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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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 Section 240.14A-11(c) or Section 240.14a-12
EDAC Technologies Corporation
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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1) Title of each class of securities to which transaction applies:
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CONTROL NUMBER.
SEC 1913 (11-01)
EDAC TECHNOLOGIES CORPORATION
1806 NEW BRITAIN AVENUE
FARMINGTON, CONNECTICUT 06032
(860) 677-2603
NOTICE OF 2003 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON TUESDAY, MAY 20, 2003
The 2003 Annual Meeting of Shareholders of EDAC Technologies
Corporation, a Wisconsin corporation (the "Company"), will be held at the
offices of the Company at 1790 New Britain Avenue, Farmington, Connecticut
06032, on Tuesday, May 20, 2003, at 1:00 p.m. local time, to consider and act
upon the following matters:
1. To elect six directors to serve until the next Annual Meeting of
Shareholders;
2. To ratify the appointment of Deloitte & Touche LLP as independent
auditors of the Company for the fiscal year ending January 3, 2004; and
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
By Order of the Board of Directors
/s/ Glenn L. Purple
Glenn L. Purple, Secretary
Farmington, Connecticut
April 25, 2003
SHAREHOLDERS OF RECORD AT THE CLOSE OF BUSINESS ON MARCH 25, 2003 ARE
ENTITLED TO NOTICE OF, AND TO VOTE AT, THE MEETING OR ANY ADJOURNMENT THEREOF.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE
MEETING, PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER TO ENSURE REPRESENTATION OF YOUR
SHARES AT THE MEETING. NO POSTAGE NEED BE AFFIXED IF THE PROXY CARD IS MAILED IN
THE UNITED STATES.
A copy of the Company's 2002 Annual Report to Shareholders and a Proxy
Statement accompany this Notice.
EDAC TECHNOLOGIES CORPORATION
1806 NEW BRITAIN AVENUE
FARMINGTON, CONNECTICUT 06032
PROXY STATEMENT FOR THE 2003 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON TUESDAY, MAY 20, 2003
SOLICITATION AND VOTING
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of EDAC Technologies Corporation ("EDAC" or the
"Company") of proxies, in the accompanying form, to be used at the 2003 Annual
Meeting of Shareholders of the Company to be held at the offices of the Company,
1790 New Britain Avenue, Farmington, Connecticut 06032, on Tuesday, May 20,
2003, at 1:00 p.m. local time, and any adjournments thereof.
The Company's Annual Report for the fiscal year ended December 28, 2002
is being mailed to shareholders, along with these proxy materials, on or about
April 25, 2003.
At the close of business on March 25, 2003, the record date for the
determination of shareholders entitled to notice of and to vote at the Annual
Meeting, there were 4,416,038 shares of common stock, par value $.0025 per share
("Common Stock"), outstanding and entitled to vote, constituting all of the
outstanding voting stock of the Company. Holders of Common Stock are entitled to
one vote per share.
The holders of a majority of the number of shares of Common Stock
issued, outstanding and entitled to vote at the Annual Meeting shall constitute
a quorum for the transaction of business at the Annual Meeting. Shares of Common
Stock represented in person or by proxy (including shares that abstain or
otherwise do not vote with respect to one or more of the matters presented for
shareholder approval) will be counted for purposes of determining whether a
quorum is present at the Annual Meeting.
Assuming a quorum is present, the affirmative vote of the holders of a
plurality of the votes cast by the shareholders entitled to vote at the Annual
Meeting is required for the election of directors, meaning the six directors
receiving the most votes will be elected. All other matters which are properly
brought before the meeting will be approved upon the affirmative vote of a
majority of the shares of Common Stock represented and voting on the matter.
Shares that abstain from voting as to a particular matter, and shares held in
"street name" by a broker or nominee that indicates on a proxy that it does not
have discretionary authority to vote as to a particular matter, will not be
voted in favor of such matter, and also will not be counted as shares voting on
such matter. Accordingly, abstentions and broker non-votes will have no effect
on the voting on a matter that requires the affirmative vote of a certain
percentage of the votes cast or the shares voting on that matter.
Although not required by law, the Company is seeking shareholder
approval to ratify the appointment of Deloitte & Touche LLP as the Company's
independent auditors for the 2003 fiscal year. If shareholders do not ratify
such appointment, the Company may reevaluate its appointment.
All shares of Common Stock represented by properly executed proxies
that are received in time for the Annual Meeting and which have not been revoked
will be voted in accordance
with the instructions indicated in such proxies. If no such instructions are
indicated, such shares of Common Stock will be voted "FOR" each nominee for
election to the Board of Directors and "FOR" the ratification of the appointment
of Deloitte & Touche LLP as independent auditors of the Company. In addition,
the persons designated in such proxies will have the discretion to vote on
matters incident to the conduct of the Annual Meeting. If the Company proposes
to adjourn the Annual Meeting, the persons named in the enclosed proxy card will
vote all shares of Common Stock for which they have authority in favor of such
adjournment.
The grant of a proxy on the enclosed proxy card does not preclude a
shareholder from voting in person at the Annual Meeting. A shareholder may
revoke a proxy at any time prior to its exercise by delivering to the Secretary
of the Company, prior to the Annual Meeting, a written notice of revocation
bearing a later date and time than the proxy, delivering to the Secretary of the
Company a duly executed proxy bearing a later date and time than the revoked
proxy, or attending the Annual Meeting and voting in person. Attendance at the
Annual Meeting will not in and of itself constitute the revocation of a proxy.
2
ELECTION OF DIRECTORS
NOMINEES
The Company's By-Laws provide for at least five and no more than nine
directors to be elected at each Annual Meeting of Shareholders. Each director
holds office until the next succeeding Annual Meeting and until his or her
successor is duly elected. In accordance with the By-Laws, the Board of
Directors has set the number of directors at six. The persons named in the
enclosed proxy will vote to elect each of William B. Bayne, Jr., John Moses,
Dominick A. Pagano, Stephen J. Raffay, Ross C. Towne and Daniel C. Tracy as
directors, unless authority to vote for the election of the nominees is withheld
by marking the proxy to that effect. Each of the nominees, except for Mr. Bayne,
is currently a director of the Company. John Kucharik, a current director, is
not standing for re-election at the Annual Meeting. Each of the nominees has
indicated his willingness to serve, if elected, but if any of such persons
should be unable or unwilling to stand for election, proxies may be voted for a
substitute nominee designated by the Board of Directors.
<Table>
<Caption>
DIRECTOR PRINCIPAL
NAME AGE SINCE OCCUPATION
- ---- --- -------- ----------
William B. Bayne, Jr.(1) 38 n/a President, Chief Executive Officer and founder of BBB
Corporation and 23rd Street Corporation (restaurant
businesses)
John Moses 58 2001 Private Investor
Dominick A. Pagano(2) 59 2001 President and Chief Executive Officer of the Company
and President and Chief Executive Officer of Dapco
Industries, Inc. (a manufacturer of ultrasonic
inspection equipment for the steel and railroad
industries)
Stephen J. Raffay(3) 75 2000 Retired Vice-Chairman,
Emhart Corporation (a manufacturer of various
machinery and consumer products)
Ross C. Towne(4) 59 2001 President and Chief Financial Officer, The Washington
Source, Inc. (a custom precision sheet metal
fabrication and integration company)
Daniel C. Tracy(5) 62 1999 Chairman of the Board of the Company and Business
Consultant
</Table>
(1) Mr. Bayne founded BBB Corporation and 23rd Street Corporation
in 1988 and 1994 respectively.
3
(2) Mr. Pagano became President and Chief Executive Officer of the
Company in August 2002 and also serves as President and Chief
Executive Officer of Dapco Industries, Inc., a company that he
founded in 1972. Mr. Pagano served as Chairman of the Board of
Directors of American Environmental Technologies, Inc. from 1988
until 1999. Mr. Pagano has been a director of the Company since
July 2001, provided, however, that he did not serve as a director
from April 2002 to October 2002.
(3) Mr. Raffay served as a senior executive and as a director of
Emhart Corporation until his retirement as Vice Chairman in 1987.
Since then he has done consulting work and serves as a member of
the boards of directors of a number of companies.
(4) Mr. Towne owned Management Partners, Inc., a management
consulting firm, from 1990 to 2000, specializing in business
planning, organizational restructuring and operational audits. He
has served as President and Chief Financial Officer of The
Washington Source, Inc. since 2000.
(5) Mr. Tracy was employed by Arthur Andersen LLP from 1963 until
his retirement in 1998, serving since 1975 as a partner. Mr. Tracy
is also a director of Great Western Land and Recreation, Inc.
The Board of Directors recommends that shareholders vote FOR all of the
nominees for director.
BOARD AND COMMITTEE MEETINGS
The Company has an Audit Committee and a Compensation Committee of the
Board of Directors. The Company does not have a nominating committee or a
committee serving a similar function. Nominations are made by and through the
full Board of Directors.
The Audit Committee, comprised of Messrs. Raffay, Towne and Tracy, held
four meetings during 2002. The Audit Committee meets annually to consider the
report and recommendation of the Company's independent auditors and is available
for additional meetings upon request of such auditors. The Audit Committee's
functions also include making recommendations to the Board of Directors
regarding the engagement or retention of such auditors, adoption of accounting
methods and procedures, public disclosures required for compliance with
securities laws and other matters relating to the Company's financial accounting
and reporting. For additional information regarding the Audit Committee, see the
"Report of the Audit Committee" below.
The Compensation Committee, comprised of Messrs. Moses, Kucharik and
Raffay, held four meetings during 2002. The Compensation Committee sets the
compensation for the executive officers of the Company and establishes
compensation policies for the Company's Chief Executive Officer and other
executive officers. The Compensation Committee is primarily responsible for the
administration of the
4
Company's stock option plans, under which option grants may be made to all
employees, officers, directors and consultants.
The Board of Directors held eight meetings during 2002. No director
attended fewer than 75% of the total number of meetings of the Board of
Directors and each Committee on which he served.
FEES OF INDEPENDENT AUDITORS
AUDIT FEES. Deloitte & Touche LLP billed the Company $101,000 in fees
for professional services rendered in connection with the audit of the Company's
financial statements for the fiscal year ended December 28, 2002, including
reviews of the interim financial statements in the Company's Quarterly Reports
on Form 10-Q for the second and third quarters during the fiscal year ended
December 28, 2002. Arthur Andersen LLP, the Company's former independent
auditors, billed the Company $5,500 for its review of the interim financial
statements in the Company's Quarterly Report on Form 10-Q for the first quarter
of fiscal year 2002.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES. Neither
Deloitte & Touche LLP nor Arthur Andersen LLP rendered any professional services
to the Company during the fiscal year ended December 28, 2002 in connection with
financial information systems design or implementation.
ALL OTHER FEES. Deloitte & Touche LLP billed the Company $28,050 in
fees for all other professional services rendered to the Company during the
fiscal year ended December 28, 2002. These services represented audits of the
Company's employee benefit plans. Arthur Andersen LLP billed the Company $23,000
in fees for other professional services rendered to the Company during the
fiscal year ended December 28, 2002, consisting of tax preparation services.
The Audit Committee of the Board of Directors of the Company considered
that the provision of the services and the payment of the fees described above
are compatible with maintaining the independence of Deloitte & Touche LLP.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee is comprised of three members of the Company's
Board of Directors. Because the Company's Common Stock is traded on the OTC
Bulletin Board, the Company is not subject to the listing requirements of any
securities exchange or The Nasdaq Stock Market regarding the composition of the
Company's Audit Committee. However, each member of the Audit Committee is
independent, as defined in Rule 4200(a)(15) for the listing standards of The
Nasdaq Stock Market. The duties and responsibilities of the Audit Committee are
set forth in a written Audit Committee Charter, which the Board of Directors
adopted on March 14, 2001, and amended on March 3, 2003. A copy of the Audit
Committee Charter, as amended, is attached as Appendix A to this Proxy
Statement.
5
The Audit Committee has:
o reviewed and discussed the Company's audited financial statements
for the fiscal year ended December 28, 2002, with the Company's
management and with the Company's independent auditors;
o discussed with the Company's independent auditors the matters
required to be discussed by SAS 61 (Codification of Statements on
Auditing Standards); and
o received and discussed with the Company's independent auditors the
written disclosures and the letter from the Company's independent
auditors required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and discussed with
the independent auditors the matters disclosed in the letter and
their independence from the Company.
Based on such review and discussions with management and the
independent auditors, the Audit Committee recommended to the Company's Board of
Directors that the audited financial statements be included in the Company's
Annual Report on Form 10-K for the fiscal year ended December 28, 2002, for
filing with the Securities and Exchange Commission (the "Commission").
AUDIT COMMITTEE:
Stephen J. Raffay, Chairman
Ross C. Towne
Daniel C. Tracy
COMPENSATION OF DIRECTORS
In 2002, the Company paid directors who are not employees of the
Company a $10,000 annual retainer and $1,000 for each non-telephonic Board of
Directors or Committee meeting attended. The Chairman of the Board of Directors
appointed in August 2002 was paid an additional $2,500 as a retainer and an
additional $500 per non-telephonic meeting attended. Each director who serves as
Chairman of a committee was paid an additional $500 for each non-telephonic
meeting chaired by such director.
Each new director of the Company is granted a stock option to purchase
10,000 shares of Common Stock on the day of such director's initial election to
the Board of Directors. The exercise price of such options is equal to the fair
market value of the Company's Common Stock on the date of grant. Each of Messrs.
Moses and Towne were granted an option to purchase 10,000 shares of Common
Stock, at an exercise price of $0.51 per share, on their initial election to the
Board of Directors on October 22, 2002. These options became exercisable on
December 22, 2002.
In addition to the option grants described above, on September 4, 2002,
Mr. Tracy was granted an option to purchase 45,000 shares of Common Stock at an
exercise price of
6
$0.45 per share, the fair market value of the Company's Common Stock on the date
of grant. This option becomes exercisable in three equal installments on March
4, 2003, September 4, 2003 and March 4, 2004.
EXECUTIVE OFFICERS
The following table sets forth the name, age and current positions and
offices of each executive officer of the Company:
<Table>
<Caption>
NAME AGE OFFICE
---- --- ------
Dominick A. Pagano 59 President and Chief Executive
Officer
Glenn L. Purple 47 Vice President - Finance, Chief
Financial Officer and Secretary
</Table>
Mr. Pagano became President and Chief Executive Officer of the Company
in August 2002 and also serves as President and Chief Executive Officer of Dapco
Industries, Inc. He has served as President and Chief Executive Officer of Dapco
Industries since he founded that company in 1972.
Mr. Purple joined the Company in February 1982 as Controller. He served
as Controller until November 2002, when he was appointed as Vice President -
Finance, Chief Financial Officer and Secretary of the Company. Mr. Purple also
served as Vice President - Finance and Chief Financial Officer of the Company
from 1989 through 1996.
Officers are elected annually by, and serve at the discretion of, the
Board of Directors.
SHAREHOLDER RETURN PERFORMANCE GRAPH
The following performance graph compares the five year cumulative total
shareholder return from investing $100 on December 31, 1997 in the Company's
Common Stock to (i) the Total Return Index for The Nasdaq Stock Market (U.S.
Companies) (the "Nasdaq (US) Index") and (ii) the Total Return Index for Nasdaq
Trucking and Transportation Stocks (the "Nasdaq Transportation Index").
7
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN OF EDAC COMMON STOCK,
NASDAQ (US) INDEX AND NASDAQ TRANSPORTATION INDEX
(PERFORMANCE GRAPH)
<Table>
<Caption>
NASDAQ EDAC
NASDAQ (US) TRANSPORTATION TECHNOLOGIES
FISCAL YEAR ENDED INDEX INDEX CORPORATION
- ----------------- ----------- -------------- ------------
December 31, 1997 100.000 100.000 100.000
January 2, 1999 140.990 90.357 60.506
January 1, 2000 261.954 86.117 18.853
December 30, 2000 157.562 78.278 10.216
December 29, 2001 125.020 92.570 23.884
December 28, 2002 86.400 94.100 6.409
</Table>
8
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation:
The Compensation Committee of the Board of Directors continues to
monitor existing compensation plans and initiates additional compensation
policies as necessary to enhance the financial performance of the Company.
The Compensation Committee and the entire Board strongly believe that
the shareholders' best interests are served by a motivated workforce that share
in the rewards of achieving defined objectives that improve shareholder value.
To support the Board objective of rewarding all levels of the
organization for the financial successes of the Company and ultimately
maximizing shareholder value, the committee is in the process of developing an
incentive plan that is directly related to shareholder value. The plan, if
approved by the Board, will be utilized to evaluate executive performance and
bonus awards for the fiscal year 2003. Presently, there are no plans for any
executive compensation bonuses until the Company returns to profitability.
As part of the Company's get well plan, Dominick Pagano agreed to work
for six months at $5,000 per month. Additionally, Mr. Pagano was granted an
option to purchase 140,000 shares of Common Stock. This compares to the
Company's previous CEO's base compensation of $250,000 annually. Starting in
February of 2003, Mr. Pagano's base compensation was increased to $180,000
annually. The Compensation Committee feels that Mr. Pagano's compensation is
quite reasonable compared to similar CEO positions within the Company's
industry.
COMPENSATION COMMITTEE:
John Moses, Chairman
Stephen J. Raffay
John Kucharik
9
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION INFORMATION
The following table sets forth certain information concerning
compensation for each of the last three fiscal years of (i) the Company's Chief
Executive Officer as of December 28, 2002, (ii) the person who served as Chief
Executive Officer for part of the fiscal year ended December 28, 2002, and (iii)
one former executive officer who would have been among the four most highly
compensated executive officers other than the Chief Executive Officer had he
been serving as executive officer at the end of fiscal year 2002 (collectively,
the "Named Executive Officers"). No information has been provided with respect
to the Company's other current executive officer, since such executive officer's
total annual salary and bonus did not exceed $100,000.
SUMMARY COMPENSATION TABLE
<Table>
<Caption>
ANNUAL COMPENSATION LONG TERM
----------------------------------- COMPENSATION
------------
AWARDS
------------
OTHER
ANNUAL SECURITIES
COMPEN- UNDERLYING ALL OTHER
NAME AND PRINCIPAL SALARY BONUS SATION OPTIONS COMPENSATION
POSITION YEAR ($) ($) ($) (#) ($)(1)
------------------ ---- ------ ----- ------- ------------ ------------
Dominick A. Pagano 2002 21,923 -- -- 140,000 --
President and Chief
Executive Officer(2)
Richard A. Dandurand 2002 169,231 -- -- -- 135,500
Former Chief Executive 2001 250,000 82,500 -- 50,000 1,750
Officer(3) 2000 19,231 -- -- 100,000 --
Ronald G. Popolizio 2002 165,315 -- -- 28,400 183,605
Former Executive Vice 2001 172,500 91,400 -- 100,000 1,750
President, Chief 2000 165,000 -- -- 25,000 1,750
Financial Officer
and Secretary (4)
</Table>
(1) For Mr. Dandurand, 2002 amount represents severance payments of
$104,167, certain other expenses of $29,583 paid or payable in
connection with Mr. Dandurand's separation, and $1,750 in payments
to defined contribution plans for the benefit of Mr. Dandurand.
For Mr. Popolizio, 2002 amount represents severance payments of
$129,375, certain other expenses of $32,480 paid or payable in
connection with Mr. Popolizio's separation, $20,000 in consulting
payments made to Mr. Popolizio for consulting services provided to
the Company after his separation, and $1,750 in payments to
defined contribution plans for the benefit of Mr. Popolizio. 2001
and 2000 amounts represent payments to defined contribution plans.
(2) Mr. Pagano became President and Chief Executive Officer on August
13, 2002.
10
(3) Mr. Dandurand became President and Chief Executive Officer on
December 1, 2000 and resigned effective July 29, 2002.
(4) Mr. Popolizio resigned as Executive Vice President, CFO and
Secretary on November 22, 2002.
OPTION GRANTS
The following table provides certain information regarding stock
options granted to the Named Executive Officers in 2002.
OPTION GRANTS IN LAST FISCAL YEAR
<Table>
<Caption>
INDIVIDUAL GRANTS
--------------------------------------------------------
POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM ($)(3)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ------------------------
NAME GRANTED (#) FISCAL YEAR (1) ($/SH)(2) DATE 5% ($) 10% ($)
- ----------------------- ------------ --------------- --------- ---------- --------- --------
Dominick A. Pagano(4) 140,000 79.6 0.60 8/12/12 52,827 133,874
Ronald G. Popolizio(5) 28,400 16.1 0.50 11/30/03 710 1,420
</Table>
(1) Based on a total of 175,900 shares subject to options granted to
employees under the Company's option plans in fiscal year 2002.
(2) Under all of the Company's option plans, the exercise price is equal to
the fair market value of the Company's Common Stock on the date of
grant.
(3) The dollar amounts under these columns represent hypothetical gains
that could be achieved for options if exercised at the end of the
option term. These gains are based on assumed rates of stock price
appreciation of 5% and 10% compounded annually from the date options
are granted, net of option exercise price. Actual gains, if any, on
stock option exercises will depend on the future performance of the
Company's Common Stock, the option holder's continued employment
throughout the option period, and the date on which options are
exercised.
(4) Mr. Pagano's option was to become exercisable as follows: 56,000 shares
on February 13, 2003, 42,000 shares on August 13, 2003, and 42,000
shares on February 13, 2004. In connection with Mr. Pagano's amended
and restated employment agreement entered into as of February 13, 2003,
this option became fully exercisable.
(5) Mr. Popolizio's option was issued in exchange for options to purchase
an aggregate of 94,333 shares of Common Stock, and was immediately
exercisable on the date of grant. See "Report on Repricing of Options"
below.
11
FISCAL YEAR-END OPTION VALUES
The following table provides certain information regarding options held
by the Named Executive Officers at December 28, 2002.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<Table>
<Caption>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY
FISCAL YEAR-END (#) FISCAL YEAR END ($)(1)
SHARES ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- -------------------- --------------- ------------ ------------------------- -------------------------
Dominick A. Pagano -- -- -/140,000 $-/-
Richard A. Dandurand -- -- 60,000/- $-/-
Ronald G. Popolizio -- -- 28,400/- $284/-
</Table>
(1) Based on the last reported sale price of the Common Stock on the OTC
Bulletin Board on December 27, 2002 ($0.51), less the option exercise
price.
12
REPORT ON REPRICING OF OPTIONS
On November 22, 2002, Ronald G. Popolizio, the Company's former
Executive Vice President and Chief Financial Officer resigned. As part of Mr.
Popolizio's severance arrangement, the Company agreed to exchange stock options
held by Mr. Popolizio to purchase an aggregate of 94,333 shares of Common Stock,
at exercise prices ranging from $1.00 to $5.91 per share, for an immediately
exercisable option to purchase 28,400 shares of Common Stock at an exercise
price of $0.50 per share (the fair market value of the Common Stock on the date
of the exchange). The following table provides certain information regarding the
repricing of Mr. Popolizio's options. The Company has not adjusted or amended
the exercise price of any other options held by any executive officer during the
last 10 completed fiscal years.
10-YEAR OPTION REPRICINGS
<Table>
<Caption>
NUMBER OF LENGTH OF
SECURITIES ORIGINAL
UNDERLYING MARKET PRICE OPTION TERM
OPTIONS OF STOCK AT EXERCISE PRICE REMAINING AT
REPRICED OR TIME OF AT TIME OF NEW DATE OF
AMENDED REPRICING OR REPRICING OR EXERCISE REPRICING OR
NAME DATE (#)(1) AMENDMENT($) AMENDMENT($) PRICE ($) AMENDMENT
- ------------------------ -------- ----------- ------------ -------------- ------------ ---------------
Ronald G. Popolizio 11/22/02 11,000 0.50 5.91 See footnote 5 years
Former Executive Vice 11/22/02 25,000 0.50 5.50 (1) 6 years
President, CFO and 11/22/02 25,000 0.50 1.00 7 years 6 mos.
Secretary 11/22/02 33,333 0.50 1.3125 8 years 2 mos.
</Table>
(1) The options listed in this column were canceled and exchanged for one
new option to purchase 28,400 shares of Common Stock at an exercise
price of $0.50 per share. The new option expires on November 30, 2003.
COMPENSATION COMMITTEE:
John Moses, Chairman
Stephen J. Raffay
John Kucharik
13
EMPLOYMENT AND SEVERANCE AGREEMENTS
On August 13, 2002, the Company entered into an Employment Agreement
with Mr. Pagano to serve as President and Chief Executive Officer of the
Company. The initial term of the agreement was for six months, which
automatically extended for successive periods of 90 days unless either party
gives the other at least 30 days advance written notice to the contrary.
As compensation under the agreement, Mr. Pagano was entitled to receive
a base salary of $5,000 per month. He also received a stock option to purchase
140,000 shares of the Company's Common Stock pursuant to the Company's 2000-B
Employee Stock Option Plan. The option has an exercise price of $0.60 per share,
the fair market value of the Company's Common Stock on the date of grant. The
option was to vest as follows: 56,000 shares on February 13, 2003; 42,000 shares
on August 13, 2003; and 42,000 shares on February 13, 2004. The option, which
has a 10-year term, vests immediately if the Company terminates Mr. Pagano's
employment without cause (as defined in the agreement) or if, after the
employment term, Mr. Pagano ceases to be a director of the Company for any
reason other than his voluntary resignation or removal for cause. The Company
may terminate Mr. Pagano's employment immediately upon cause or his disability
(as defined in the agreement). If the Company terminates Mr. Pagano's employment
for any reason other than cause, disability or death, Mr. Pagano is entitled to
receive a severance payment equal to his base salary for the then remaining
employment term, and shall be entitled to retain his stock option.
As of February 13, 2003, the Company and Mr. Pagano entered into an
amended and restated employment agreement, which replaced his August 13, 2002
employment agreement. Under the new agreement, the initial term of Mr. Pagano's
employment agreement is 12 months from the date of the agreement, which
automatically extends for successive periods of 90 days unless either party
gives the other 30 days advance written notice to the contrary. His base salary
is $15,000 per month. In addition, the stock option granted to Mr. Pagano in
connection with the August 13, 2002 employment agreement became fully vested.
The other terms of the August 13, 2002 employment agreement described above are
now contained in the February 13, 2003 agreement.
On November 22, 2002, Ronald G. Popolizio, the Company's former
Executive Vice President and Chief Financial Officer resigned. The Company
agreed to pay Mr. Popolizio severance of $129,735 payable over nine months
commencing in December 2002, and to provide Mr. Popolizio with the continued use
of a leased automobile at the Company's expense until July 2005. In addition,
the Company agreed to provide Mr. Popolizio with certain other benefits, such as
certain insurance coverage, reimbursement of legal expenses and outplacement
services, and agreed to exchange certain stock options held by Mr. Popolizio to
purchase an aggregate of 94,333 shares of Common Stock, at exercise prices
ranging from $1.00 to $5.91 per share, for an option to purchase 28,400 shares
of Common Stock at an exercise price of $.050 per share (the fair market value
of the Common Stock on the date of the exchange). In addition to the benefits
described above, the Company paid Mr. Popolizio $20,000 for certain consulting
services provided by Mr. Popolizio after his resignation.
14
Effective July 29, 2002, Richard A. Dandurand resigned as the Company's
Chairman and Chief Executive Officer and the Company entered into a separation
agreement with Mr. Dandurand. Pursuant to this separation agreement, Mr.
Dandurand received $104,167 payable over five months in equal installments
beginning on August 1, 2002. The date by which Mr. Dandurand has to exercise
60,000 vested stock options was extended until March 31, 2003. Mr. Dandurand
also received continued health, life and long-term disability insurance coverage
until December 2002, use of a leased automobile for 18 months and outplacement
services.
Pursuant to an employment agreement with the Company, as amended in May
2002, Mr. Dandurand was entitled to a minimum annual salary of $250,000 plus an
annual incentive bonus determined by the Compensation Committee of the Board of
Directors, a grant of options to purchase 150,000 shares of Common Stock and
various other fringe benefits. Mr. Dandurand was also entitled to receive a
grant of options to purchase 50,000 shares of Common Stock on December 1, 2001,
contingent upon renewal of the employment agreement. The employment agreement
also provided that, upon termination of employment by the Company for any reason
other than death, disability or cause, or by Mr. Dandurand following any change
in the location he was based to a location outside of Hartford County,
Connecticut, Mr. Dandurand would receive severance equal to 18 months of his
then base salary and all previously granted stock options would become
immediately exercisable. If Mr. Dandurand's employment was terminated due to
death or disability, he would be entitled to receive a prorated cash bonus for
the year of termination. The original term of the employment agreement extended
to December 1, 2001, subject to automatic renewal for additional one-year terms
unless notice of termination was given within 45 days of the end of the then
current term.
Pursuant to an employment agreement with the Company, as amended in May
2002, Mr. Popolizio was entitled to a minimum annual salary of $172,500 plus an
annual incentive bonus determined by the Compensation Committee of the Board of
Directors and various other fringe benefits. The agreement also provided that,
upon termination of employment by the Company for any reason other than death,
disability or cause, or by Mr. Popolizio following any change in the location he
is based to a location outside of Hartford County, Connecticut, Mr. Popolizio
would receive severance equal to 24 months of his then base compensation plus
two times the average of the three highest annual bonus payments received by him
during the five fiscal years prior to termination. If Mr. Popolizio's employment
was terminated due to death or disability, he would receive a prorated cash
bonus for the year of termination.
CHANGE OF CONTROL AGREEMENTS
The Company entered into Change of Control Agreements with Richard A.
Dandurand, the Company's former Chief Executive Officer, in 2000, and with
Ronald G. Popolizio, the Company's former Executive Vice President, Chief
Financial Officer and Secretary, in 1999. These agreements essentially acted as
springing employment agreements, which provide that upon a change of control of
the Company (as defined in the agreement), the executive shall continue to be
employed by the Company for a period of two years for Mr. Dandurand and three
years for Mr. Popolizio in the same capacities
15
and with the same compensation and benefits as the executive was receiving prior
to the change of control (all as specified in the agreements). If the executive
is terminated after the change of control without cause or he quits for good
reason (both as defined in the agreement), the executive is generally entitled
to receive a severance payment from the Company equal to the amount of
compensation to be paid to the executive under the agreement, in the case of Mr.
Dandurand, for two years following termination if termination occurs during the
180-day period following a change of control, and for 18 months if termination
occurs thereafter during the term of the agreement and, in the case of Mr.
Popolizio, for the greater of the balance of the term of the agreement or one
year. A termination by the executive for any reason during the 180-day period
following a change of control is deemed to be for good reason.
In 2002, certain shareholders proposed changes to the composition of
the Company's board of directors. The letters and other communications from
these shareholders contained certain statements which, if true, appear to have
indicated that a change of control (as defined in the Change of Control
Agreements) may have occurred. In May 2002, Messrs. Dandurand and Popolizio each
agreed to waive their rights under the Change of Control Agreements with respect
to any prior events that may have been deemed to constitute a change of control.
These officers did not waive their rights under the Change of Control Agreements
with respect to any future events that may constitute a change of control. In
consideration for these waivers, the Company agreed to effect certain amendments
to the employment agreements of Messrs. Dandurand and Popolizio, including to
provide that Mr. Popolizio's minimum base salary is $172,500 (which is the base
salary that was in effect for Mr. Popolizio during 2001) and to provide each
officer with severance payments if the officer resigns following certain changes
in the location of his employment by the Company. Messrs. Dandurand and
Popolizio resigned effective July 29, 2002 and November 22, 2002, respectively,
and their Change of Control Agreements terminated as of such dates. See
"Employment and Severance Agreements."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of outside directors. During the
fiscal year ended December 28, 2002, the following board members served on the
Compensation Committee: Robert J. Gilchrist, John Kucharik, John Moses, Stephen
J. Raffay and Daniel C. Tracy. No member of the Compensation Committee was at
any time during fiscal year 2002, or formerly, an officer or employee of the
Company or any subsidiary of the Company, nor has any member of the Compensation
Committee had any relationship with the Company requiring disclosure under Item
404 of Regulation S-K under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors, upon the recommendation of the Audit Committee,
has appointed Deloitte & Touche LLP as the Company's independent auditors for
the 2003 fiscal year. Deloitte & Touch LLP has served as the Company's
independent auditors since May 2002. Although this appointment is not required
to be submitted to a vote of
16
shareholders, the Company believes it appropriate as a matter of policy to
request that the shareholders ratify the appointment. If shareholder
ratification is not received, the Board of Directors may reconsider the
appointment of Deloitte & Touche LLP.
It is expected that a representative of Deloitte & Touche LLP will be
present at the Annual Meeting and will have the opportunity to make a statement
if he or she desires to do so and will also be available to respond to
appropriate questions.
INFORMATION REGARDING CHANGE OF AUDITORS
On May 16, 2002, the Company's Board of Directors, upon recommendation
of its Audit Committee, approved the engagement of Deloitte & Touche LLP to
replace Arthur Andersen LLP as the Company's auditors. Arthur Andersen LLP's
reports on the Company's consolidated financial statements for each of the
fiscal years ended December 29, 2001 and December 30, 2000 did not contain an
adverse opinion or disclaimer of opinion, nor were they qualified or modified as
to uncertainty, audit scope or accounting principles, except that Arthur
Andersen LLP's report on the Company's consolidated financial statements for the
fiscal year ended December 29, 2001 was modified as to the Company's ability to
continue as a going concern. During the Company's fiscal years ended December
29, 2001 and December 30, 2000, and through May 21, 2002 (the date that the
Company filed a Current Report on Form 8-K disclosing its decision to no longer
engage Arthur Andersen LLP), there were no disagreements with Arthur Andersen
LLP on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure which, if not resolved to Arthur
Andersen LLP's satisfaction, would have caused them to make reference to the
subject matter in connection with their report on the Company's consolidated
financial statements for such years; and there were no reportable events, as
listed in Item 304(a)(1)(v) of SEC Regulation S-K.
During the Company's fiscal years ended December 29, 2001 and December
30, 2000, and through May 21, 2002, the Company did not consult Deloitte &
Touche LLP with respect to the application of accounting principles to a
specified transaction, either completed or proposed, or the type of audit
opinion that might be rendered on the Company's consolidated financial
statements, or any other matters or reportable events listed in Items
304(a)(2)(i) and (ii) of SEC Regulation S-K.
SECURITY OWNERSHIP
The following table sets forth information regarding the beneficial
ownership of shares of Common Stock as of February 15, 2003 by (i) each
director, nominee for director and Named Executive Officer, (ii) each person or
entity known by the Company to beneficially own more than 5% of the outstanding
shares of Common Stock and (iii) all directors and executive officers as a
group.
The Company has determined beneficial ownership in accordance with the
rules of the Commission. Unless otherwise indicated, the persons included in the
table have sole voting and investment power with respect to all shares
beneficially owned, except to the extent authority is shared with spouses under
applicable law. Shares of Common
17
Stock subject to options that are either currently exercisable or exercisable
within 60 days of February 15, 2003 are deemed to be outstanding and to be
beneficially owned by the option holder for the purpose of computing the
percentage ownership of the option holder. However, these shares are not treated
as outstanding for the purpose of computing the percentage ownership of any
other person.
<Table>
<Caption>
NUMBER OF SHARES PERCENT
NAME BENEFICIALLY OWNED OF CLASS
- ---- ------------------ --------
William B. Bayne Jr.(1) 353,156 8.0
Richard A. Dandurand(2) 79,110 1.8
John Kucharik(3) 21,008 *
John Moses(4) 551,190 12.5
Dominick A. Pagano(5) 340,738 7.5
Ronald G. Popolizio(6) 49,813 1.1
Stephen J. Raffay(7) 15,500 *
Ross C. Towne(8) 91,256 2.1
Daniel C. Tracy(9) 83,039 1.9
All Directors and Executive Officers as a
group (7 persons)(10) 1,138,035 24.5
</Table>
*Represents beneficial ownership of less than 1%.
(1) Mr. Bayne's address is 714 South 19th Street, Arlington, Virginia
22202.
(2) Includes 60,000 shares subject to stock options held by Mr.
Dandurand. These options expired unexercised on March 31, 2003.
(3) Includes 10,000 shares subject to stock options held by Mr.
Kucharik.
(4) Includes 10,000 shares subject to stock options held by Mr. Moses.
Mr. Moses' address is 3616 North Albemarle Street, Arlington,
Virginia, 22207.
(5) Includes 140,000 shares subject to stock options held by Mr.
Pagano. Mr. Pagano's address is 1806 New Britain Avenue,
Farmington, Connecticut 06032.
(6) Includes 28,400 shares subject to stock options held by Mr.
Popolizio.
(7) Includes 10,000 shares subject to stock options held by Mr.
Raffay.
(8) Includes 10,000 shares subject to stock options held by Mr. Towne.
(9) Includes 35,000 shares subject to stock options held by Mr. Tracy.
18
(10) Includes 221,333 shares subject to stock options held by all
directors and executive officers as a group.
The above beneficial ownership information is based upon information
furnished by the specified persons and is determined in accordance with Rule
13d-3 under the Exchange Act, as required for purposes of this Proxy Statement.
It is not necessarily to be construed as an admission of beneficial ownership
for other purposes and may include shares as to which beneficial ownership is
disclaimed.
SHAREHOLDER PROPOSALS
Any shareholder who desires to submit a proposal for inclusion in the
proxy statement and form of proxy for the Company's 2004 Annual Meeting must
submit the proposal in writing to Glenn L. Purple, Secretary, EDAC Technologies
Corporation, 1806 New Britain Avenue, Farmington, Connecticut 06032, no later
than December 25, 2003.
The Company's Amended and Restated By-Laws require a shareholder to
give advance notice of any proposal, including the nomination of candidates for
the Board of Directors, that the shareholder wishes to bring before a meeting of
shareholders of the Company. In general, for a proposal to be brought before a
meeting of shareholders by a shareholder, written notice of the shareholder
proposal must be delivered to, or mailed to and received by, the Secretary of
the Company at the principal executive offices of the Company, not later than
the close of business on the later of (i) the 60th calendar day prior to the
date of such meeting or (ii) the 10th calendar day following the day on which
public announcement is first made of the date of such meeting. The written
notice of a shareholder proposal must contain all of the information required by
the Company's Amended and Restated By-Laws. Notices of intention to present
proposals at the 2004 Annual Meeting should be addressed to Glenn L. Purple,
Secretary, EDAC Technologies Corporation, 1806 New Britain Avenue, Farmington,
Connecticut 06032.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10% of a registered class of
the Company's equity securities, to file with the Commission initial reports of
beneficial ownership on Form 3 and reports of changes in beneficial ownership of
the Company's equity securities on Forms 4 or 5. The rules promulgated by the
Commission under Section 16(a) of the Exchange Act require those persons to
furnish the Company with copies of all reports filed with the Commission
pursuant to Section 16(a). Based solely upon a review of such forms actually
furnished to the Company, and written representations of certain of the
Company's directors and executive officers that no forms were required to be
filed, the Company believes that during fiscal year 2002, all directors,
executive officers and 10% shareholders of the Company have filed with the
Commission on a timely basis all reports required to be filed under Section
16(a) of the Exchange Act, with the following exception: Mr. Kucharik failed to
timely file a Form 5 to report two de minimus
19
purchases of the Company's Common Stock in July 2002 and November 2002. Mr.
Kucharik filed a Form 5 to report these transactions on February 12, 2003 (one
day late).
OTHER MATTERS
The Board of Directors does not know of any other matters which may be
brought before the Annual Meeting. However, if any other matters properly come
before the Annual Meeting, including any adjournment or adjournments thereof, it
is intended that proxies received in response to this solicitation will be voted
on such matters in the discretion of the person or persons named in the
accompanying proxy form.
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and
employees, without additional remuneration, may solicit proxies by telephone,
telegraph and personal interviews, and the Company reserves the right to retain
outside agencies for the purpose of soliciting proxies. Brokers, custodians and
fiduciaries will be requested to forward proxy soliciting material to the owners
of stock held in their names, and, as required by law, the Company will
reimburse them for their out-of-pocket expenses in this regard.
THE BOARD OF DIRECTORS HOPES THAT SHAREHOLDERS WILL ATTEND THE ANNUAL
MEETING. WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL BE
APPRECIATED. SHAREHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY
EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
By Order of the Board of Directors
/s/ Glenn L. Purple
Glenn L. Purple, Secretary
Farmington, Connecticut
April 25, 2003
20
APPENDIX A
AUDIT COMMITTEE CHARTER
MISSION AND PURPOSE
The Audit Committee ("the Committee") is approved by the Board of
Directors ("the Board") of EDAC Technologies Corporation (the "Company") to
assist the Board in monitoring: (1) the integrity of the Company's financial
statements; (2) the compliance by the Company with legal and regulatory
requirements; and (3) the performance and independence of the Company's external
auditors.
GENERAL GUIDELINES
RESPONSIBILITIES
The Committee shall be responsible for overseeing: the financial
reporting process, the system of internal controls, the audit process, and the
independent public accountants. Management of the company is responsible for the
preparation of financial statements, and ensuring that the statements are
complete, accurate and prepared in accordance with generally accepted accounting
principles. Management is also responsible for ensuring compliance with laws and
regulations. The independent public accountants are responsible for planning and
conducting audits in accordance with generally accepted auditing standards.
In carrying out its responsibilities, the Committee will maintain and
facilitate free and open communication between directors, the independent public
accountants and the management of the Company.
SIZE AND COMPOSITION
The Committee shall consist of no fewer than three directors, each of
whom shall meet the independence and experience requirements of the Nasdaq Stock
Market, Inc. ("Nasdaq"). The Board shall appoint the Committee's Chairperson and
members annually or until successors shall be qualified and elected. One member
of the Committee shall be a "financial expert" as may be defined by the rules of
the Securities and Exchange Commission ("SEC").
CHARTER
The Committee shall maintain a written charter that is approved by the
Board. The charter will be reviewed and updated at least annually.
OVERSIGHT BY THE BOARD OF DIRECTORS
The Board will approve the Committee's charter and revisions, will
determine annually that the Committee's members meet the independence and
experience requirements of the Nasdaq, and that the Committee has fulfilled its
duties and responsibilities. The Committee acts on the Board's behalf in the
matters outlined in this charter and is hereby given all the resources and
authority necessary to properly discharge its duties and responsibilities.
The Committee will report its activities to the full Board on a regular
basis so the Board is kept informed of its activities on a current basis.
MEETINGS
The Committee will meet at least four times per year, or more
frequently as circumstances dictate. The Committee will review quarterly reports
of earnings prior to the release of earnings to the public and the filing of the
SEC Forms 10-K and 10-Q. The Committee shall meet when necessary but at least
once a year with the Chief Financial Officer and the independent public
accountants in private meetings.
Participation of External Auditors and Other Advisors. The Committee
will engage the Company's independent public accountants in discussions required
by their professional standards and other relevant regulatory requirements prior
to the filing of forms 10K and 10Q. The Committee shall have the authority to
retain special legal, accounting or other consultants to advise the Committee,
and the Company shall provide the Committee with appropriate funding for payment
of compensation, fees and expenses to such consultants. The Committee may
request any officer or employee of the Company or the Company's outside counsel
(in addition to the independent public accountants) to attend a meeting of the
Committee or to meet with any members of, or consultants to, the Committee.
EXTERNAL AUDITORS
Appointment and Termination. The Committee will recommend to the board
the appointment of the independent public accountants (subject, if applicable,
to stockholder ratification), evaluate the performance of the independent public
accountants and, if so determined by the Committee, recommend that the Board
replace the independent public accountants. The Committee may consider
management's recommendation for the appointment of the independent public
accountants, and may review with management the performance and /or termination
of the independent public accountants. The Committee will approve the fees to be
paid to the independent public accountants.
Non-Audit Services. The Committee will approve in advance, the
retention of the independent public accounting firm for any non-audit service
that such firm is not prohibited from performing for the Company and approve the
fees for any such service.
Independence. The Committee will ensure that the independent public
accountants provide periodic reports to the Committee setting forth all
relationships between the independent public accountants and the Company,
consistent with the Independence Standards Board Standard No. 1. The Committee
will discuss with the independent public accountants any disclosed relationships
or services which may impact the objectivity and independence of the independent
public accountants. The Committee will take, or recommend that the full Board
take, appropriate action to ensure the independence of the independent public
accountants.
Review. The Committee will review with the independent public
accountants and, if it deems it appropriate, management:
o Prior to the annual audit, the scope, approach, planning and staffing.
o Significant accounting policies
o Changes to the Company's auditing and accounting principles and practices as
suggested by the independent public accountants or management;
o Audit conclusions regarding significant accounting estimates and reserves;
o Proposed fee arrangements for ongoing and special projects;
o Assessments of the adequacy of internal controls and disclosure controls and
procedures;
o The resolution of identified material weakness and reportable conditions in
internal controls and disclosure controls and procedures (including the
prevention or detection of management override or compromise of the internal
control system);
o The Company's compliance with laws and regulations having to do with
accounting and financial matters;
o Any problems or difficulties the independent public accountants may have
encountered and any Management Letter comments provided by the independent
public accountants and management's responses thereto;
o Reports from the independent public accountants regarding (a) critical
accounting policies used by the Company in its financial statements; (b) all
alternative treatments of financial information within generally accepted
accounting principles that the independent public accounts have discussed
with management, ramifications of the use of such alternative treatments and
the treatment preferred by the independent public accounts; and (c) other
material written communications between the independent public accountants
and management; and
o The matters described under "Financial Statements" below.
The independent public accountants shall provide assurance to the
Committee that their audit was conducted in accordance with generally accepted
auditing standards including provisions contained in Section 10A of the
Securities Exchange Act of 1934.
2
The Committee and the Board should consider whether the independent
public accountants should meet with the full Board to discuss any matters
relative to the financial statements and/or potentially relevant matters, and
to answer questions from other directors.
FINANCIAL STATEMENTS
Year-End Financial Statements. The Committee will review with
management and the independent public accountants the Company's interim and
year-end financial statements, including management's discussion and analysis
and audit findings (including any significant suggestions for improvements
provided to management by the independent public accountants). Such review will
include a discussion of significant adjustments recorded and other matters
required to be discussed by Statement on Auditing Standards No.61 relating to
the conduct of the audit. Following such review, the Committee will recommend to
the Board whether the audited financial statements should be included in the
Company's annual report on Form 10-K.
Quarterly Financial Statement. The Committee will review with
management and the independent public accountants the Company's quarterly
financial statements prior to the filing of its Form 10-Q. The Committee will
engage in discussions with the independent public accountants with respect to
the impact of significant events, transactions and changes in accounting
estimates considered by the independent public accountants in performing the
quarterly review.
Quality of Financial Reporting. The members of the Committee will
discuss among themselves and with management and the independent public
accountants, the quality (not just the acceptability) of the Company's
accounting principles and underlying estimates in the financial statements.
Briefings. The Committee will request from financial management and the
independent public accountants, a briefing on any significant accounting and
reporting issues, including any changes in accounting standards or rules
promulgated by the Financial Accounting Standards Board ("FASB"), the Securities
and Exchange Commission ("SEC") or other regulatory bodies, that have an effect
on the financial statements.
Inquiries. The Committee will inquire:
o About the existence and substance of any significant accounting accruals,
reserves, or estimates made by management that had a material impact on the
financial statements: and
o Of management and the independent public accountants if there were any
significant financial accounting or reporting issues and /or disagreements
discussed during the accounting period and, if so, how they were resolved.
LEGAL MATTERS
The Committee will discuss and review with management, company counsel,
and the independent public accountants the substance of any significant issues
raised by counsel concerning litigation, contingencies or claims, the Company's
compliance policies and any material reports or inquires received from
regulators or government agencies. The Committee should understand how such
matters are reflected in the Company's financial statements.
The Committee will discuss and review with management and advise the
Board with respect to the Company's policies and procedures regarding compliance
with applicable laws and regulations.
OTHER
Investigations. The Committee will initiate the investigation of any
matter brought to its attention within the scope of its duties, with the power
and funding to retain outside counsel and other advisers.
Proxy Statement Report. The Committee will prepare a report for
inclusion in the Company's proxy statement for its annual meeting of
stockholders describing the activities in which it has engaged during the prior
year pursuant to its charter. The report will address all issues required by the
rules of the SEC.
3
Financial Risk Exposures. The Committee will meet periodically with
management to review the Company's major financial risk exposures and steps
management has taken to monitor and control such exposures.
Internal Audit. The Committee will discuss the scope and staffing of an
internal audit function and if an internal audit function is formed, the
Committee will review the plans and findings of the internal audits and will
meet in executive sessions with the head of Internal Auditing.
Related Party Transactions. The Committee will be responsible for
reviewing related party transactions for potential conflicts of interest and
approving related party transactions.
Complaints. The Committee will establish procedures for the receipt,
retention and treatment of complaints received by the Company regarding
accounting, internal accounting controls or auditing matters and for the
confidential, anonymous submission by employees of the Company or its
subsidiaries of concerns regarding questionable accounting or auditing matters.
Officer Expense Accounts. The Committee will direct that an annual
report of senior officer expense reports and perquisites be performed and
reported to the Committee.
4
EDAC TECHNOLOGIES CORPORATION
ANNUAL MEETING OF SHAREHOLDERS - MAY 20, 2003
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints each of Glenn L. Purple and Edward J.
Samorajczyk, Jr., and each of them, as proxies (with full power of substitution)
of the undersigned to attend the Annual Meeting of Shareholders of EDAC
Technologies Corporation (the "Company") to be held on May 20, 2003 at 1:00
p.m., local time, at the offices of the Company, 1790 New Britain Avenue,
Farmington, Connecticut and any adjournment thereof, and to vote the shares of
common stock of the Company held by the undersigned on March 25, 2003, as
specified on the reverse side and on any other matters that may properly come
before said meeting, or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
THE ELECTION OF ALL NOMINEES AND FOR PROPOSAL 2.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
ANNUAL MEETING OF SHAREHOLDERS OF
EDAC TECHNOLOGIES CORPORATION
MAY 20, 2003
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
-- Please detach and mail in the envelope provided. --
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF ALL NOMINEES FOR DIRECTOR AND "FOR" PROPOSAL 2.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE [X]
- -----------------------------------------------------------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
1. ELECTION OF DIRECTORS: 2. To ratify the appointment of Deloitte & Touche LLP
as independent auditors of the Company for the fiscal
NOMINEES year ending January 3, 2004.
[ ] FOR ALL NOMINEES William B. Bayne, Jr.
John Moses PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD
[ ] WITHHOLD AUTHORITY Dominick A. Pagano PROMPTLY USING THE ENCLOSED ENVELOPE.
FOR ALL NOMINEES Stephen J. Raffay
Ross C. Towne
[ ] FOR ALL NOMINEES Daniel C. Tracy
EXCEPT
(See instructions below)
INSTRUCTIONS: To withhold authority to vote for any
nominee(s), write the nominee(s) name(s) on the
lines provided below.
------------------------------------------
------------------------------------------
- ----------------------------------------------------
- ----------------------------------------------------
To change the address on your account, please [ ]
check the box at right and indicate your new
address in the address space above. Please note
that changes to the registered name(s) on the
account may not be submitted via this method.
- ----------------------------------------------------
Signature of Shareholder Date: Signature of Shareholder Date:
---------------------- ------------ ---------------------- ------------
NOTE: This proxy must be signed exactly as the name appears hereon. When shares are held jointly, each holder should sign.
When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a
corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership,
please sign in partnership name by authorized person.
</Table>