Internet as
soon as possible. Prompt response is helpful and your cooperation will be
appreciated.
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
WEDNESDAY, JANUARY 23, 2002
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
Our Board of Directors is soliciting your proxy to vote at our annual meeting of
shareholder members (or at any adjournment of the meeting). This proxy statement
summarizes the information you need to know to vote at the meeting.
We began mailing this proxy statement and the enclosed proxy card on or about
December 6, 2001 to all shareholders entitled to vote. The Woodward Governor
Company Annual Report, which includes our financial statements, is being sent
with this proxy statement.
Date, time and place of meeting:
Date: January 23, 2002
Time: 10:00 a.m.
Place: 5001 North Second Street
Rockford, Illinois
RECORD DATE INFORMATION
Shareholders who owned Woodward common stock at the close of business on the
record date, November 26, 2001, are entitled to vote at the meeting. As of the
record date, there were 11,322,400 shares outstanding.
Each share of Woodward common stock that you own entitles you to one vote,
except for the election of directors. Since three directors are standing for
election, you will be entitled to three director votes for each share of stock
you own. Of this total, you may choose how many votes you wish to cast for each
director.
VOTING YOUR PROXY
Woodward offers shareholders the opportunity to vote by mail, by telephone or
via the Internet. Instructions to use these methods are set forth on the
enclosed proxy card.
If you vote by telephone or via the Internet, please have your proxy or voting
instruction card available. The control number appearing on your card is
necessary to verify your vote. A telephone or Internet vote authorizes the named
proxies in the same manner as if you marked, signed and returned the card by
mail. Voting by telephone and via the Internet are valid proxy voting methods
under Delaware law and Woodward Bylaws.
If you properly fill in your proxy card and send it to us in time to vote, one
of the individuals named on your proxy card (your "proxy") will vote your shares
as you have directed. If you sign the proxy card but do not make specific
choices, your proxy will follow the Board's recommendations and vote your
shares:
"FOR" the election of the Board's nominees to the Board of Directors;
and "FOR" the proposal to adopt the Woodward Governor Company 2002
Stock Option Plan.
If any other matter is presented at the meeting, your proxy will vote in
accordance
with his or her best judgment. At the time this proxy statement went to press,
we knew of no other matters to be acted on at the meeting.
REVOKING YOUR PROXY
You may revoke your proxy by:
o sending in another signed proxy card with a later date,
o notifying our Secretary in writing before the meeting that you
have revoked your proxy, or
o voting in person at the meeting.
GIVING YOUR PROXY TO SOMEONE OTHER THAN INDIVIDUALS DESIGNATED ON THE CARD
If you want to give your written proxy to someone other than individuals named
on the proxy card:
o cross out individuals named and insert the name of the individual
you are authorizing to vote, or
o provide a written authorization to the individual you are
authorizing to vote along with your proxy card.
QUORUM REQUIREMENT
A quorum of shareholders is necessary to hold a valid meeting. The presence, in
person or by proxy, at the meeting of holders of shares representing a majority
of the votes of the common stock entitled to vote constitutes a quorum.
Abstentions and broker non-votes are counted as present for establishing a
quorum. A broker non-vote occurs when a broker votes on some matters on the
proxy card but not on others because he or she is not permitted to vote on that
item absent instruction from the beneficial owner of the shares and no
instruction is given.
VOTE NECESSARY FOR ACTION
Directors are elected by a plurality vote of shares present at the meeting,
meaning that the three director nominees receiving the most votes will be
elected.
Other action is by an affirmative vote of the majority of shares present at the
meeting. Abstentions and broker non-votes will be treated as unvoted in matters
other than director elections.
BOARD OF DIRECTORS
STRUCTURE
Our Board of Directors is divided into three classes for purposes of election.
One class is elected at each annual meeting of shareholders to serve for a
three-year term.
Directors elected at the 2002 Annual Meeting of Shareholders will hold office
for a three-year term expiring in 2005 or when their successors are elected.
Other directors are not up for election at this meeting and will continue in
office for the remainder of their terms.
If a nominee is unavailable for election, proxy holders will vote for another
nominee proposed by the Board.
PROPOSAL 1 -- ELECTION OF DIRECTORS
DIRECTORS UP FOR ELECTION AT THIS MEETING FOR TERMS EXPIRING IN 2005:
o John A. Halbrook, 56, is Chairman and Chief Executive Officer of
the Company. Other directorships: AMCORE Financial, Inc. Mr.
Halbrook has been a director of the Company since 1991.
o Rodney O'Neal, 48, is Executive Vice President of Delphi
Automotive Systems, a supplier of automotive interior systems and
President of the Safety, Thermal & Electrical Architecture
Sector. Mr. O'Neal has been a director of the Company since 1999.
o Michael T. Yonker, 59, is retired President and Chief Executive
Officer of Portec, Inc., which had operations in the construction
equipment, materials handling and railroad products industries.
Other directorships: Modine Manufacturing Company, Inc. and
Geneva Steel Corporation. Mr. Yonker has been a director of the
Company since 1993.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES PRESENTED IN
PROPOSAL 1.
DIRECTORS REMAINING IN OFFICE UNTIL 2004:
o Vern H. Cassens, 69, is retired Senior Vice President and Chief
Financial Officer of the Company. Mr. Cassens has been a director
of the Company since 1977.
o Thomas W. Heenan, 70, is a retired partner in the law firm of
Chapman and Cutler. Mr. Heenan has been a director of the Company
since 1986.
o Michael H. Joyce, 61, is President and Chief Operating Officer of
Twin Disc, Incorporated, a designer and manufacturer of
heavy-duty transmission equipment. Other directorships: Twin
Disc, Incorporated and The Oilgear Company. Mr. Joyce has been a
director of the Company since 2000.
o Lou L. Pai, 54, Private Investor. Mr. Pai served as Chairman and
Chief Executive Officer of Enron Xcelertor, a developer of new
business opportunities, from February 2001 to June 2001; as
Chairman of The New Power Company, a provider of energy to
residential users, from September 2000 to August 2001; as
Chairman and Chief Executive Officer of Enron Energy Services, a
provider of energy outsource solutions, from January 1997 to
January 2001 and as President and Chief Operating Officer of
Enron Capital and Trade Resources from January 1995 to January
1997. Other directorships: The New Power Company. Mr. Pai has
been a director of the Company since 1999.
DIRECTORS REMAINING IN OFFICE UNTIL 2003:
o J. Grant Beadle, 68, is retired Chairman and Chief Executive
Officer of Union Special Corporation, a manufacturer of
industrial sewing machines. Other directorships: William Blair
Mutual Funds, Inc., and each of the eleven related mutual funds.
Mr. Beadle has been a director of the Company since 1988.
o Paul Donovan, 54, is Senior Vice President and Chief Financial
Officer of Wisconsin Energy Corporation, a holding company with
subsidiaries in utility and non-utility businesses, including
electric and natural gas energy
services, pump manufacturing, waste-to-energy and real estate
businesses. Other directorships: AMCORE Financial, Inc. and
Solutia, Inc. Mr. Donovan has been a director of the Company
since 2000.
o Lawrence E. Gloyd, 69, is Chairman Emeritus and retired Chairman
and Chief Executive Officer of CLARCOR Inc., a manufacturer of
filtration and consumer packaging products. Other directorships:
AMCORE Financial, Inc., CLARCOR Inc., Genlyte Thomas Group LLC
and Thomas Industries, Inc. Mr. Gloyd has been a director of the
Company since 1994.
o J. Peter Jeffrey, 68, is retired Vice President of Development at
Father Flanagan's Boys' Home. Mr. Jeffrey has been a director of
the Company since 1981.
BOARD MEETINGS AND COMMITTEES
The Board of Directors met five times during 2001; all directors attended more
than 75% of the aggregate of the total meetings of the Board of Directors and
all committees of the Board on which they served except for Messrs. O'Neal and
Pai.
AUDIT COMMITTEE
J. Peter Jeffrey, chairman
J. Grant Beadle
Vern H. Cassens
Paul Donovan
Thomas W. Heenan
Michael T. Yonker
The Audit Committee oversees and monitors management's and the independent
public accountants' participation in the financial reporting process. The
Committee operates under a Charter, which was attached to the proxy statement
for the annual meeting of shareholders held January 24, 2001, that more fully
describes the responsibilities of the Committee. Consistent with Nasdaq's
independent director and Audit Committee listing standards, and in accordance
with the Committee charter, all members of the Audit Committee are independent
directors. The Committee held three meetings during 2001.
COMPENSATION COMMITTEE
Michael T. Yonker, chairman
J. Grant Beadle
Paul Donovan
Lawrence E. Gloyd
Thomas W. Heenan
Rodney O'Neal
The Compensation Committee recommends the base compensation of Woodward's
officers and key personnel, and evaluates the performance of and reviews the
results of the annual member evaluation for those individuals. The Committee
administers the Company's Long-Term Incentive Compensation Plan, determining and
taking all action, including granting of all incentives to eligible worker
members, in accordance with the terms of the Plan. The Committee held three
meetings during 2001.
EXECUTIVE COMMITTEE
John A. Halbrook, chairman
J. Grant Beadle
Lawrence E. Gloyd
Thomas W. Heenan
Michael T. Yonker
The Executive Committee exercises all the powers and authority of the Board of
Directors in the management of the business when the Board is not in session and
when in the opinion of the Chairman the matter should not be postponed until the
next scheduled Board meeting. The Committee may declare cash dividends. The
Committee may not authorize certain major corporate actions such as amending the
Certificate of Incorporation, amending the Bylaws, adopting an agreement of
merger or consolidation or recommending the sale, lease or exchange of
substantially all of Woodward's assets. The Committee held one meeting during
2001.
SELECTION COMMITTEE
J. Grant Beadle, chairman
John A. Halbrook
Thomas W. Heenan
Michael H. Joyce
Lou L. Pai
The Selection Committee recommends qualified individuals to fill any vacancies
on the Board. The Committee held two meetings during 2001.
No procedures have been established for the Selection Committee to consider
nominees recommended by shareholder members.
In addition to the above standing committees, the Board of Directors has
appointed Mr. Gloyd as a "Lead Director." The Lead Director chairs a separate
meeting of the outside directors prior to each regularly scheduled Board
meeting. Topics discussed are at the discretion of the outside directors. The
Lead Director then meets with the Chairman and Chief Executive Officer to
discuss the minutes of such meetings.
All actions by committees are reported to the Board at the next scheduled
meeting and are subject to approval and revision by the Board. No legal rights
of third parties may be affected by Board revisions.
DIRECTOR QUALIFICATIONS
The Company's Bylaws provide that:
o each director shall retire on September 30th following his
seventieth birthday unless approved otherwise by the Board,
o no person may serve as a director unless he or she agrees to be
guided by the philosophy and concepts expressed in our
Constitution, and
o Woodward must receive adequate notice regarding nominees for
directors. A copy of the notice requirement in Section 2.8 is
attached as Exhibit A.
DIRECTOR COMPENSATION
We do not pay directors who are also Woodward officers additional compensation
for their service as directors. In 2001, compensation for non-employee directors
included the following:
o a monthly retainer of $2,000
o Board and Committee members receive $1,000 for each meeting
attended
o Committee chairmen receive $1,500 for each Committee meeting
attended
o Lead Director receives $1,500 for each meeting of the outside
directors
o expenses of attending Board and Committee meetings
o award of options to purchase 1,000 shares of Woodward Governor
Company common stock
Pursuant to Outside Director Stock Purchase Agreements entered into by Mr.
Donovan and Mr. Joyce, we sold 1,501 shares and 2,792 shares, respectively, of
Treasury Stock at the closing price on the dates of purchase. In payment of the
purchase price, non-interest bearing notes were signed and will be repaid by
application of each director's monthly retainer. The amount of indebtedness
outstanding during the year and the amount outstanding at November 26, 2001: Mr.
Donovan, $110,983/$87,433 and Mr. Joyce, $110,982/$87,282.
SHARE OWNERSHIP OF MANAGEMENT
The following table shows how much Woodward stock is owned, as of November 26,
2001, by each director, each executive officer named in the Summary Compensation
Table, and all directors and executive officers as a group.
OWNERSHIP OF COMMON STOCK
-----------------------------
NAME NUMBER PERCENT
------------------- ----------- -----------
J. Grant Beadle 6,956 (2) 0.06
Stephen P. Carter 79,839 (1) 0.71
Vern H. Cassens 78,050 (1)(2) 0.69
Paul Donovan 2,502 (2) 0.02
Ronald E. Fulkrod 36,307 (1) 0.32
Thomas A. Gendron 41,136 (1) 0.36
Lawrence E. Gloyd 7,292 (2) 0.06
John A. Halbrook 256,337 (1) 2.26
Thomas W. Heenan 19,836 (2) 0.18
J. Peter Jeffrey 7,524 (2) 0.07
Michael H. Joyce 3,792 (2) 0.03
Rodney O'Neal 5,553 (2) 0.05
Lou L. Pai 5,496 (2) 0.05
C. Phillip Turner 109,614 (1) 0.97
Michael T. Yonker 7,036 (2) 0.06
All directors and executive
officers as a group 675,444 (1) 5.97
(1) Includes the maximum number of shares which might be deemed to be
beneficially owned under rules of the Securities and Exchange
Commission. Includes options to purchase shares of Common Stock
as follows: Mr. Carter 75,210; Mr. Cassens 34,080; Mr. Fulkrod
24,832; Mr. Gendron 38,074; Mr. Halbrook 241,575; and Mr. Turner
77,158. Also includes shares (does not include fractional shares)
allocated to participant accounts of executive officers under the
Woodward Governor Company Member Investment and Stock Ownership
Plan. The Plan directs the Trustee to vote the shares allocated
to participant accounts under the Woodward Stock Plan portion of
the Plan as directed by such participants and to vote all
allocated shares for which no timely instructions are received in
the same proportion as the allocated shares for which
instructions are received.
(2) Includes options to purchase 1,000 shares of Common Stock granted
under the Long-Term Incentive Compensation Plan to members of the
Board of Directors who are not also worker members.
SHARE OWNERSHIP GUIDELINES
In 1998 the Board of Directors established share ownership guidelines for
executive officers and non-employee directors to align their interests and
objectives with the Company's shareholders. These guidelines require that
executive officers own shares with a value ranging from a minimum of two times
annual salary for officers at the level of vice president to a minimum of four
times annual salary for the Company's Chairman and Chief Executive Officer. The
guidelines also require that non-employee directors own shares with a value
equal to five times annual retainer.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon a review of our records, all reports required to be filed pursuant to
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act") were
filed on a timely basis.
PERSONS OWNING MORE THAN FIVE PERCENT OF WOODWARD STOCK
(AS OF NOVEMBER 26, 2001)
OWNERSHIP OF COMMON STOCK
---------------------------
PRINCIPAL HOLDERS NUMBER PERCENT
-------------------------- ------------ ----------
Woodward Governor Company
Profit Sharing Trust
5001 North Second Street
Rockford, Illinois 61125-7001 1,770,440 (1) 15.64%
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, Maryland 21202 706,500 (2) 6.24%
(1) Shares owned by the Woodward Governor Company Profit Sharing Trust are held
in its Member Investment and Stock Ownership Plan (the "Plan"). Vanguard
Fiduciary Trust serves as Trustee of the Profit Sharing Trust. Of the total
shares held in the Profit Sharing Trust, 1,634,953 shares of Common Stock are
allocated to participant accounts and the rest of the shares will be allocated
to participants as the principal and interest on the current outstanding loan to
the Plan are repaid. The Plan directs the Trustee to vote the shares allocated
to participant accounts under the Woodward Stock Plan portion of the Plan as
directed by such participants and to vote all allocated shares for which no
timely instructions are received in the same proportion as the allocated shares
for which instructions are received. The remaining shares in the Plan are voted
by the Trustee as directed by the Plan's Administrative Committee. In the event
of a tender or exchange offer, participants have the right individually to
decide whether to tender or exchange shares in their account. The Plan directs
the Trustee to tender or exchange all allocated shares for which no timely
instructions are received in the same proportion as the allocated shares with
respect to which it does receive directions. The remaining unallocated shares
are tendered or exchanged by the Trustee as directed by the Plan's
Administrative Committee.
(2) T. Rowe Price Associates, Inc. has advised the Company that it has sole
dispositive power for the entire holding of 706,500 shares and has sole voting
power for 219,800 shares. These securities are owned by various individual and
institutional investors which T. Rowe Price serves as investment adviser with
power to direct investments and/or sole power to vote the securities. For
purposes of the reporting requirements of the Exchange Act, T. Rowe Price is
deemed to be a beneficial owner of such securities; however, T. Rowe Price
expressly disclaims that it is, in fact, the beneficial owner of such
securities.
COMMON STOCK PERFORMANCE
The following Performance Graph compares Woodward's cumulative total return on
its Common Stock for a five-year period (years ended September 30, 1997 to
September 30, 2001) with the cumulative total return of the S&P SmallCap 600
Index and the S&P Manufacturing Diversified Index.
TOTAL RETURN TO SHAREHOLDERS
(INSERT PERFORMANCE GRAPH HERE)
Starting
Basis
DESCRIPTION 1996 1997 1998 1999 2000 2001
----------- ------ ---- ---- ----- ---- ----
Woodward Governor Company $100.00 $153.32 $104.07 $117.27 $216.82 $239.69
S&P SmallCap 600 $100.00 $136.97 $111.39 $130.93 $162.58 $145.32
S&P Manufacturing Div $100.00 $139.21 $125.51 $196.72 $194.48 $174.63
The graph assumes that the value of the investment in Woodward's Common Stock
and each index was $100 on September 30, 1996 and that all dividends were
reinvested.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The goal of the Compensation Committee (the "Committee") is to establish and
administer a compensation program that will (1) offer competitive compensation
to attract, retain and motivate a high-quality senior management team and (2)
link total annual cash compensation to individual performance. The Committee
believes proper administration of such a program will result in development of a
management team that embraces the best long-term interests of Woodward and its
shareholders.
To accomplish this goal, the Committee, comprised entirely of independent
directors who are not worker members, structures total compensation packages
comprised of base salary, short-term and long-term incentive compensation, and
stock options.
Market-based compensation recognizes experience and competence level as
determined through salary surveys; this process establishes base salary and
target incentive (variable) compensation for the individual. Woodward's stock
performance is not specifically considered in determining base salary or any
incentive compensation.
COMPENSATION STRUCTURE AND COMPONENTS
o individuals are assigned to salary grade ranges based upon their
position
o base salary is set within the range based upon actual job
responsibilities, performance and experience in the job
o annual incentive compensation targets of at least 15%, but not
more than 70% of base salary are established
o incentive compensation targets are tied to salary grade
BASE SALARY
Base salary and annual rate adjustments are based on individual performance,
experience, responsibilities, management and leadership abilities, and executive
compensation reviews prepared by outside compensation consultants.
ANNUAL INCENTIVE COMPENSATION
Annual cash incentives are based on overall financial performance of the Company
or individual groups or operating units, achievement of short-term objectives,
and direct individual performance. If certain minimum target results are not
achieved, no annual incentive will be paid. If targeted levels are attained,
annual incentive levels range from 15% to 70% of base salary. Participants have
an opportunity to significantly increase their annual incentive compensation
above targeted levels for outstanding performance.
STOCK OPTIONS
The Woodward Governor Company 1996 Long-Term Incentive Compensation Plan (the
"Stock Option Plan") was established to further Woodward's long-term growth and
profitability by offering long-term incentives to certain key management worker
members and directors who are not worker members. By providing an equity
position in the Company, the Compensation Committee believes that participants'
interests will be better aligned with those of the Company's shareholders.
The Stock Option Plan authorizes awards of both incentive and nonqualified stock
options to worker members and nonqualified stock options to directors who are
not worker members. Management makes recommendations to the Committee on the
size of grant, if any, for each participant. The option price of the shares is
determined at the date of the grant and will not be less than the fair market
value as quoted on the Nasdaq National Market on that date.
In fiscal 2001, 30 worker members and 10 directors who are not worker members
participated in the Plan.
LONG-TERM MANAGEMENT INCENTIVE COMPENSATION PLAN
In fiscal 2000, the Company established a long-term performance-based
compensation plan. Eligibility is limited to a few top-level executives as
determined by the Compensation Committee, currently five individuals. The
Committee sets long-term performance goals and confirms attainment or lack
thereof. The performance goals are established to encourage consistent,
sustainable growth and are measured over one initial two-year cycle, which was
completed on September 30, 2001, and then over three-year cycles.
Long-term cash award opportunities are determined at the beginning of each
performance cycle and are based on goals associated with:
o average annual growth in earnings per share
o average annual return on invested assets
A target award is established for each eligible executive based upon salary
grade ranging from 40% to 50% of base salary. A threshold level of performance
is established below which the executive receives no incentive award. Once
threshold performance is achieved the executive receives a minimum award equal
to 5% to 10% of the target award. Above threshold performance the award
increases proportionally until target performance is achieved. The award
opportunity continues to increase for above-target performance to a practical
maximum of 200% of the target award.
COMPENSATION OF THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Mr. Halbrook's base salary of $475,433 was determined in the same manner as for
all other executive officers. For fiscal 2001, Mr. Halbrook was awarded
incentive compensation in the amount of $582,870. This award was entirely based
on total Company performance as measured by shareholder value created which was
calculated or measured by improvements in earnings and in utilization of
receivables, inventories and capital assets.
Under the Stock Option Plan, Mr. Halbrook was granted options in fiscal year
2002 to purchase 50,000 shares of Woodward Governor Company Common Stock.
Mr. Halbrook also participates in the Long-Term Management Incentive
Compensation Plan. Mr. Halbrook received $403,830 for the two-year period ended
at September 30, 2001. The amount of future incentive awards will be determined
at the end of each subsequent three-year period based on achievement of
performance goals.
Compensation Committee: Michael T. Yonker, Chairman
J. Grant Beadle
Paul Donovan
Lawrence E. Gloyd
Thomas W. Heenan
Rodney O'Neal
EXECUTIVE COMPENSATION
The following table sets forth a summary for the last three fiscal years of the
cash and non-cash compensation paid to John A. Halbrook, Woodward's Chairman and
Chief Executive Officer, and to each of the other four most highly compensated
executive officers.
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
------------
Annual Compensation Awards Payouts
------------------- ------ -------
Other Securities LTIP
Annual Underlying Payouts All Other
Name and Principal Position Year Salary Bonus (1) Compensation (2) Options (#) $ (3)
--------------------------- ---- ------ --------- ---------------- ----------- ------
Compensation (4)
----------------
John A. Halbrook 2001 $475,433 $582,870 -- 40,000 $403,830 $ 53,439
Chairman and Chief 2000 447,431 471,135 -- 35,000 -- 49,988
Executive Officer 1999 415,506 696,226 -- 50,000 -- 46,316
Thomas A. Gendron 2001 245,975 262,293 -- 13,000 125,258 29,312
Vice President 2000 168,251 167,765 -- 8,000 -- 20,658
Industrial Controls 1999 133,975 81,198 -- 9,000 -- 18,036
C. Phillip Turner 2001 241,631 398,021 -- 5,000 167,184 35,266
Vice President 2000 231,544 46,167 -- 15,000 -- 33,649
Aircraft Engine Systems 1999 214,994 219,519 -- 20,000 -- 31,675
Ronald E. Fulkrod 2001 229,970 162,350 -- 13,000 121,277 34,981
Vice President 2000 167,094 162,432 -- 8,000 -- 25,432
1999 136,000 68,250 -- 5,000 -- 20,771
Stephen P. Carter 2001 217,664 230,000 -- 10,000 150,480 26,879
Vice President, Chief 2000 208,283 138,515 -- 13,000 -- 25,641
Financial Officer 1999 190,008 233,484 -- 18,000 -- 23,996
and Treasurer
(1) Includes annual incentive compensation as well as amounts deferred
pursuant to the Executive Benefit Plan.
(2) No executive officer received personal benefits valued at more than either
10% of cash compensation or $50,000.
(3) Amounts paid under the Long-Term Management Incentive Compensation Plan
for the performance period cycle ended September 30, 2001.
(4) Company contributions to the Member Investment and Stock Ownership Plan,
Retirement Income Plan and Unfunded Deferred Compensation Plans are as
follows:
MEMBER INVESTMENT AND STOCK OWNERSHIP PLAN
OFFICER 2001 2000 1999
------------------------------------------
Halbrook $13,750 $13,750 $13,000
Gendron 14,208 13,058 12,095
Turner 13,909 13,877 13,524
Fulkrod 15,191 13,052 10,789
Carter 13,947 13,917 13,563
RETIREMENT INCOME PLAN
OFFICER 2001 2000 1999
------------------------------------------
Halbrook $ 9,350 $ 9,180 $ 8,480
Gendron 8,160 7,599 5,941
Turner 13,260 13,090 12,160
Fulkrod 13,260 12,380 9,983
Carter 8,840 8,670 8,000
UNFUNDED DEFERRED COMPENSATION PLANS
OFFICER 2001 2000 1999
------------------------------------------
Halbrook $30,339 $27,058 $24,836
Gendron 6,944 0 0
Turner 8,096 6,682 5,992
Fulkrod 6,530 0 0
Carter 4,092 3,055 2,343
Under a plan closed in 1971, Mr. Fulkrod and Mr. Turner are eligible for an
annual benefit of $283 at normal retirement.
TRANSITIONAL COMPENSATION AGREEMENTS
In September 1999, Woodward approved transitional compensation agreements with
Messrs. Halbrook, Carter and Turner that become operative only upon a change in
control or other specified event. For purposes of these agreements, a change in
control occurs if:
o any person, entity, or group (with certain exceptions) becomes
the beneficial owner of 15% or more of the outstanding shares
of Woodward common stock; or
o there is a change in a majority of the Board during any
two-year period other than by election or nomination by a vote
of two-thirds of the Board members as of the beginning of the
period; or Woodward's shareholders approve a merger,
consolidation, sale of assets or share exchange resulting in
our shareholders owning less than 51% of the combined voting
power of the surviving corporation following the transaction;
or
o our shareholders approve a liquidation or dissolution.
Following a change in control, Woodward will continue to employ the executive
for a maximum period of two years in substantially the same position, for
substantially the same compensation and benefits. If the executive's employment
is terminated by Woodward (other than for cause or due to death or disability),
or the executive terminates with good reason (as defined in the agreement), he
or she receives an amount (payable in a lump sum) equal to 300% of each of (1)
the executive's annual base salary, (2) highest annual bonus in the last three
years, and (3) the sum of the Member Investment and Stock Ownership Plan,
Retirement Income Plan and Unfunded Deferred Compensation Plan annual
contributions made or credited for the benefit of the executive. Member benefits
shall be continued at Woodward's expense for a period of three years after the
date of termination. Outplacement services will be provided at Woodward's
expense as well as tax preparation services for the executive's taxable year in
which the termination occurred.
If the benefits and amount payable to the executives are subject to federal
excise tax, the executive officers will also be entitled to receive an
additional payment so that they will receive (on a net basis) the same amount
that they would have received absent the applicability of the excise tax.
STOCK OPTIONS
The following table shows stock options granted during 2001 under the Woodward
Governor Company 1996 Long-Term Incentive Compensation Plan to the individuals
named in the Summary Compensation Table:
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
Potential Realizable Value
Number of % of Total at Assumed Annual Rates of
Securities Options Stock Price Appreciation
Underlying Granted to For Option Term (3)
Options Employees --------------------------
Granted in Fiscal Exercise Expiration
Name (1) Year Price (2) Date 5%($) 10%($)
---------- ----- ------ --------- ------- ------------- -----------
John A. Halbrook 40,000 24.54% $41.813 11/21/2010 $1,051,839 $2,665,566
Thomas A. Gendron 13,000 7.98% 41.813 11/21/2010 341,848 866,309
C. Phillip Turner 5,000 3.07% 41.813 11/21/2010 131,480 333,196
Ronald E. Fulkrod 13,000 7.98% 41.813 11/21/2010 341,848 866,309
Stephen P. Carter 10,000 6.14% 41.813 11/21/2010 262,960 666,392
(1) Consists of non-qualified options issued for a ten-year term.
(2) Closing price of Common Stock as reported on the Nasdaq National Market
as of the date of grant.
(3) The potential realizable value is calculated based on the term of the
option at its time of grant (ten years). It is calculated assuming that
the stock price on the date of grant appreciates at the indicated
annual rate compounded annually for the entire term of the option and
the option is exercised and sold on the last day of its term for the
appreciated stock price. No gain to the optionee is possible unless the
stock price increases over the option term.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides information on option exercises in 2001 by the
individuals named in the Summary Compensation Table and the value of their
unexercised options at September 30, 2001.
Number of Securities Value of
Underlying Unexercised Unexercised
Shares Options at In-the-Money Options
Acquired Value Fiscal Year-End(#) at Fiscal Year-End ($)
on Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
----------------- ------- ----- --------------------- -----------------
John A. Halbrook 0 $0 222,825 / 66,250 $5,146,070 / $887,605
Thomas A. Gendron 0 0 32,824 / 19,000 754,746 / 228,481
C. Phillip Turner 0 0 72,158 / 16,250 1,672,718 / 299,810
Ronald E. Fulkrod 0 0 19,582 / 19,000 498,906 / 228,481
Stephen P. Carter 0 0 69,460 / 19,750 1,536,888 / 297,445
LONG-TERM MANAGEMENT INCENTIVE COMPENSATION PLAN AWARDS
See "Compensation Committee Report on Executive Compensation" for a description
of the Long-Term Management Incentive Compensation Plan (LTMIC). The following
table shows, for the named executive officers, the calculated future payouts, if
any, under the LTMIC for the three-year performance cycle which began in fiscal
year 2001. Threshold amounts are the minimum amounts payable under the LTMIC
provided that the minimum level of performance is achieved with respect to the
pre-established performance objectives, measured in terms of the Company's
cumulative earnings per share and return on average invested assets for the
cycle. If such performance is not achieved, amounts will be zero.
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
NUMBER OF PERFORMANCE OR
SHARES, OTHER PERIOD ESTIMATED FUTURE PAYOUTS UNDER
UNITS, OR UNTIL NON-STOCK PRICE-BASED PLANS
OTHER MATURATION OR ---------------------------------------
Name Rights Payout Threshold Target Maximum
------------ ------ ------------ --------- ------ -------
John A. Halbrook - 3 Years $20,192 $224,350 $448,700
Thomas A. Gendron - 3 Years 6,263 69,588 139,176
C. Phillip Turner - 3 Years 8,359 92,880 185,760
Ronald E. Fulkrod - 3 Years 6,064 67,376 134,752
Stephen P. Carter - 3 Years 7,524 83,600 167,200
Amounts shown in this table were calculated using the salaries for the named
executive officers in the LTMIC as of the beginning of the performance period
October 1, 2000 through September 30, 2003.
AUDIT COMMITTEE REPORT TO SHAREHOLDERS
AUDIT COMMITTEE REPORT
We recommended to the Board of Directors that the consolidated balance sheets of
the Company at September 30, 2001 and 2000, and the related statements of
consolidated earnings, shareholders' equity and cash flows of the Company for
each of the three years ended September 30, 2001, be included in the Company's
Annual Report on Form 10-K to be filed with the United States Securities and
Exchange Commission for the year ended September 30, 2001. Our recommendation
was based on our review and discussion of the audited financial statements with
management, and our discussions with PricewaterhouseCoopers LLP, the independent
public accountants who audited the financial statements.
We discussed with PricewaterhouseCoopers LLP the matters required to be
discussed under Statement of Auditing Standards No. 61. We also discussed with
PricewaterhouseCoopers LLP their independence and received from them the written
disclosures and the letter required by Independence Standards Board Standard No.
1.
Audit Committee: J. Peter Jeffrey, chairman
J. Grant Beadle
Vern H. Cassens
Paul Donovan
Thomas W. Heenan
Michael T. Yonker
FEES PAID TO PRICEWATERHOUSECOOPERS LLP
Fees paid to PricewaterhouseCoopers LLP in fiscal 2001 totaled $630,000 for the
audit of the Company's financial statements and $550,000 for all other
professional services. No fees were paid to PricewaterhouseCoopers LLP for
financial information systems design and implementation services.
THE WOODWARD GOVERNOR COMPANY 2002 STOCK OPTION PLAN
PROPOSAL 2 - APPROVAL OF THE WOODWARD GOVERNOR COMPANY 2002 STOCK OPTION PLAN
The Woodward Governor Company 2002 Stock Option Plan (the "Plan") has been
established to extend The Woodward Governor Company 1996 Long-Term Incentive
Compensation Plan approved by shareholders in January 1996.
The proposed Plan is intended to stimulate individual efforts on the Company's
behalf by both key worker members and members of the Company's Board of
Directors (the "Board") who are not also worker members. In order to build a
stable and experienced management team, the Company seeks to maintain and
strengthen these individuals' desire to remain with the Company. The ultimate
goal of the Plan is to encourage those individuals who are and will be
responsible for its future growth and continued success to have a greater
personal financial investment in the Company through ownership of its Common
Stock.
The proposed Plan is set forth in Exhibit B. Key features of the Plan include:
o a prohibition against the repricing of stock options;
o a prohibition against granting options with an exercise price less than
the fair market value of Common Stock on the date of grant (no
discounts);
o authorization of 2,100,000 shares (an increase of 791,337 shares over
the original 1996 Plan) subject to the Plan (of the 2,100,000 shares
authorized, 1,024,359 shares remain available for stock option award);
o limits on the number of awards that may be granted to any individual
under the Plan each year (100,000 for a worker member in any one year;
150,000, aggregate, to members of the Company's Board over the life of
the Plan);
o limited to award of stock options only; and
o vesting period of at least one year for options granted
ADMINISTRATION
The Plan will be administered by the Compensation Committee of the Board. The
Committee is authorized, subject to the provisions of the Plan, to establish
rules and regulations necessary for the proper administration of the Plan. Any
decisions made by the Committee will be final and binding.
ELIGIBILITY
Key worker members of the Company, its subsidiaries and its affiliates, and
members of the Board who are not regular worker members will be eligible to
receive stock option grants in accordance with provisions of the Plan.
OTHER INFORMATION
Upon approval of the Company's shareholders, the Plan will be effective on
January 1, 2002 and will terminate on December 31, 2006, unless terminated
earlier by the Board of Directors. The Board may amend the Plan as it deems
advisable, except that it may not amend the Plan without shareholder approval
where the absence of such approval would cause the Plan to fail to comply with
any requirement of applicable law or regulation. Worker members who will
participate in the Plan in the future and the amounts of their allotments are to
be determined by the Committee subject to any restrictions outlined in the Plan.
No such determinations have yet been made and it is not possible to state the
terms of any individual options that may be issued under the Plan or the names
or positions of or respective amounts of the allotment to any individuals who
may participate.
The Board believes it is in the best long-term interests of both shareholders
and worker members of the Company to maintain a progressive stock-based
incentive program in order to attract and retain the services of outstanding
personnel and to encourage such personnel to have a greater financial investment
in the Company. Although the success of the Company over the past five years
cannot be attributed solely to the adoption of the 1996 Long-Term Incentive
Compensation Plan, the Board firmly believes it may well have contributed to
that success.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE WOODWARD GOVERNOR COMPANY
2002 STOCK OPTION PLAN PRESENTED IN PROPOSAL 2.
INDEPENDENT PUBLIC ACCOUNTANTS
In 2001, PricewaterhouseCoopers LLP served as Woodward's independent public
accountants. The Board intends to reappoint them for the fiscal year ending
September 30, 2002. We anticipate a representative from PricewaterhouseCoopers
LLP will be present at the annual meeting and available to answer appropriate
questions.
SHAREHOLDER PROPOSALS
If you want to submit a proposal for possible inclusion in our proxy statement
for the 2003 Annual Meeting of Shareholders, you must ensure your proposal is
received by us on or before August 8, 2002.
If you intend to present a proposal to shareholders, but do not want it included
in the proxy statement, management's proxies for that meeting will be entitled
to exercise their discretionary authority on that proposal unless we receive
notice of your proposal no later than October 22, 2002. Even if we receive
proper notice before October 22, 2002, the proxies may still exercise their
discretionary authority on the proposal by telling shareholders about the
proposal and how they intend to vote on it, unless you solicit proxies for the
proposal as required by Rule 14a-4(c)(2) under the Exchange Act.
OTHER MATTERS
Woodward is soliciting this proxy on behalf of its Board of Directors. This
solicitation is being made by mail, but also may be made by telephone or in
person. The Company has employed Morrow & Company to solicit proxies for the
annual meeting from brokers, bank nominees, other institutional holders and
certain individual shareholders. The Company has agreed to pay $4,000, plus the
out-of-pocket expenses of Morrow & Company, for these services. The Company will
also pay the regular charge of brokers and other nominees who hold shares of
record for forwarding proxy material to the beneficial owners of such shares.
We do not know of any matters to be acted upon at the meeting other than those
discussed in this statement. If any other matter is presented, proxy holders
will vote on the matter in their discretion.
By Order of the Board of Directors
WOODWARD GOVERNOR COMPANY
Carol J. Manning
Corporate Secretary
December 6, 2001
EXHIBIT A
SECTION 2.8 OF THE BYLAWS REQUIRING WRITTEN NOTICE
SECTION 2.8 NOMINATIONS FOR DIRECTOR. Nominations for election to the Board of
Directors may be made by the Board of Directors or by any stockholder entitled
to vote for the election of directors. Nominations other than those made by the
Board of Directors shall be made by notice in writing, delivered or mailed by
registered or certified United States mail, return receipt requested, postage
prepaid, to the Secretary of the Corporation, not less than 20 days nor more
than 50 days prior to any meeting of stockholders called for the election of
directors; provided, however, if less than 21 days' notice of the meeting is
given to stockholders, such written notice shall be delivered or mailed, as
prescribed, not later than the close of business on the seventh day following
the day on which the notice of meeting was mailed to the stockholders. Each such
written notice shall contain the following information:
(a) The name and residence address of the stockholder making the
nomination;
(b) Such information regarding each nominee as would have been
required to be included in a proxy statement filed pursuant to
the proxy rules of the Securities and Exchange Commission had
the nominee been nominated by the Board of Directors; and
(c) The signed consent of each nominee to serve as a member of the
Board of Directors if elected, and the signed agreement of
each nominee that if elected he or she will be guided by the
philosophy and concepts of human and industrial association of
the Corporation as expressed in its Constitution in connection
with the nominee's service as a member of the Board of
Directors.
Unless otherwise determined by the Chairman of the Board of Directors or by a
majority of the directors then in office, any nomination which is not made in
accordance with the foregoing procedure shall be defective, and any votes which
may be cast for the defective nominee shall be disregarded.
EXHIBIT B
WOODWARD GOVERNOR COMPANY
2002 STOCK OPTION PLAN
(EFFECTIVE JANUARY 1, 2002)
Woodward Governor Company (the "Company") previously established the Woodward
Governor Company 1996 Long-Term Incentive Compensation Plan (the "Plan") to
further the long-term growth and profitability of the Company by offering
long-term incentives in addition to current compensation to certain key
management worker members of the Company and to provide such participating
worker members with an equity position in the Company to further align their
interests with those of the shareholders of the Company. The Plan was amended,
April 26, 2001, to extend participation in the Plan to members of the Company's
Board of Directors (the "Board") who are not also worker members of the Company.
The Plan is intended to stimulate such individuals' efforts on the Company's
behalf, maintain and strengthen their desire to remain with the Company, and
encourage such individuals to have a greater personal financial investment in
the Company through ownership of its Common Stock.
The following provisions constitute an amendment and restatement of the Plan,
effective as of January 1, 2002 (the "Effective Date"), which on and after such
date shall be known as the "Woodward Governor Company 2002 Stock Option Plan."
1. PLAN ADMINISTRATION
The Plan shall be administered by the Compensation Committee of the Board or any
successor committee thereto (the "Committee") as determined by the Board. The
Committee shall consist of not less than two members of the Board, each of whom
shall qualify as a "nonemployee director" within the meaning of Rule 16b-3, as
amended, or other applicable rules under Section 16(b) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and an "outside director"
within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"). The Committee is authorized, subject to the provisions of
the Plan, to establish such rules and regulations as it deems necessary for the
proper administration of the Plan, and to make such determinations and to take
such action in connection therewith or in relation to the Plan as it deems
necessary or advisable. Determinations by the Committee under the Plan including
without limitation, determinations of the eligible Participants, the form,
amount and timing of Stock Options (as defined in Section 4), the terms and
provisions of Stock Options, and the agreements evidencing Stock Options, need
not be uniform and may be made selectively among the individuals who receive, or
are eligible to receive, Stock Options hereunder, whether or not such
individuals are similarly situated. Any determination by the Committee with
respect to the terms and provisions of the Plan or any Stock Option agreement
shall be final, binding and conclusive on all parties.
2. ELIGIBILITY
Key management worker members of the Company, its subsidiaries and its
affiliates, who meet the common law definition of an employee, whether or not
directors of the Company, shall be eligible to participate in the Plan
("Eligible Worker Members") if designated by the Committee. Members of the Board
who are not regular worker members shall also be eligible for participation in
the Plan if so designated by the Committee or the Board; provided, however, such
directors shall not be eligible to receive Incentive Stock Options under the
Plan. Eligible Worker Members and members of the Board who are awarded Stock
Options under the Plan are referred to as "Participants."
3. SHARES AVAILABLE FOR STOCK OPTION AWARDS.
(a) SHARES SUBJECT TO ISSUANCE OR TRANSFER. Subject to adjustment as
provided in Section 3.(c) hereof, 2,100,000 shares of the Company's common
stock ("Common Stock") shall be reserved for granting Stock Options under
the Plan. The maximum number of Shares available for granting Stock Options
under this plan to Members of the Board who are not regular worker members
shall be 150,000.
The number of shares of Common Stock available for granting Stock Options
under the Plan shall be increased by the number of shares underlying Stock
Options which have lapsed, expired, been forfeited or been canceled for any
reason without the issuance of shares of Common Stock (including shares
which are not delivered but which are, instead, retained to satisfy the
Participant's tax withholding obligations). Shares under this Plan may be
delivered by the Company from its authorized but unissued shares of Common
Stock or from Common Stock held in the Treasury.
(b) MAXIMUM SHARES TO ANY ELIGIBLE WORKER MEMBER. Subject to adjustment as
provided in Section 3.(c) hereof, no Eligible Worker Member shall receive
Stock Options covering more than 100,000 shares of Common Stock in any
given calendar year. Notwithstanding this limitation the Committee may
grant Stock Options covering up to 500,000 shares to the Chief Executive
Officer during the 12-month period following such individual's date of
hire.
(c) RECAPITALIZATION ADJUSTMENT. In the event of a reorganization,
recapitalization, stock split, stock dividend, combination of shares,
merger, consolidation, rights offering, or any other change in the
corporate structure or shares of the Company, the Committee shall make such
adjustment, if any, as it may deem appropriate in the number and kind of
shares authorized by the Plan, and in the number and kind of shares subject
to outstanding Stock Options and the option price thereof.
In the event of a merger or consolidation of the Company with another
entity following which the Company is not the surviving entity (as
determined by the Committee), or in the event of a sale of all or
substantially all of the assets of the Company to an unrelated third party,
the Committee may cancel all outstanding Stock Options as of the date of
such transaction, provided that (i) Participants are provided with
reasonable advance notice of such cancellation and are given an opportunity
to exercise all outstanding Stock Options prior to the effective date of
such cancellation, or (ii) Participants receive a payment or other benefit
that the Committee, in good faith, believes is reasonable compensation for
such cancelled Stock Options.
4. STOCK OPTIONS
The Committee may grant options that qualify as "Incentive Stock Options" within
the meaning of Section 422 of the Code or any successor statute thereto, and
"Nonqualified Stock Options" which do not qualify as Incentive Stock Options
(collectively "Stock Options"). Such Stock Options shall be subject to the
following terms and conditions and such other terms and conditions as the
Committee may prescribe:
(a) OPTION PRICE. The option price per share with respect to each Stock
Option shall be determined by the Committee and shall not be less than 100%
of the Fair Market Value of the Common Stock on the date the Stock Option
is granted, but in no event less than the par value of the Common Stock.
With the exception of "recapitalization adjustments", as provided for in
Section 3.(c) hereof, once the option price has been established it will
not be changed.
The "Fair Market Value" of a share of Common Stock, as of any date, will be
the price quoted on the Nasdaq National Market at the close of the business
on such date.
(b) PERIOD OF OPTION. The expiration date of each Stock Option shall be
fixed by the Committee but shall be no later than the tenth anniversary of
the grant date.
(c) PAYMENT. The option price shall be payable in cash or, if permitted by
the Committee, by delivery of shares of Common Stock previously owned and
held by the Participant for at least six months having a Fair Market Value
equal to the option price. Such payment shall be made at the time the Stock
Option is exercised. No shares shall be issued until full payment therefor
has been made, together with satisfaction of any applicable withholding
taxes. The holder of a Stock Option shall have none of the rights of a
shareholder of the Company until the Stock Option is exercised and shares
of Common Stock are issued in such individual's name.
(d) EXERCISE OF OPTION. The shares covered by a Stock Option may be
purchased in such installments, on such exercise dates and during such
periods as determined by the Committee at the time the option is granted.
(e) VESTING. The minimum vesting period will be a one-year period of service
with the Company following the date the Stock Option is granted. The
Committee may condition exercisability of a Stock Option over a longer
specified period of service with the Company.
(f) TERMINATION OF MEMBERSHIP. Upon the termination of a
Participant's membership or service on the Board, as applicable, for any
reason other than retirement, death, disability or cause, any portion of a
Stock Option that is not exercisable on such termination date shall expire
and be permanently forfeited unless otherwise determined by the Committee
at the time of grant. The Participant may exercise the portion of the Stock
Option that is exercisable on such termination date within the time period,
if any, determined by the Committee at the time of grant, but in no event
later than the expiration date of the Stock Option. If a Participant's
membership is terminated for cause, as defined by the Committee, the
Committee may provide that all vested and unvested rights under the Stock
Option shall expire upon receipt of the notice of such termination.
(g) RETIREMENT. Upon a Participant's retirement (as defined below), all
shares subject to outstanding Stock Options held by such Participant shall
become immediately exercisable. Following retirement, the Participant may
exercise any outstanding Stock Options within the time period, if any,
determined by the Committee at the time of grant, but not later than the
expiration date of the Stock Option. Any portion of a Stock Option that is
not exercised during such time period shall expire at the end of such
period and may not be exercised thereafter. Unless determined otherwise by
the Committee, "retirement" shall mean termination of a Participant's
membership after attainment of (i) age 55 and 10 years of service with the
Company, or (ii) age 65. The Committee shall determine whether termination
of service on the Board constitutes a retirement for purposes of the Plan.
(h) DEATH. Upon the death of a Participant, all shares subject to
outstanding Stock Options held by such Participant shall become immediately
exercisable. Following the Participant's death, his or her legal
representative may exercise any outstanding Stock Options within the time
period, if any, determined by the Committee at the time of grant, but not
later than the expiration date of the Stock Option. Any portion of a Stock
Option that is not exercised during such time period shall expire at the
end of such period and may no longer be exercised.
(i) DISABILITY. Upon termination of membership or service on the Board,
as applicable, by reason of a Participant's disability (as defined by the
Committee), all shares subject to outstanding Stock Options held by such
Participant shall become immediately exercisable. Following termination for
disability, the Participant may exercise any outstanding Stock Options
within the time period, if any, determined by the Committee at the time of
grant, but not later than the expiration date of the Stock Option. Any
portion of a Stock Option that is not exercised during such time period
shall expire at the end of such period and may no longer be exercised.
(j) CHANGE OF CONTROL. Notwithstanding anything in the Plan to the contrary
any Stock Option outstanding but not yet exercisable will become
exercisable upon a change in control of the Company, as defined by the
Committee.
(k) LIMITS ON INCENTIVE STOCK OPTIONS. Except as may otherwise be permitted
by the Code, the Committee shall not grant to an Eligible Worker Member
Incentive Stock Options that, in the aggregate, are first exercisable
during any one calendar year to the extent that the aggregate fair market
value of the Common Stock, at the time the Incentive Stock Options are
granted, exceeds $100,000.
(l) COMPLIANCE WITH SECURITIES LAWS. The Company shall not be obligated to
sell or issue any shares pursuant to any Stock Option unless the shares
with respect to which the option is being exercised are at that time
effectively registered or exempt from registration under the Securities Act
of 1933, as amended, and applicable state securities laws.
5. DISCONTINUANCE OR AMENDMENT OF THE PLAN
The Board of Directors may discontinue or amend the Plan at any time; provided,
however, subject to Section 3, no such discontinuance or amendment shall
materially adversely affect any outstanding Stock Options; provided further,
that the Board may not amend the Plan without shareholder approval where the
absence of such approval would cause the Plan to fail to comply with any
requirement of applicable law or regulation. No Stock Options shall be granted
under the Plan after December 31, 2006.
6. NONTRANSFERABILITY
Stock Options granted under the Plan are not transferable except as designated
by the Participant by will or by the laws of descent and distribution. To the
extent that a Participant who receives a Stock Option under the Plan has the
right to exercise such Stock Option, the Stock Option may be exercised during
the lifetime of the Participant only by the Participant or his or her guardian
or legal representative. Notwithstanding the foregoing, the Committee Chairman,
in such individual's sole discretion, may permit a Participant to transfer
Nonqualified Stock Options granted under the Plan to a member of the
Participant's family, to a trust for the benefit of the Participant or members
of the Participant's family or to a partnership or limited liability company,
the partners or members of whom are the Participant or members of the
Participant's family.
7. NO RIGHT OF MEMBERSHIP
The Plan and the Stock Options granted hereunder shall not confer upon any
Eligible Worker Member the right to continued membership with the Company, its
subsidiaries and its affiliates or affect in any way the right of such entities
to terminate the membership of an Eligible Worker Member at any time and for any
reason.
8. TAXES
The Company shall be entitled to withhold the amount necessary to satisfy the
federal, state and local withholding requirements attributable to any option
granted, any amount payable or shares deliverable under the Plan after giving
the person entitled to receive such amount or shares notice as far in advance as
practicable. If the Committee permits this obligation to be met using shares
deliverable under the Plan, the Company will only withhold the number of shares
necessary to satisfy its withholding obligations at the minimum statutory tax
rate. Alternatively, the Committee may require the grantee to remit an amount in
cash or in Common Stock to satisfy such tax withholding requirements. If the
Participant tenders shares of previously owned Common Stock to satisfy tax
withholding, such shares may not have a Fair Market Value in excess of the
Company's withholding obligation at the minimum statutory tax rate unless such
Common Stock has been held by the Participant at least six months.
9. WRITTEN AGREEMENTS
Each award of Stock Options shall be evidenced by a written agreement, executed
by the Participant and the Company, which shall contain such restrictions, terms
and conditions as the Committee may require.
10. SHAREHOLDER APPROVAL
This amendment and restatement of the Plan is subject to and contingent upon
approval of the shareholders of the Company.
ANNUAL MEETING OF SHAREHOLDERS OF
WOODWARD GOVERNOR COMPANY
JANUARY 23, 2002
PROXY VOTING INSTRUCTIONS
TO VOTE BY MAIL
Please date, sign and mail your proxy card in the envelope provided as soon as
possible.
TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
Please call 1-888-266-6788 toll-free and follow the instructions. Have your
control number and the proxy card available when you call.
TO VOTE BY INTERNET
Please access the web page at www.proxyvoting.com/wgov and follow the on-screen
instructions. Have your control number available when you access the web page.
YOUR CONTROL NUMBER IS ______________________
Please Detach and Mail in the Envelope Provided
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
_X_ PLEASE MARK VOTES
AS IN THIS EXAMPLE
1. ELECTION OF DIRECTORS __ For __ Withhold __ For all Except
01 John A. Halbrook
02 Rodney O'Neal
03 Michael T. Yonker
INSTRUCTIONS: To withhold authority to vote for any individual nominee,
mark the "For All Except" box and strike a line through the
nominee's name in the list provided above. Your shares will
be voted for the remaining nominees.
2. APPROVAL OF THE WOODWARD GOVERNOR COMPANY 2002 STOCK OPTION PLAN
___ For ___ Against ___ Abstain
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
A majority of said attorneys or proxies who are present at the meeting shall
have, and may exercise, all of the powers of all said attorneys or proxies
hereunder.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD USING THE ENCLOSED ENVELOPE.
Signature________________ Signature if held jointly ______________ Dated _______
NOTE: Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
PROXY PROXY
WOODWARD GOVERNOR COMPANY
Proxy for Annual Meeting of the Shareholders - January 23, 2002
Solicited by the Board of Directors
The undersigned hereby appoints J. Grant Beadle, Vern H. Cassens and John A.
Halbrook, as the undersigned's proxies, with full power of substitution, to
represent and to vote, as designated on the reverse side, all the undersigned's
common stock in the Woodward Governor Company at the Annual Meeting of
Shareholders to be held on Wednesday, January 23, 2002, and at any adjournment
thereof, with the same authority as if the undersigned were personally present.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDERS. IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE
VOTED IN THE DISCRETION OF THE NAMED PROXIES ON ALL MATTERS. THE BOARD FAVORS A
VOTE "FOR" THE ELECTION OF THE NOMINEES TO THE BOARD OF DIRECTORS AND "FOR"
APPROVAL OF THE WOODWARD GOVERNOR COMPANY 2002 STOCK OPTION PLAN.