<PAGE> 1
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SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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 sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
ZARING NATIONAL CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(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: ...........................................................
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<PAGE> 2
ZARING NATIONAL CORPORATION
11300 Cornell Park Drive
Suite 500
Cincinnati, Ohio 45242
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 23, 1998
TO THE SHAREHOLDERS OF ZARING NATIONAL CORPORATION:
The Annual Meeting of Shareholders (the "Meeting") of Zaring National
Corporation (the "Company") will be held on Thursday, April 23, 1998 at 9:00
a.m. at the Manor House Banquet & Conference Center, 7440 Mason-Montgomery Road,
Mason, Ohio 45040, for the following purposes:
1. To elect six directors to hold office until the 1999 Annual Meeting of
Shareholders and until such time as their successors are duly elected
and qualified;
2. To approve amendments to the Company's Key Employees Stock Option Plan;
3. To approve amendments to the Company's Outside Directors Stock Option
Plan;
4. To confirm the appointment of Arthur Andersen LLP as independent
auditors of the Company for the 1998 fiscal year; and
5. To transact such other business as may properly come before the meeting
and any adjournment thereof.
Shareholders of record at the close of business on March 6, 1998 will be
entitled to vote at the meeting and at any adjournment thereof.
RONALD G. GRATZ
Secretary
March 25, 1998
IMPORTANT
Your prompt dating, signing and returning of the enclosed proxy in the
enclosed envelope would be appreciated. If you attend the Meeting, you may
nevertheless vote in person should you desire. The return of proxies is
important, regardless of the number of shares owned.
<PAGE> 3
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of Zaring
National Corporation (the "Company"), 11300 Cornell Park Drive, Suite 500,
Cincinnati, Ohio 45242, for use at the Annual Meeting of Shareholders of the
Company to be held on April 23, 1998, and at any adjournment thereof (the
"Meeting"). This Proxy Statement is being mailed to shareholders on or about
March 25, 1998.
On March 6, 1998, the record date for the determination of shareholders
entitled to vote at the Meeting (the "Record Date"), there were 4,765,788 of the
Company's common shares without par value (the "Common Shares") outstanding, and
each such share is entitled to one vote on each matter coming before the
Meeting. In voting on the proposal to elect directors of the Company, the
nominees receiving the greatest number of votes will be elected. Approval of any
other matter properly coming before the Meeting requires the vote of the holders
of a majority of the Common Shares present in person or represented by proxy at
the Meeting, and entitled to vote.
VOTING AND REVOCATION OF PROXIES
HOLDERS OF COMMON SHARES
An abstention from voting will be tabulated as a vote withheld (and thus
will have the practical effect of a "no" vote in voting on the proposal to elect
directors), but will be included in computing the number of Common Shares
present for purposes of determining the presence of a quorum at the Meeting. If
a broker indicates on the form of proxy that it does not have discretionary
authority as to certain Common Shares to vote on a particular matter, those
Common Shares will be considered as present but not entitled to vote with
respect to that matter. If a proxy card is signed and returned without
specifying choices, the shares represented thereby will be voted (1) to elect as
directors the six persons named below, (2) to approve amendments to the
Company's Key Employees Stock Option Plan, (3) to approve amendments to the
Company's Outside Directors Stock Option Plan; (4) to confirm Arthur Andersen
LLP as independent auditors of the Company for fiscal year 1998 and (5) as
recommended by the individuals named on the proxy card in their discretion with
regard to other matters as may properly come before the Meeting.
The members of the proxy committee, whose names are set forth on the
accompanying form of proxy, were named by the Board of Directors of the Company.
A shareholder giving a proxy in the accompanying form retains the power to
revoke it by making a later appointment or by giving notice of revocation to the
proxy tabulator, The Fifth Third Bank, 38 Fountain Square, Cincinnati, Ohio
45263. Attendance at the Meeting does not in itself revoke the appointment;
however, it may be revoked by giving notice in open meeting. A revocation made
during the Meeting will not affect any vote previously taken.
PARTICIPANTS IN RETIREMENT BENEFIT PLAN
Separate proxy cards are being submitted to all persons who have Common
Shares allocated to their accounts as participants or beneficiaries under the
Zaring National Corporation Retirement Benefit Plan (the "RBP Plan"). It is
anticipated that a representative of PNC Bank, National Association ("PNC"),
which acts as Trustee for the RBP Plan, will attend the Meeting in order to
vote, in accordance with the instructions of the participants or their
beneficiaries, the shares which it holds of record as Trustee and which have
been allocated to the participants' accounts. If a proxy card is signed and
returned without specifying choices, the shares represented thereby will be
voted (1) to elect as directors the six persons named below, (2) to approve
amendments to the Company's Key Employees Stock Option Plan, (3) to approve
amendments to the Company's Outside Directors Stock Option Plan, and (4) to
confirm Arthur Andersen LLP as independent auditors of the Company for fiscal
year 1998. If no proxy card is received from a participant or beneficiary, no
vote will be cast as to the shares represented thereby as to the above three
matters. PNC, as Trustee of the RBP Plan will determine the vote of the shares
held by such plan as to any matters other than the above three items which
properly come before the Meeting.
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<PAGE> 4
Any RBP Plan participant or beneficiary giving a proxy in the accompanying
form retains the power to revoke it by making a later appointment or by giving
notice of revocation to PNC. Under the rules of the RBP Plan, only PNC, as the
Trustee of the plan, can vote the shares allocated to the accounts of
participants, even if such participants or their beneficiaries attend the
Meeting in person.
COSTS OF SOLICITATION
The Company will bear the costs of solicitation of proxies, including the
charges and expenses of stock brokerage firms, banks, trust companies and others
for forwarding solicitation materials to beneficial owners of shares. In
addition to solicitation by mail, directors, officers and regular employees of
the Company may solicit proxies in person or by telephone.
ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" THE ELECTION OF THE NOMINEES.
The Company's Amended Regulations provide that the number of directors
shall be not less than five or more than nine and that such number shall be
determined by the affirmative vote of a majority of the whole Board of Directors
present at any meeting of the Board of Directors at which a quorum is present.
Directors are elected for a one-year term until the next Annual Meeting of
Shareholders.
INFORMATION CONCERNING NOMINEES
Six directors will be elected at the Meeting. The Board of Directors has
nominated Allen G. Zaring, III, John R. Brooks, Murat H. Davidson, Daniel W.
Geeding, Robert N. Sibcy and John H. Wyant to serve as directors of the Company
until the 1999 Annual Meeting of Shareholders and until such time as their
respective successors are elected and qualified.
If any nominee is unable or unwilling to serve as a director on the date of
the Meeting (a situation which is not contemplated by the Board of Directors at
the present time), proxies will be voted by the proxy committee for the election
of such substitute as the Board of Directors may recommend and for the remaining
nominees.
The following table sets forth information with respect to the age and
experience of nominees for election as directors.
<TABLE>
<CAPTION>
POSITIONS WITH YEAR FIRST ELECTED
NOMINEE AGE THE COMPANY A DIRECTOR
------- --- -------------- ------------------
<S> <C> <C> <C>
John R. Brooks........................ 53 Director 1979
Murat H. Davidson..................... 53 Director 1989
Daniel W. Geeding (a)................. 55 Director 1993
Robert N. Sibcy....................... 54 Director 1995
John H. Wyant (a)..................... 51 Vice-Chairman of the Board 1994
Allen G. Zaring, III (a).............. 56 Chairman of the Board 1964
</TABLE>
- ---------------
(a) Member of the Executive Committee of the Board of Directors. The membership
of the Executive Committee includes the Chairman of the Board.
John R. Brooks is a member of the Audit and Compensation Committees. Mr.
Brooks is the President of John R. Brooks Associates, Inc., a financial
consulting firm. From 1996 to 1997, Mr. Brooks served as a consultant to The
Seven Hills Schools, a private school in Cincinnati. From 1990 to 1996, Mr.
Brooks served as the Business Affairs Director of The Seven Hills Schools.
Murat H. Davidson has been a director of the Company since 1989. Mr.
Davidson is a partner and the managing director of Regan Partners, L.P. From
1993 to 1995, he was the managing director of Tiger
2
<PAGE> 5
Management Corp. Prior to joining Tiger, Mr. Davidson was the managing director
of Dreman Value Management L.P. He has 23 years of portfolio management
experience.
Daniel W. Geeding is a member of the Executive, Audit and Compensation
Committees. Mr. Geeding is the Director of the Center for International Business
at Xavier University and a Professor of Management at Xavier University. From
1988 to 1997, Mr. Geeding was the Dean of the Xavier University College of
Business Administration. He is also on the Board of Directors of Glenway
Financial Corporation and Frisch's Restaurants, Inc.
Robert N. Sibcy has been a director of the Company since 1995. Mr. Sibcy is
President and the owner of Sibcy Cline, Inc., a real estate brokerage firm.
John H. Wyant is currently Vice Chairman of the Board of the Company and a
member of the Executive, Audit and Compensation Committees. He is the founder
and general partner of Blue Chip Venture Capital Fund, a venture capital fund
formed in 1992 to invest in privately-held companies. He has served as Chief
Executive Officer of Nutrition Technology Corporation and Home Entertainment
Network. Mr. Wyant also serves as a director of Ciao Cucina Corporation.
Allen G. Zaring, III formed the principal predecessor to the Company in
1964 and is currently Chairman of the Board of the Company. He is a member of
the Executive Committee of the Board of Directors. Mr. Zaring is on the local
advisory board of the PNC Bank National Association and is a member of the Board
of Advisors of Blue Chip Venture Capital Fund.
SECURITY OWNERSHIP
The following table sets forth information, as of March 6, 1998 (unless a
different date is specified in the notes to the table), with respect to (a) each
person known by the Board of Directors of the Company to be the beneficial owner
of more than 5% of the Company's outstanding Common Shares, (b) each current
director and nominee for director of the Company, (c) each current executive
officer of the Company named in the Summary Compensation Table herein, and (d)
all directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
SHAREHOLDER OWNERSHIP (A) OF CLASS
----------- ----------------- --------
<S> <C> <C>
Allen G. Zaring, III..................................... 2,730,614(b)(c) 57.02%
The Zaring Family Limited Partnership.................... 2,000,000(b) 41.77%
John R. Brooks........................................... 117,340(c) 2.45%
George E. Casey, Jr...................................... 23,581 *
Murat H. Davidson........................................ 19,039(c) *
Daniel W. Geeding........................................ 3,800(c) *
Ronald G. Gratz.......................................... 10,933 *
Daniel W. Jones.......................................... 14,268 *
Matthew S. Massarelli.................................... 412 *
Robert N. Sibcy.......................................... 293,100(c) 6.12%
John H. Wyant............................................ 4,000(c) *
Allen G. Zaring, IV...................................... 6 *
All directors and executive officers as a group (31
persons)............................................... 3,243,743 67.74%
</TABLE>
- ---------------
* Percent of class is less than 1%
(a) The Securities and Exchange Commission has defined "beneficial owner" of a
security to include any person who has or shares voting power or investment
power with respect to any such security or who has the right to acquire
beneficial ownership of any such security within 60 days. Unless otherwise
indicated, the amounts owned reflect (i) direct beneficial ownership, and
(ii) the person indicated has sole voting and investment power.
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<PAGE> 6
(b) Includes the following Common Shares: 715,203 owned individually by Allen G.
Zaring, III, 11,012 owned by Mr. Zaring's spouse, Anne M. Zaring, and
2,000,000 held by the Zaring Family Limited Partnership of which Allen G.
Zaring, III and Anne M. Zaring are general partners.
(c) Includes Common Shares subject to outstanding options under the Company's
stock option plans. The percentages shown in the foregoing table are
calculated on the basis that outstanding shares include Common Shares
subject to outstanding options under the Company's stock option plans that
are exercisable by directors and officers within 60 days, in addition to the
number of Common Shares actually outstanding. Such amounts are:
<TABLE>
<S> <C>
Allen G. Zaring, III........................................ 4,399
John R. Brooks.............................................. 1,500
Murat H. Davidson........................................... 1,500
Daniel W. Geeding........................................... 1,500
Ronald G. Gratz............................................. 1,584
Daniel W. Jones............................................. 6,139
Matthew S. Massarelli....................................... 0
Robert N. Sibcy............................................. 1,000
John H. Wyant............................................... 1,500
Allen G. Zaring, IV......................................... 0
</TABLE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, directors and persons who own more than 10% of a registered class of
the Company's equity securities to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Officers, directors and
greater than 10% shareholders are required to furnish the Company with copies of
all Section 16(a) forms they file. Based solely on the Company's review of the
copies of such forms received by it, and by statements of officers and directors
that they complied with all applicable filing requirements, the Company's
officers, directors and greater than 10% beneficial owners complied with all
filing requirements applicable to them, except as follows: Mr. Wyant filed three
late Form 4s reporting his purchase of 500 shares on May 16, 1997, his wife's
sale of 2,500 shares on May 1, 1997 and his children's sale of 1,000 shares on
September 11, 1996.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has an Audit Committee, the members of which are not
officers or employees of the Company. The Audit Committee, which held four
meetings during fiscal year 1997, recommends to the Board of Directors the
independent auditors to be employed by the Company; consults with the
independent auditors on the scope of the annual audit; approves the fees paid to
the independent auditors for audit services; reviews reports of examination of
the independent auditors, internal auditors and regulatory authorities; and
reports to the Board of Directors with respect to all of the foregoing. The
members of the Audit Committee are Messrs. Geeding (Chairman), Brooks and Wyant.
The Board of Directors has a Compensation Committee, the members of which
are not officers or employees of the Company. The Compensation Committee, which
held three meetings during fiscal year 1997, is responsible for developing the
Company's executive compensation principles, policies and programs and
recommending them to the Board of Directors. The Compensation Committee also
recommends to the Board of Directors, on an annual basis, the amount and type of
compensation to be paid to the Chief Executive Officer and, with advice from the
Chief Executive Officer, to each of the other executive officers of the Company.
The members of the compensation Committee are Messrs. Brooks (Chairman), Geeding
and Wyant. See "Report of the Compensation Committee of the Board of Directors
on Executive Compensation."
The Board of Directors has an Executive Committee, which held two meetings
during fiscal year 1997. During intervals between meetings of the Board of
Directors, the Executive Committee has the authority to
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<PAGE> 7
exercise all the powers of the Board of Directors, except that it is not
empowered to declare dividends, to elect or remove officers, or to fill
vacancies on the Board of Directors or on the Executive Committee. All actions
of the Executive Committee are reported to the Board of Directors at its next
meeting and are subject to revision or alteration by the Board of Directors. The
members of the Executive Committee are Messrs. Zaring (Chairman), Geeding and
Wyant.
The Board of Directors held 4 meetings during fiscal year 1997. Each
current director who held that office throughout the fiscal year attended 75% or
more of those meetings and the meetings held during the fiscal year by all board
committees on which he served.
The Board of Directors does not have a Nominating Committee.
EXECUTIVE COMPENSATION
The following table summarizes all annual and long-term compensation paid
by the Company for services rendered the Company in all capacities for the
fiscal years ended December 31, 1995 through December 31, 1997, for (i) the
Chief Executive Officer, (ii) the four most highly compensated executive
officers of the Company who were serving as executive officers as of December
31, 1997 and (iii) George E. Casey, Jr., for whom disclosure would have been
required but for the fact that he was not serving as an executive officer of the
Company as of December 31, 1997 (collectively, the "Named Officers"):
SUMMARY COMPENSATION
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
- ------------------------------------------------------------------- ----------------------- ---------- ALL
OTHER SECURITIES OTHER
ANNUAL RESTRICTED UNDERLYING COMPEN-
SALARY BONUS COMPEN- SHARES OPTIONS/ LTIP SATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) SATION($) AWARDS($) SARS(#)(3) PAYOUTS($) ($)(4)
- --------------------------- ---- ------ ----- --------- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Allen G. Zaring, III....... 1997 $ 77,885 $ 0 $ 0 $ 0 70,953 $ 0 $107,002
Chairman (1) 1996 11,774 0 0 0 9,217 0 117,561
1995 4,855 0 0 0 0 0 79,414
George E. Casey, Jr........ 1997 $200,000 $116,271 $ 0 $ 0 12,368 $ 0 $ 5,191
President & CEO (2) 1996 200,000 181,680 0 0 34,217 0 3,597
Zaring Homes, Inc. 1995 192,308 161,180 0 0 0 0 0
Daniel W. Jones 1997 $121,323 $ 70,280 $ 0 $ 0 7,421 $ 0 $ 3,651
Executive Vice President 1996 114,039 134,253 0 0 5,069 0 6,652
Zaring Homes, Inc. 1995 109,039 110,253 0 0 0 0 0
Ronald G. Gratz............ 1997 $124,038 $ 26,199 $ 0 $ 0 5,676 $ 0 $ 3,672
CFO/Secretary/Treasurer 1996 120,000 29,160 0 0 3,318 0 1,123
1995 16,154 0 0 0 0 0 0
Matthew S. Massarelli...... 1997 $107,885 $ 6,372 $ 0 $ 0 0 $ 0 $ 2,322
Executive Vice President 1996 21,635 6,075 0 0 0 0 198
Home Max, Inc. 1995 -- -- -- -- -- -- --
Allen G. Zaring, IV........ 1997 $ 99,231 $ 15,501 $ 0 $ 0 4,768 $ 0 $ 192
Executive Vice President 1996 53,365 11,250 0 0 0 0 396
Hearthside Homes, LLC 1995 -- -- -- -- -- -- --
</TABLE>
- ---------------
(1) Annual salary in 1995 and 1996 reflects only amounts paid by the Company for
Mr. Zaring III and his family's health insurance coverage and associated
expenses and the value of split dollar life insurance maintained on his life
by the Company.
(2) Mr. Casey resigned as President and CEO of Zaring Homes, Inc., effective
December 15, 1997. He resigned as a director of the Company, effective
February 25, 1998.
(3) No options were granted to the Named Officers in fiscal year 1995. For
additional information regarding options granted to the Named Officers in
fiscal year 1997, see the table captioned "Options/SAR Grants in Last Fiscal
Year."
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<PAGE> 8
(4) The Company maintains split-dollar life insurance on the life of Mr. Zaring,
III. The Company paid $12,054 allocated to the term portion of the
split-dollar coverage in 1997. Mr. Zaring, III reimbursed the Company for
this portion of the insurance coverage. The terms of the split-dollar
agreement between the Company and Mr. Zaring, III state that the Company is
to be reimbursed for its payment of premiums. The actuarial value of the
excess of the cash value over the premiums paid by the Company for 1997 was
$105,202. The amount was based upon the assumption that the policies will be
paid in full and remain in effect until Mr. Zaring, III's retirement, with
the amount representing the weighted average for retirement at ages 56, 60
and 65. The Company contributed $1,800 as a premium on a life insurance
policy on the life of Mr. Zaring, III.
Includes in 1997, for the other Named Officers: for Mr. Casey: $1,152
contributed by the Company as a premium on a life insurance policy on the
life of Mr. Casey, $1,669 contributed by the Company to the Employee Stock
Purchase Plan (the "Stock Purchase Plan," described below) and 2,370
allocated by the Company to the Executive Deferred Compensation Plan (the
"Deferred Compensation Plan," described below); for Mr. Jones: $264
contributed by the Company as a premium on a life insurance policy on the
life of Mr. Jones, $905 contributed by the Company to the Stock Purchase
Plan and $2,482 allocated by the Company to the Deferred Compensation Plan;
for Mr. Gratz: $1,152 contributed by the Company as a premium on a life
insurance policy on the life of Mr. Gratz, $145 contributed by the Company
to the Stock Purchase Plan and $2,375 allocated by the Company to the
Deferred Compensation Plan; for Mr. Massarelli: $216 contributed by the
Company as a premium on a life insurance policy on the life of Mr.
Massarelli and $2,106 allocated by the Company to the Deferred Compensation
Plan; and for Mr. Zaring, IV, $192 contributed by the Company as a premium
on a life insurance policy on the life of Mr. Zaring, IV.
The Stock Purchase Plan is intended to enable certain full-time employees of
the Company and its subsidiaries which participate in the plan (with the
Company and such subsidiaries being referred to as the "Employer" in this
paragraph) to acquire a proprietary interest in the growth and performance
of the Employer and thereby an increased incentive to work for the future
success of the Employer, by offering such employees the opportunity to
acquire Common Shares. In 1997, an eligible employee was able to have a
percentage (1% to 10% if the eligible employee was a sales manager or 1% to
25% if he or she was not a sales manager) of his or her cash compensation
other than his or her base salary or wages (such non-base compensation being
referred to in this paragraph as his or her "incentive pay"), including
commissions paid for sales, compensation for services on the basis of a
percentage of profits and bonuses, deducted on an after-tax basis from his
or her pay in order to be used to buy Common Shares. (For 1998, an eligible
employee is able to have from 1% to 10% of both his or her incentive
compensation and his or her base salary or wages deducted on an after-tax
basis from his or her pay to be used to buy Common Shares.) The Employer
will match the amount of an eligible employee's pay deductions under the
Stock Purchase Plan in an amount equal to one-ninth of such pay deductions.
An eligible employee's pay deductions and any matching contributions made by
the Employer under the Stock Purchase Plan are allocated to an account in
the name of the eligible employee and generally used thereafter to purchase
Common Shares for the employee.
The Deferred Compensation Plan is intended to provide retirement income to a
select group of key employees of the Company and its subsidiaries which
participate in the plan (with the Company and such subsidiaries being
referred to as the "Employer" in this paragraph). The retirement income paid
under the Deferred Compensation Plan is paid from the general assets of the
Employer, and such payments are not secured in advance by any fund that is
beyond the creditors of the Employer in the event of the Employer's
insolvency or bankruptcy. Under the Deferred Compensation Plan, eligible key
employees are able to defer, on a pre-tax basis, up to 25% of their base
salary for a calendar year and/or up to 100% of their bonuses made for such
calendar year (and paid during such year or within six months of the end of
such year). Under the plan, eligible employees may designate how they want
their deferred earnings to be assumed to be invested for purposes of the
plan among certain investment funds, one of such investment funds being a
Company Common Stock Fund (which is a fund which is assumed to invest
substantially all of its assets in Common Shares). The Employer also credits
additional amounts to an eligible employee's account under the Deferred
Compensation Plan for each calendar quarter in an amount equal to the lesser
of: (i) 100% of the amount of the base salary and bonuses which the eligible
employee has deferred during such calendar quarter under the plan and for
which the eligible employee has directed that the initial assumed investment
of such amount will be the Company Common Stock Fund; or (ii) 25% of the
total amount of base salary and bonuses which the
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<PAGE> 9
eligible employee defers under the plan in such calendar quarter. Once an
eligible employee has made deferrals of at least $9,500, subject to certain
adjustments, in any calendar year, no further deferrals of base salary or
bonuses in the rest of the calendar year are considered in determining any
additional matching amount for the eligible employee's account under the
plan. Any matching amounts allocated to the eligible employee's account
under the plan are always assumed to be invested in the Company's Common
Stock Fund. After an eligible employee terminates employment with the
Employer, the amounts credited to his or her account under the Deferred
Compensation Plan are paid to him or her in a lump sum payment (or, if the
eligible employee otherwise elects within a certain period of time prior to
his or her termination of employment, in up to ten annual installment
payments).
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE
APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM*
- ----------------------------------------------------------------------------------- ---------------------------
(A) (B) (C) (D) (E) (F) (G)
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- ------------------------- ------ ---- ------ ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Allen G. Zaring,
III(1)................. 10,953 5.5% $10.61 5/08/07 $189,295 $ 301,421
Allen G. Zaring,
III(2)................. 60,000 30.0 9.625 6/05/07 940,687 1,497,886
George E. Casey,
Jr.(1)(4).............. 10,953 5.5 10.61 5/08/07 189,295 301,421
George E. Casey,
Jr.(3)(5).............. 1,415 0.7 9.50 5/08/07 21,897 34,868
Ronald G. Gratz(1)....... 4,792 2.4 10.61 5/08/07 82,867 131,874
Ronald G. Gratz(3)....... 884 0.4 9.50 5/08/07 13,679 21,782
Daniel W. Jones(1)....... 6,572 3.3 10.61 5/08/07 113,581 180,859
Daniel W. Jones(3)....... 849 0.4 9.50 5/08/07 13,139 20,921
Allen G. Zaring, IV(1)... 4,025 2.0 10.61 5/08/07 69,562 110,766
Allen G. Zaring, IV(3)... 743 0.4 9.50 5/08/07 11,498 18,309
</TABLE>
- ---------------
* The dollar gains under these columns result from calculations assuming 5%
and 10% growth rates as set by the Securities and Exchange Commission and
are not intended to forecast future price appreciation of the Company's
Common Shares. The gains reflect a future value based upon growth at these
prescribed rates. The Company did not use an alternative formula for a grant
date valuation, an approach which would state gains at present, and
therefore lower, value. The Company is not aware of any formula which will
determine with reasonable accuracy a present value based on future unknown
or volatile factors.
It is important to note that options have value to the Named Officers and to
all option recipients only if the stock price advances beyond the base price
shown in the table during the effective option period.
(1) These awards were stock options made pursuant to the Key Employees Stock
Option Plan. Under this plan, the option will, in general, be able to be
exercised only on or after the date of issuance of the Company's Form 10-K
for the fiscal year during which such option is granted and only as to a
number of Common Shares equal to the product obtained by multiplying (i) the
total number of Common Shares which were subject to the option by (ii) the
performance-based percentage applicable to such option (as determined
below). The option will become void as to all other Common Shares which were
subject to the option.
The performance-based percentage applicable to the option will be deemed to
be equal to the quotient produced by dividing (i) the difference between the
EPS percentage growth value (as determined below) and 10% by (ii) 10%. The
EPS percentage growth rate refers to the percentage by which the Company's
earnings per Common Share (as set forth within the financial statements
contained in the Company's Forms 10-K) have increased, on a compounded
annual basis, from the end of the Company's latest fiscal year which ended
prior to the regular annual meeting of the Board of Directors which was held
in 1995 to the end of the
7
<PAGE> 10
Company's fiscal year during which the option is granted. However,
notwithstanding the foregoing, in no event will the EPS percentage growth
rate applicable to any option be deemed to be more than 20%.
However, notwithstanding the above provisions, an option granted under the
Key Employees Stock Option Plan will become void as to all Common Shares
which were subject to the option if the key employee to whom the option is
granted fails to purchase Common Shares during the Company's fiscal year
during which the option is granted at a cost to the key employee of at least
10% of his or her incentive compensation earned for such fiscal year from
the Company and its affiliated companies. The option will also become void
as to any Common Shares subject to the options that are not purchased either
within a certain period of time after the applicable key employee terminates
his or her employment as an employee or a director with the Company and its
affiliate companies or within the ten year period beginning on the date the
option is granted.
(2) On June 5, 1997, the Company granted Allen G. Zaring, III an option to
purchase 60,000 Common Shares, which option was not granted under any formal
plan of the Company. The option vests in three annual installments beginning
on June 5, 1998.
(3) These awards were made pursuant to the 1997 Stock Option Plan. Under this
plan, an option will, in general, be able to be exercised as to the total
number of Common Shares granted under the option at any time on or after May
8, 1998. The option will, however, become void as to any Common Shares
subject to the option that are not purchased either within a certain period
of time after the employee to whom the option was granted terminated
employment with the Company and its affiliated companies or within the ten
year period beginning on the date the option is granted.
(4) Mr. Casey resigned as the President and CEO of Zaring Homes, Inc., effective
December 15, 1997 and as a director of the Company as of February 25, 1998,
and, pursuant to the Key Employee Stock Option Plan, any options granted to
him under such plan became void as to all Common Shares which were subject
to the option on December 15, 1997 and had not been earlier purchased.
(5) Mr. Casey resigned as the President and CEO of Zaring Homes, Inc., effective
December 15, 1997, and, pursuant to the 1997 Stock Option Plan, the option
granted to him under such plan became void as to all Common Shares which
were subject to the option on such date and had not been earlier purchased.
REPORT OF THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee")
consists entirely of outside directors, currently three in number. The Committee
is responsible for developing the Company's executive compensation principles,
policies and programs and recommending them to the Board of Directors. In
addition, the Committee, with advice from the Chief Executive Officer,
recommends to the Board of Directors on an annual basis the compensation to be
paid to the Chief Executive Officer and to each of the other executive officers
of the Company, including those named in the Summary Compensation Table.
The Committee believes that, in representing the Board of Directors, it
must act in the best interests of the shareholders as it reviews and determines
the Company's executive compensation principles, policies and programs. The
Committee's essential goal is to create a balance by which the Company is able
to attract and retain qualified management personnel while at the same time
maximizing the Company's financial performance and safeguarding the Company's
assets. In compensating the Company's executive officers, the Committee seeks to
achieve the following goals:
- motivate executive officers to strive for and achieve outstanding
corporate performance that provides a direct benefit to shareholders;
- attract highly-qualified key management personnel; and
- reward superior performance in reaching corporate objectives with
aggressive compensation levels and provide that a significant portion of
compensation is dependent on the Company's annual performance.
In fiscal year 1997, executive officer compensation had two primary
elements: base salary and incentive cash bonuses. These elements are discussed
in more detail below.
8
<PAGE> 11
BASE SALARY COMPENSATION:
Base salaries for executive officers in fiscal 1997 were determined after
review of an analysis of salaries paid for comparable positions and
consideration of the competition for executive talent within the Company's
industry. The Committee's review included the companies used in the Peer Group
for the performance information graph (see "Shareholder Return Performance
Information," below) as well as additional companies in the homebuilding
industry. The Company's compensation philosophy is to target executive salaries
close to the mean of the market rate paid for comparable positions within the
homebuilding industry.
In 1997, executive officers' base salaries were increased on an average by
1.1% to reflect general economic conditions, with the exception of the base
salary of one executive which increased by 80.0% recognizing that the executive
would receive base salary in 1997 without the opportunity to receive incentive
bonus compensation.
INCENTIVE CASH BONUS COMPENSATION:
The Incentive Cash Bonus Compensation, which is paid out in the form of
quarterly bonuses during the year, was established to provide a direct financial
incentive to achieve both individual and corporate goals. Each year the Company
enters into incentive cash bonus arrangements with its executive officers. Under
this program, an executive may earn a maximum bonus between 40% and 100% of his
or her base salary. The bonus is based upon the achievement of certain goals,
including customer satisfaction, the time to construct homes, the level of
revenues, the level of profits, inventory turnover and return on managed assets.
STOCK OPTION AWARDS
During 1997, the Company awarded two types of stock options to its
executive officers. Under the Key Employees Stock Option Plan, stock options of
a level set by the plan's terms were awarded and allocated among certain key
employees, based generally upon their level of annual base salary and maximum
incentive compensation. The option granted to any key employee under such plan
generally will not be exercisable unless the Company achieves certain financial
results, as is described under "Option/SAR Grants in Last Fiscal Year" above,
and if the employee purchases a certain number of the Company's common shares
(under the Key Employees Stock Option Plan or otherwise) equal to 10% of his or
her incentive compensation for the Company's fiscal year in which the option was
granted. Thus, the 1997 awards under the Key Employees Stock Option Plan are
directly tied to the financial performance of the Company. In addition, under
the 1997 Stock Option Plan, stock options of a level set by the plan's terms
were awarded and allocated among all executive officers and full-time employees
of the Company and its subsidiaries (excluding HomeMax, Inc., Blue Chip Mortgage
Company and subsidiaries of such companies), based generally upon their annual
rates of base salary and wages.
COMPENSATION OF CHIEF EXECUTIVE OFFICER:
At the request of Allen G. Zaring, III, the Company's Chief Executive
Officer, the only compensation he received in recent years was health insurance
coverage and payment of associated health expenses for himself and his family
and the value of split dollar life insurance maintained on his life by the
Company.
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<PAGE> 12
In 1997, Mr. Zaring, III, became more actively involved in the day-to-day
management of the Company and its subsidiaries than he had in recent years. In
recognition of his increased involvement in the management of the Company and
its subsidiaries, the Committee and Mr. Zaring, III, agreed that he receive an
annual salary in the amount of $125,000. In addition, on June 5, 1997, the
Company granted Mr. Zaring, III, an option to purchase 60,000 Common Shares
which vests in three annual installments beginning on June 5, 1998. Mr. Zaring
also received health insurance coverage and payment of associated health
expenses for himself and his family and the value of split dollar life insurance
maintained on his life by the Company.
The Compensation Committee
John R. Brooks, Chairman
Daniel W. Geeding
John H. Wyant
SHAREHOLDER RETURN PERFORMANCE INFORMATION
The following graph portrays a comparison of the percentage change in the
Company's cumulative total shareholder return on its Common Shares (as measured
by dividing (i) the sum of (A) the cumulative amount of dividends, assuming
dividend reinvestment during the periods presented, and (B) the difference
between the Company's share price at the end and the beginning of the periods
presented; by (ii) the share price at the beginning of the periods presented)
since the date of its initial public offering with the NASDAQ U.S. Composite
Index and a Peer Group Index. The Peer Group consists of Engle Homes, Inc., FPA
Corporation, Inco Homes Corporation, Oriole Homes Corp., and Washington Homes,
Inc.
CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
NASDAQ
ZARING STOCK
MEASUREMENT PERIOD NATIONAL PEER MARKET
(FISCAL YEAR COVERED) CORPORATION GROUP (US)
<S> <C> <C> <C>
5/25/93 100.00 100.00 100.00
12/31/93 114.55 105.28 111.99
12/31/94 45.00 47.25 109.47
12/31/95 69.09 51.80 154.82
12/31/96 81.82 50.16 190.43
12/31/97 65.45 63.48 233.68
</TABLE>
<TABLE>
<CAPTION>
5/25/93 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Zaring National Corporation..................... $100.00 $114.55 $ 45.00 $ 69.09 $ 81.82 $ 65.45
PEER GROUP...................................... 100.00 105.28 47.25 51.80 50.16 63.48
NASDAQ STOCK MARKET (US)........................ 100.00 111.99 109.47 154.82 190.43 233.68
</TABLE>
10
<PAGE> 13
DIRECTOR COMPENSATION
Directors who are not employees of the Company are paid directors' fees for
their services at the rate of $5,000 per year each, as well as a fee of $1,000
per Board meeting attended and $500 per Committee meeting attended. Total
payments to such directors for the Company's last fiscal year amounted to
$54,007, which includes amounts paid as reimbursement for travel expenses.
In addition to such remuneration, outside directors (directors who are not
also employees of the Company) will receive stock options under the Company's
Outside Directors Stock Option Plan (the "Outside Directors Option Plan"). The
Outside Directors Option Plan provides for the grant to all outside directors of
options to purchase Common Shares of the Company over an extended period of time
at a set purchase price.
The full Board of Directors of the Company interprets the Outside Directors
Option Plan to the extent any interpretation is necessary. Beginning with the
date of the 1994 annual meeting of shareholders of the Company and on each
annual meeting of shareholders thereafter as long as the Outside Directors
Option Plan is in effect, an option to purchase 500 Common Shares of the Company
is granted automatically under the plan to each outside director who continues
in such office after such annual meeting.
Any option granted under the Outside Directors Option Plan is exercisable
after six months and one day from the date the option is granted. In no event
may any such option be exercisable after the expiration of ten years from the
date the option is granted. The price at which shares can be purchased under any
option will be equal to the fair market value of such shares at the time the
option is granted. Each option granted under the Outside Directors Option Plan
will be granted within ten years from the date the plan was adopted by the
Company.
The total number of Common Shares of the Company that may be issued
pursuant to the Outside Directors Option Plan is 25,000 subject to adjustments
to prevent dilution or enlargement of rights of participants in certain
circumstances. 2,500 options were awarded under the Outside Directors Option
Plan during the Company's last fiscal year.
TRANSACTIONS INVOLVING DIRECTORS AND EXECUTIVE OFFICERS
In 1997, the Company sold residential lots to L.T. Zaring Co., a company
owned by Mr. Zaring, III's brother, for approximately $165,000. The sale was on
terms equivalent to those that would have applied to a purchase by an unrelated
third party. In 1997, the Company sold residential homes to certain members of
management, for a total of approximately $732,000.
Prior to December, 1997, the Company was a 50% owner of a joint venture
with Bramblewood Development, Inc., a company owned by Mr. Robert Sibcy, a
director of the Company. The joint venture ended in 1997 upon completion of its
business purpose. In 1997, the Company acquired residential lots from
Bramblewood Development, Inc., in the total amount of $480,000. This transaction
was approved by independent members of the Board of Directors and Mr. Zaring,
III abstained from voting thereon.
APPROVAL OF AMENDMENTS TO THE COMPANY'S
KEY EMPLOYEES STOCK OPTION PLAN
In 1993, the Board of Directors and shareholders of the Company adopted the
Company's Key Employees Stock Option Plan (the "Option Plan"), which plan has
been amended in certain respects since then. The purpose of the Option Plan is
to enable the Company and its subsidiaries to attract and retain key employees,
by granting options to purchase Common Shares over an extended period of time at
a set purchase price.
The Board of Directors of the Company has reviewed the provisions of the
Option Plan and believes that additional amendments to the Option Plan, to be
effective as of January 1, 1998, are necessary to fulfill the purposes of such
plan.
The full text of the amended Option Plan is set forth in Appendix A to this
Proxy Statement. The following discussion describes the operation of the amended
Option Plan on or after January 1, 1998 and reflects the
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<PAGE> 14
changes made in such plan effective as of such date, but it is qualified in its
entirety by reference to the text of the amended Option Plan.
PROPOSED AMENDMENTS
The Board of Directors of the Company continues to believe that the future
growth and profitability of the Company depends in large measure on the
Company's and its subsidiaries' ability to attract and retain key employees and
to encourage those employees to acquire a "stake" in the future economic
performance of the Company through ownership of meaningful numbers of Common
Shares. The Board of Directors of the Company also believes that, in order for
the amended Option Plan to carry out those objectives, it must be specific,
clear and consistent, not only as to the terms for calculating and awarding
Common Share options but also as to the vesting terms and exercise rights
accompanying such options. The amended Option Plan is intended to help the Board
of Directors of the Company achieve such results.
NUMBER OF SHARES RESERVED FOR THE AMENDED OPTION PLAN
The aggregate number of Common Shares which may be delivered upon the
exercise of options granted pursuant to the amended Option Plan, including both
Common Shares delivered upon exercise of options granted on or after January 1,
1998 and Common Shares delivered upon exercise of options granted prior to
January 1, 1998, is 250,000 Common Shares. To the extent any option granted
under the amended Option Plan becomes void or cannot be exercised, however, the
Common Shares subject to the part of such option which has become void or
nonexercisable will again be eligible for grant under such plan. The amended
Option Plan will, under its terms, grant all of the options which will be
granted under the plan by the date of the regular annual meeting of the Board of
Directors of the Company for 2000.
ELIGIBILITY
(a) Grant of Options: Subject to the approval of the Compensation
Committee of the Board of Directors of the Company (such committee herein called
the "Committee"), on each date on which the regular annual meeting of the Board
of Directors of the Company for 1998, 1999, or 2000 is held (each such date
herein called an "Option Date"), an option shall be granted by the Committee
under the amended Option Plan to each person who is then a key employee (as
determined under paragraph (b) below). Each option granted to a key employee
shall offer to the key employee the opportunity to purchase a number of Common
Shares equal to the product produced by multiplying (i) the number of Common
Shares which are available for options on the subject Option Date (as described
under paragraph (c) below) by (ii) the key employee's compensation fraction
applicable to such Option Date (as described under paragraph (d) below). No
other options will be granted under the amended Option Plan on or after January
1, 1998.
(b) Key Employees: For purposes of the amended Option Plan, each of the
following persons shall be considered a key employee (to whom an option may be
granted under such plan) as of any Option Date: the persons serving on the
subject Option Date as Chairman of the Board of Directors of the Company, the
Chief Executive Officer, the Chief Operating Officer, the Chief Financial
Officer, the President or a Vice President of the Company, a President or an
Executive Vice President of a regional division or subsidiary of the Company or
any other person who is designated by the Committee as being one of the key
employees to the future success and profitability of the Company and its
subsidiaries and to whom an option under the amended Option Plan is to be
granted on such Option Date. The Company considers that approximately 24 of its
employees are eligible to participate in the amended Option Plan as of March 6,
1998.
(c) Number of Common Shares Available for Options on Each Option Date: The
number of Common Shares which are available for options granted on any Option
Date shall be equal to the number produced by subtracting B from A (A - B),
where "A" refers to 150,000 Common Shares when the Option Date occurs in 1998,
200,000 Common Shares when the Option Date occurs in 1999, and 250,000 Common
Shares when the Option Date occurs in 2000, and "B" refers to the number of
Common Shares which are covered by the portions of the options which have been
granted under the amended Option Plan on all dates that have occurred prior to
12
<PAGE> 15
the subject Option Date, including dates that occurred prior to January 1, 1998,
and which have not become void by the subject Option Date.
(d) Key Employees' Compensation Fractions: A key employee's compensation
fraction applicable to any Option Date (which is used to determine the portion
of the Common Shares available for options granted on such Option Date which
will be subject to the option to be granted on such date to such key employee)
shall be equal to a fraction having (i) a numerator equal to such key employee's
annual rate of compensation for the Company's fiscal year in which the date on
which such Option is granted falls and (ii) a denominator equal to the aggregate
annual rates of compensation for the same fiscal year of all persons who are key
employees as of the subject Option Date.
In general, a key employee's annual rate of compensation for any fiscal
year of the Company shall be deemed to be equal to the sum of (i) the amount of
his or her rate of base salary for services for the Company and/or its
affiliated companies which is in effect on the first day of such fiscal year.
Incentive compensation which the Company determines may be earned by the key
employee with respect to each fiscal year, reimbursements or other expense
allowances, fringe benefits, moving expenses, welfare benefits and any benefits
provided under this amended Option Plan are not, however, considered part of a
key employee's annual rate of compensation.
Also, the annual rate of compensation of the Chairman of the Board of
Directors of the Company as of the first day of any fiscal year will not be
deemed for purposes of the amended Option Plan to be less than the annual rate
of compensation as of such date of the Company's Chief Executive Officer, even
if the Chairman of the Board receives a lesser amount of compensation.
TERMS AND EXERCISE OF OPTIONS
Each option granted under the amended Option Plan to a key employee gives
the key employee the right to purchase the number of Common Shares which are
subject to the option under the conditions described below.
The price at which any Common Share subject to the option may be purchased
(such price herein called the "Option Price") will be the fair market value of a
Common Share on the Option Date on which such option is granted. In general, the
fair market value of a Common Share on any Option Date will be deemed to be the
closing price on such date of a Common Share on the largest national securities
exchange (including the NASDAQ National Market) on which Common Shares are then
listed. In this regard, the closing price of a Common Share traded on NASDAQ on
March 18, 1998 (the latest practical date at the time this description was
prepared) was $9.75.
The option may not be transferred by the key employee to whom it is granted
except by will or the laws concerning inheritances, and during the key
employee's lifetime can be exercised only by him or her.
Further, the option may, in general, be able to be exercised only on or
after the end of the fiscal year in which such option is granted.
Notwithstanding the above provisions, the option will become void as to all
Common Shares which were subject to the option if the key employee to whom the
option is granted fails to purchase Common Shares (whether through the amended
Option Plan or otherwise) during the Company's fiscal year during which the
option is granted at a cost to the key employee of at least 10% of his or her
incentive compensation earned for such fiscal year. (For this purpose, the
incentive compensation for any fiscal year of the Chairman of the Board of
Directors of the Company for such fiscal year will not be deemed to be less than
the incentive compensation for such fiscal year of the Company's Chief Executive
Officer, even if the Chairman of the Board receives a lesser amount of incentive
compensation.)
In addition, the option will become void as to all of the Common Shares
which are subject to the option and have not been earlier purchased under the
option (including both Common Shares with respect to which the option has not
earlier become exercisable under the provisions of the option and Common Shares
with respect to which the option has become exercisable but has not earlier been
exercised) no later than the earlier of ten years from the date the option is
granted or the date determined in accordance with the following provisions:
13
<PAGE> 16
(i) If the key employee to whom the option is granted dies while still
an employee or director of the Company or an affiliate of the Company, the
date which is one year after the date of the key employee's death;
(ii) If the key employee to whom the option is granted no longer is an
employee or a director of the Company or an affiliate of the Company by
reason of having become totally disabled, the date which is one year after
the latest date on which he or she was an employee or a director of the
Company;
(iii) If the key employee to whom the option is granted no longer is
an employee or a director of the Company or an affiliate of the Company by
reason of his or her voluntary resignation or for cause (e.g., because of
fraud, felony, willful misconduct or commission of any act which causes or
may reasonably be expected to cause substantial damage to the Company or
any affiliate of the Company), the latest date on which he or she was an
employee or director of the Company; or
(iv) If the key employee to whom the option is granted no longer is an
employee or a director of the Company or an affiliate of the Company for
any reason other than his or her death, his or her disability, his or her
voluntary resignation or for cause, the date which is 60 days after the
latest day on which he or she was an employee or director of the Company.
Any option to be granted under the amended Option Plan will also be subject
to any additional terms as are specified by the Committee in the applicable
written option agreement.
The payment for any Common Shares subject to an option granted to a key
employee under the amended Option Plan which are being purchased by the key
employee (or, if applicable, by another person to whom the option is transferred
after the key employee's death) must generally be made in cash.
MISCELLANEOUS RULES
The fair market value of a Common Share as of any date will, for purposes
of the amended Option Plan, generally be deemed to be the closing price on such
date of a Common Share on the largest national securities exchange on which the
Common Shares are then listed (which currently is the NASDAQ National Market).
Further, the number and class of Common Shares which are subject to options
granted under the amended Option Plan and the Option Prices of such options will
be adjusted appropriately in the event there are changes in the outstanding
Common Shares of the Company by reason of stock dividends, stock splits,
recapitalizations, mergers, consolidations, liquidations or other similar
changes in the capitalization of the Company. In any such case, the aggregate
number and classes of shares available under the amended Option Plan and the
number of shares as to which options may be granted also will be appropriately
adjusted.
In addition, if at any time the Committee determines, in its discretion,
that the listing of Common Shares purchased under the amended Option Plan on any
securities exchange, the registration or qualification of such shares under any
state or federal law or the consent or approval of any governmental regulatory
body is necessary or desirable as a condition of, or in connection with, the
purchase, issue or transfer of such Common Shares purchased under the amended
Option Plan, then such Common Shares will not be purchased, issued or
transferred unless and until one of the following conditions is satisfied: (i)
such listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Committee, or
(ii) the applicable key employee or other person who exercises the option agrees
that the Common Shares subject to the option may be issued or transferred
subject to any restrictions that will make it unnecessary to effect or obtain
such listing, registration, qualification, consent or approval.
TAX ASPECTS
In general, the grant of an option to a key employee under the amended
Option Plan does not result in federal income tax to the key employee, or a
deduction to the Company or any subsidiary of the Company, at the time of the
grant of the option.
However, upon the exercise of an option granted to a key employee under the
amended Option Plan, the excess of the fair market value on the date of exercise
of the Common Shares being purchased under the option
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<PAGE> 17
over the Option Price of such shares will generally be considered compensation
income to the key employee when the option is exercised.
Also, in general, the Company or a subsidiary of the Company will be
entitled to claim a deduction for its taxable year which includes the end of the
key employee's taxable year in which income is recognized by the key employee by
reason of the exercise of the option, and the amount of such deduction will be
equal to the taxable income recognized by the key employee. (In this regard, the
Company believes that the value of the options granted under the Option Plan to
certain executive officers of the Company and its subsidiaries will be treated
as performance-based compensation and thereby will be deductible by the Company
and its subsidiaries without regard to the $1 million deduction limits of
Section 162(m) of the Internal Revenue Code.)
In the event of a subsequent sale or exchange of the shares acquired upon
exercise of the option, any increase or decrease in the value of such shares
after the date of exercise would generally qualify as long-term capital gain or
loss if the shares have been held by the person who exercised the option for
more than one year after such date or short-term capital gain or loss if the
shares have been held for one year or less after such date.
Certain special rules may apply when the key employee to whom the option is
granted is subject to Section 16(b) of the Securities Exchange Act of 1934 (the
"1934 Act"), which section generally provides that sales and purchases of Common
Shares of the Company by certain directors, officers or other key employees at a
profit can subject the person to suit in order to prevent him or her from
obtaining short-swing trading profits. The effect of these special rules at this
time is somewhat unclear, but they potentially could cause some slight delay in
the key employee recognizing compensation income, and in the Company taking a
deduction, by reason of the exercise by the key employee of an option granted
under the amended Option Plan.
Any key employee subject to Section 16(b) of the 1934 Act will need to
check carefully with his or her tax advisor with respect to the effect of such
section on the time at which compensation attributable to the exercise of an
option granted under the amended Option Plan will be included in his or her
income.
The above discussion is a general overview of the federal income tax
consequences of the amended Option Plan and is not intended to cover all tax
aspects of such plan. It is based on current federal income tax laws and
regulations and is subject to change if such laws and regulations are amended or
modified.
AMENDMENT
The Company may amend or terminate the amended Option Plan at any time by
action taken by the Company's Board of Directors.
However, no such action can adversely affect the rights of any key employee
under any option granted under the amended Option Plan prior to the amendment or
termination.
Finally, no amendment can change the class of employees or persons eligible
to receive options under the amended Option Plan, change the aggregate number of
shares to be subject to options granted under the amended Option Plan or
materially increase the benefits to eligible persons under the amended Option
Plan without, in any of such cases, approval by the majority of the outstanding
Common Shares of the Company present or represented and entitled to vote at a
meeting of shareholders of the Company.
ADMINISTRATION OF THE AMENDED OPTION PLAN
The amended Option Plan is administered by the Compensation Committee of
the Board of Directors of the Company, which is the Committee referred to in
this discussion.
The Committee will prepare a form of a written option agreement, which form
shall comply with all provisions set forth in the amended Option Plan, to use in
issuing options granted under such plan.
The grant of options under the amended Option Plan shall be made by the
Committee and be effected by the execution of written option agreements in the
form approved by the Committee and signed by a member of the Committee (or any
person designated as its agent for this purpose).
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<PAGE> 18
The Committee has, subject to the applicable provisions of the amended
Option Plan, full authority and discretion to interpret the amended Option Plan,
and its decision on all matters relating to the amended Option Plan will be
conclusive on all interested persons.
REQUIRED VOTE
The amendments to the Option Plan require the affirmative vote of the
holders of a majority of the Common Shares present in person or represented by
proxy and entitled to vote at the Meeting. THE BOARD OF DIRECTORS OF THE COMPANY
RECOMMENDS A VOTE FOR THE ADOPTION OF THIS PROPOSAL.
APPROVAL OF AMENDMENTS TO THE COMPANY'S
OUTSIDE DIRECTORS STOCK OPTION PLAN
In 1993, the Board of Directors and shareholders of the Company adopted the
Company's Outside Directors Stock Option Plan (the "Outside Directors Option
Plan"). The purpose of the Outside Directors Option Plan is to offer to each
member of the Company's Board of Directors who is not also an employee of the
Company or any subsidiary of the Company (with any such non-employee Director
herein called an "Outside Director") the opportunity to acquire Common Shares
through written offers of the Company (each offer continuing for a stated period
of time at a set price) to sell such stock (such written offers herein called
"options").
The Board of Directors of the Company has reviewed the provisions of the
Outside Directors Option Plan and believes that additional amendments to the
Outside Directors Option Plan, to be effective as of January 1, 1998, are
necessary to fulfill the purposes of such plan and to help achieve the results
described below under "Proposed Amendments."
The full text of the amended Outside Directors Option Plan is set forth in
Appendix B to this Proxy Statement. The following discussion describes the
operation of the amended Outside Directors Option Plan on or after January 1,
1998 and reflects the changes made in such plan effective as of such date, but
it is qualified in its entirety by reference to the text of the amended Outside
Directors Option Plan.
PROPOSED AMENDMENTS
The Board of Directors of the Company believes that it is valuable to
provide the Outside Directors of the Company with a greater direct "stake" in
the future economic performance of the Company than they currently have through
the issuance of options for the purchase of meaningful numbers of Common Shares.
The Board of Directors of the Company also believes that all or the bulk of the
compensation to be given to the Outside Directors for their services as
Directors should be paid in the form of options to purchase Common Shares. The
amended Outside Directors Option Plan is intended to help the Board of Directors
of the Company achieve such results.
NUMBER OF SHARES RESERVED FOR THE AMENDED OUTSIDE DIRECTORS OPTION PLAN
The aggregate number of Common Shares which may be delivered upon the
exercise of options granted pursuant to the amended Outside Directors Option
Plan on or after January 1, 1998 (and not including Common Shares which may be
delivered upon the exercise of options granted pursuant to the Outside Directors
Option Plan prior to January 1, 1998) shall be 75,000 Common Shares. Upon the
expiration or termination of any option (including an option granted under the
Outside Directors Option Plan prior to January 1, 1998) that has not been
exercised in full, unpurchased Common Shares covered by such option may be made
available for other options to be granted under the amended Outside Directors
Option Plan.
ELIGIBILITY
Options may be granted under the amended Outside Directors Option Plan to,
and only to, persons who are Outside Directors of the Company at the times the
options are granted.
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GRANT OF OPTIONS
On the date of the 1998 Annual Meeting of Shareholders of the Company, and
on the date of each Annual Meeting of Shareholders of the Company thereafter as
long as the amended Outside Directors Option Plan is in effect and still has
Common Shares available for use under the plan, an option to purchase a number
of Common Shares (as described below) shall be granted automatically to each
person who is then an Outside Director and who continues in such office after
such annual meeting.
The number of Common Shares that will be subject to any such option granted
to an Outside Director shall be equal to the quotient produced by dividing
$25,000 by the fair market value of a Common Share on the date of the applicable
Annual Meeting of Shareholders of the Company.
If, on the date of any Annual Meeting of Shareholders of the Company, there
are not sufficient Common Shares available under the amended Outside Directors
Option Plan for granting all of the options called for by the terms of such
plan, the number of Common Shares for which options shall be granted shall be
prorated equally among the Outside Directors entitled to receive such options.
TERMS AND EXERCISE OF OPTIONS
Each option granted under the amended Outside Directors Option Plan to an
Outside Director gives the Outside Director the right to purchase the number of
Common Shares which are subject to the option under the conditions described
below.
The price at which any Common Share subject to the option may be purchased
(such price herein called the "Option Price") will be the fair market value of a
Common Share on the date on which such option is granted. In general, the fair
market value of a Common Share on any such option date will be deemed to be the
closing price on such date of a Common Share on the largest national securities
exchange (including the NASDAQ National Market) on which Common Shares are then
listed. In this regard, the closing price of a Common Share traded on NASDAQ on
March 18, 1998 (the latest practical date at the time this description was
prepared) was $9.75.
The option may not be transferred by the Outside Director to whom it is
granted except by will or the laws of descent and distribution, and during the
Outside Director's lifetime shall be exercisable only by him or her.
The option shall, subject to the provisions described below, be exercisable
on any date after (but not before) the date on which occurs the first Annual
Meeting of Shareholders of the Company which follows the date of the Annual
Meeting of Shareholders on which the option was granted.
Notwithstanding the above provisions, the option will be nonexercisable and
void, on the date on which occurs the first Annual Meeting of Shareholders of
the Company which follows the date of the Annual Meeting of Shareholders on
which the option was granted, as to all Common Shares which were subject to such
option if the Outside Director to whom the option was granted has failed to
attend at least 75% of the meetings of the Board of Directors of the Company
which occurred in the fiscal year of the Company during which the option was
granted.
In addition, the option shall not in any event be exercisable as to any
Common Shares with respect to which the option is granted (including, to the
extent applicable, both Common Shares with respect to which the option has not
earlier become exercisable under the other provisions of the plan and Common
Shares with respect to which the option has become exercisable but has not
earlier been exercised) after the earlier of the expiration of ten years from
the date the option is granted or the date determined in accordance with the
following provisions:
(i) If the Outside Director to whom the option was granted dies while
still an Outside Director of the Company or within 30 days after he or she
ceases to be an Outside Director (or within one year after he or she ceases
to be an Outside Director if such termination as an Outside Director occurs
by reason of the Outside Director's disability), the date which is one year
after the date of the Outside Director's death;
(ii) If the Outside Director to whom the option was granted ceases to
be an Outside Director of the Company by reason of having become disabled,
the date which is one year after the date the Outside Director ceases to be
an Outside Director; or
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(iii) If the Outside Director to whom the option was granted ceases to
be an Outside Director of the Company for any reason other than death or
disability, the date which is three months after the date the Outside
Director ceases to be an Outside Director.
Any option to be granted under the amended Outside Directors Option Plan
will also be subject to any additional terms as are specified by the Board of
Directors of the Company in the applicable written option agreement.
The payment for any Common Shares subject to an option granted to an
Outside Director under the amended Outside Directors Option Plan which are being
purchased by the Outside Director (or, if applicable, by another person to whom
the option is transferred after the Outside Director's death) must generally be
made in cash.
MISCELLANEOUS RULES
The number and class of Common Shares which are subject to options granted
under the amended Outside Directors Option Plan and the Option Prices of such
options will be adjusted appropriately in the event there are changes in the
outstanding Common Shares of the Company by reason of stock dividends, stock
splits, recapitalizations, mergers, consolidations, liquidations or other
similar changes in the capitalization of the Company. In any such case, the
aggregate number and classes of shares available under the amended Outside
Directors Option Plan and the number of shares as to which options may be
granted also will be appropriately adjusted.
In addition, if at any time the Board of Directors of the Company
determines, in its discretion, that the listing of Common Shares purchased under
the amended Outside Directors Option Plan on any securities exchange, the
registration or qualification of such shares under any state or federal law or
the consent or approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the purchase, issue or
transfer of such Common Shares purchased under the amended Outside Directors
Option Plan, then such Common Shares will not be purchased, issued or
transferred unless and until one of the following conditions is satisfied: (i)
such listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Board of
Directors of the Company, or (ii) the applicable Outside Director or other
person who exercises the option agrees that the Common Shares subject to the
option may be issued or transferred subject to any restrictions that will make
it unnecessary to effect or obtain such listing, registration, qualification,
consent or approval.
TAX ASPECTS
In general, the grant of an option to an Outside Director under the amended
Outside Directors Option Plan does not result in federal income tax to the
Outside Director, or a deduction to the Company, at the time of the grant of the
option.
However, upon the exercise of an option granted to an Outside Director
under the amended Outside Directors Option Plan, the excess of the fair market
value on the date of exercise of the Common Shares being purchased under the
option over the Option Price of such shares will generally be considered
compensation income to the Outside Director when the option is exercised.
Also, in general, the Company will be entitled to claim a deduction for its
taxable year which includes the end of the Outside Director's taxable year in
which income is recognized by the Outside Director by reason of the exercise of
the option, and the amount of such deduction will be equal to the taxable income
recognized by the Outside Director.
In the event of a subsequent sale or exchange of the shares acquired upon
exercise of the option, any increase or decrease in the value of such shares
after the date of exercise would generally qualify as long-term capital gain or
loss if the shares have been held by the person who exercised the option for
more than one year after such date or short-term capital gain or loss if the
shares have been held for one year or less after such date.
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Certain special rules may apply when the Outside Director to whom the
option is granted is subject to Section 16(b) of the Securities Exchange Act of
1934 (the "1934 Act"), which section generally provides that sales and purchases
of Common Shares of the Company by certain directors, officers or other key
employees at a profit can subject the person to suit in order to prevent him or
her from obtaining short-swing trading profits. The effect of these special
rules at this time is somewhat unclear, but they potentially could cause some
slight delay in the Outside Director recognizing income, and in the Company
taking a deduction, by reason of the exercise by the Outside Director of an
option granted under the amended Outside Directors Option Plan.
Any Outside Director subject to Section 16(b) of the 1934 Act will need to
check carefully with his or her tax advisor with respect to the effect of such
section on the time at which compensation attributable to the exercise of an
option granted under the amended Outside Directors Option Plan will be included
in his or her income.
The above discussion is a general overview of the federal income tax
consequences of the amended Outside Directors Option Plan and is not intended to
cover all tax aspects of such plan. It is based on current federal income tax
laws and regulations and is subject to change if such laws and regulations are
amended or modified.
AMENDMENT
The Company may amend or terminate the amended Outside Directors Option
Plan at any time by action taken by the Company's Board of Directors.
However, no such action can adversely affect the rights of any Outside
Director under any option granted under the amended Outside Directors Option
Plan prior to the amendment or termination.
Finally, no amendment can change the class of persons eligible to receive
options under the amended Outside Directors Option Plan, change the aggregate
number of shares to be subject to options granted under the amended Outside
Directors Option Plan or materially increase the benefits to eligible persons
under the amended Outside Directors Option Plan without, in any of such cases,
approval by the majority of the outstanding Common Shares of the Company present
or represented and entitled to vote at a meeting of shareholders of the Company.
ADMINISTRATION OF THE AMENDED OPTION PLAN
The amended Outside Directors Option Plan is administered by the Board of
Directors of the Company.
The Board of Directors of the Company will prepare a form of a written
option agreement, which form shall comply with all provisions set forth in the
amended Outside Directors Option Plan, to use in issuing options granted under
such plan.
The grant of options under the amended Outside Directors Option Plan shall
be made by the Board of Directors of the Company and be effected by the
execution of written option agreements in the form approved by such Board and
signed by a member of such Board (or any person designated as its agent for this
purpose).
The Board of Directors of the Company has, subject to the applicable
provisions of the amended Outside Directors Option Plan, full authority and
discretion to interpret the amended Outside Directors Option Plan, and its
decision on all matters relating to the amended Outside Directors Option Plan
will be conclusive on all interested persons.
REQUIRED VOTE
The amendments to the Outside Directors Option Plan require the affirmative
vote of the holders of a majority of the Common Shares present in person or
represented by proxy and entitled to vote at the Meeting. THE BOARD OF DIRECTORS
OF THE COMPANY RECOMMENDS A VOTE FOR THE ADOPTION OF THIS PROPOSAL.
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<PAGE> 22
INDEPENDENT AUDITORS
The Board of Directors has appointed Arthur Andersen LLP as independent
auditors of the Company for fiscal year 1998. Arthur Anderson LLP has served the
Company in that capacity since 1983.
While there is no legal requirement that the selection of auditors be
submitted to a vote of the shareholders, the Board of Directors believes that
the selection of auditors is of sufficient importance to justify shareholder
ratification. In the event that the shareholders do not confirm the selection of
Arthur Andersen LLP, the Board of Directors will reconsider its selection. It is
anticipated that a representative of Arthur Andersen LLP will attend the
Meeting, will have an opportunity to make a statement if he or she desires to do
so and will be available to respond to appropriate questions that may be asked
by shareholders.
Confirmation of the appointment of Arthur Andersen LLP will require the
affirmative vote of the holders of a majority of Company Common Shares present
in person or represented by proxy and entitled to vote at the Meeting. THE BOARD
OF DIRECTORS RECOMMENDS THAT THE SELECTION OF ARTHUR ANDERSEN LLP BE CONFIRMED.
SHAREHOLDER PROPOSALS
Proposals of security holders intended by such holders to be presented at
the next annual meeting of shareholders of the Company must be received by the
Company no later than November 23, 1998 for inclusion in the Company's proxy
statement and proxy relating to that meeting. Proposals should be sent to Ronald
G. Gratz, Secretary, Zaring National Corporation, 11300 Cornell Park Drive,
Suite 500, Cincinnati, Ohio 45242.
OTHER BUSINESS
The Board of Directors knows of no other matter to be presented, or to be
acted upon, at the Meeting. If any other matter comes before the Meeting or any
adjournment thereof, the members of the proxy committee named in the enclosed
proxy will vote upon such matter in accordance with their best judgment.
This Proxy Statement and the above Notice are sent by order of the Board of
Directors.
RONALD G. GRATZ
Secretary
March 25, 1998
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APPENDIX A
ZARING NATIONAL CORPORATION
KEY EMPLOYEES STOCK OPTION PLAN
(AS AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 1, 1998)
(a) Purpose. The purpose of this plan, which is named the Zaring National
Corporation Key Employees Stock Option Plan (such plan herein called the
"Plan"), is to aid in the long-term retention of key employees of Zaring
National and the Subsidiaries, and thereby to advance the long-range interests
and performances of Zaring National and the Subsidiaries, by offering such key
employees the opportunity to acquire Common Shares through written offers of
Zaring National (each offer continuing for a stated period of time at a set
price) to sell such stock (such written offers herein called "options"). This
Plan document amends and restates the Plan effective as of January 1, 1998 and
does not affect any options granted under the Plan prior to such date.
(b) General Definitions. Unless otherwise required by the context and
except as otherwise provided under the following provisions of the Plan, the
following terms when used in the Plan shall have the meanings hereinafter set
forth:
(1) "Affiliated Company" means any corporation or limited liability
company (other than Zaring National) which is part of an unbroken chain of
corporations and limited liability companies (i) that begins with Zaring
National and (ii) in which each corporation or limited liability company in
such chain, other than the last corporation or limited liability company in
such chain, owns at least 50% of the total combined voting power of all
classes of stock or membership interests in one of the other corporations
or limited liability companies in such chain;
(2) "Board of Directors" means the Board of Directors of Zaring
National;
(3) "Committee" means the Compensation Committee of the Board of
Directors;
(4) "Common Shares" means common shares of Zaring National;
(5) "Key Employee" means, with respect to any Option Date, each person
who is eligible to be granted an option on such Option Date under the
provisions of paragraph (e) below;
(6) "Option Date" means each date that occurs in 1998, 1999, or 2000
on which a regular annual meeting of the Board of Directors is held;
(7) "Optionee" means, with respect to any option which is granted
under the Plan, the person to whom such option is granted;
(8) "Option Price" means, with respect to any option granted under the
Plan, the price at which any Common Share subject to the option may be
purchased;
(9) "Subsidiary" means any corporation or limited liability company
(other than Zaring National) which is part of an unbroken chain of
corporations and limited liability companies (i) that begins with Zaring
National and (ii) in which each corporation or limited liability company in
such chain, other than the last corporation or limited liability company in
such chain, owns at least 50% of the total combined voting power of all
classes of stock or membership interests in one of the other corporations
or limited liability companies in such chain; and
(10) "Zaring National" means Zaring National Corporation, or any
corporate successor thereto.
(c) Aggregate Number of Shares Available for Options. The aggregate number
of Common Shares which may be delivered upon the exercise of options granted
pursuant to the Plan, including both Common Shares delivered upon the exercise
of options granted on or after January 1, 1998 and Common Shares delivered upon
the exercise of options granted prior to January 1, 1998, shall be 250,000
Common Shares. Upon any date on which any option which is granted under the Plan
becomes nonexercisable and void as to any Common Shares, such Common Shares
shall become available for other options to be granted under the Plan.
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(d) Grant of Options. Subject to the approval of the Committee, on each
Option Date, an option shall be granted by such Committee under the Plan to each
person who is then a Key Employee (as determined under paragraph (e) below).
Each option so granted to a Key Employee shall offer to the Key Employee the
opportunity to purchase a number of Common Shares equal to the product (rounded
down, if such product is not otherwise a whole number, to the next lower whole
number) produced by multiplying (i) the number of Common Shares which are
available for options on the subject Option Date (as determined under paragraph
(f) below) by (ii) the Key Employee's compensation fraction applicable to such
Option Date (as determined under paragraph (g) below). In no event may any Key
Employee be granted options to purchase more than the total number of Common
Shares which are available under this Plan. Except as provided in this paragraph
(d), no options will be granted under the Plan on or after January 1, 1998.
(e) Key Employees. For purposes of the Plan (and particularly for purposes
of paragraph (d) above), each of the following persons shall be considered a Key
Employee (to whom an option may be granted under the Plan) as of any Option
Date: the person serving on the subject Option Date as Chairman of the Board of
Directors of Zaring National, the Chief Executive Officer, the Chief Operating
Officer, the Chief Financial Officer, the President, or a Vice President of
Zaring National, a President or an Executive Vice President of a regional
division or Subsidiary of Zaring National, or any other person who is designated
by the Committee as being one of the key employees to the future success and
profitability of Zaring National and its Subsidiaries and eligible to receive an
option under the Plan on such Option Date. No other persons may be granted
options under the Plan on or after January 1, 1998.
(f) Number of Common Shares Available for Options on Each Option Date. For
purposes of paragraph (d) above, the number of Common Shares which are available
for options on any Option Date shall be deemed to be equal to the number
produced by subtracting B from A (A--B), where: "A" refers to 150,000 Common
Shares when the Option Date occurs in 1998, 200,000 Common Shares when the
Option Date occurs in 1999, and 250,000 Common Shares when the Option Date
occurs in 2000; and "B" refers to the number of Common Shares which are covered
by the portions of the options which have been granted under the Plan on all
dates that have occurred prior to the subject Option Date, including dates that
occurred prior to January 1, 1998, and which have not become void by the subject
Option Date.
(g) Key Employees' Compensation Fractions. For purposes of paragraph (d)
above, a Key Employee's compensation fraction applicable to any Option Date
shall be deemed to be equal to a fraction having (i) a numerator equal to such
Key Employee's annual rate of compensation for Zaring National's fiscal year in
which such Option Date falls and (ii) a denominator equal to the aggregate
annual rate of compensation for the same fiscal year of all persons who are Key
Employees as of such Option Date. For purposes hereof, the following provisions
shall apply:
(1) Except as otherwise provided below, a Key Employee's annual rate
of compensation for any fiscal year of Zaring National shall be deemed to
be equal to the amount of his or her annual rate of base salary for
services for Zaring National and/or the Affiliated Companies which is in
effect on the first day of such fiscal year. Except as provided in
subparagraph (2) below, in no event shall incentive compensation,
reimbursements or other expense allowances, fringe benefits (cash or
noncash, such as the use of an automobile), moving expenses, welfare
benefits, or any benefits provided under this Plan be considered part of
the Key Employee's annual rate of compensation.
(2) A Key Employee's annual rate of compensation shall be determined
without regard to any reductions in such compensation which the Key
Employee may elect and which may not be includable in the Key Employee's
income for federal income tax purposes by reason of Section 402(e)(3) or
125 of the Internal Revenue Code of 1986, as amended (such act herein
called the "Code").
(3) Notwithstanding the foregoing, in no event shall the annual rate
of compensation for any fiscal year of any Key Employee who is the Chairman
of the Board of Directors of Zaring National on the first day of such
fiscal year be deemed to be less than the annual rate of compensation for
such fiscal year of Zaring National's Chief Executive Officer on the first
day of such fiscal year.
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(h) Requirements of Options. Each option granted under this Plan to a Key
Employee (herein called the "Optionee" of the option):
(1) shall be granted only with respect to Common Shares;
(2) shall call for an Option Price which is equal to the fair market
value of a Common Share on the Option Date on which such option is granted;
(3) shall not be transferable by the Optionee of the option except by
will or the laws of descent and distribution, and during the Optionee's
lifetime shall be exercisable only by him or her;
(4) shall, except as otherwise is provided in subparagraphs (5) and
(6) below, be exercisable as to the total number of Common Shares granted
under the option at any time after (but not before) the end of the fiscal
year in which such option is granted;
(5) shall, notwithstanding the provisions of subparagraph (4) above,
be nonexercisable and void, on the last day of Zaring National's fiscal
year in which the date on which such option is granted falls, as to all
Common Shares which were subject to such option if the Optionee of the
option has failed to purchase Common Shares (whether through the Plan or
otherwise) during such fiscal year at a cost to the Optionee of at least
10% of his or her incentive compensation earned from Zaring National and
the Affiliated Companies for such fiscal year. For purposes hereof, in no
event shall the incentive compensation for any fiscal year of any Optionee
who is the Chairman of the Board of Directors of Zaring National for such
fiscal year or any part thereof be deemed to be less than the incentive
compensation for such fiscal year of Zaring National's Chief Executive
Officer;
(6) shall, notwithstanding the provisions of subparagraph (4) above,
become nonexercisable and void as to all of the Common Shares which are
subject to such option and have not been earlier purchased under the option
(including both Common Shares with respect to which the option has not
earlier become exercisable under the provisions of the option and Common
Shares with respect to which the option has become exercisable but has not
earlier been exercised) no later than the earlier of the date which is ten
years from the date the option is granted or the date determined in
accordance with the following provisions:
(i) If the Optionee of the option dies while still an employee or
director of Zaring National or an Affiliated Company, the date which is
one year after the date of the Optionee's death;
(ii) If the Optionee of the option no longer is an employee or a
director of Zaring National or an Affiliated Company by reason of having
become disabled, the date which is one year after the latest date on
which he or she was such an employee or director. For purposes of the
Plan, an Optionee will be considered disabled only if the Optionee is
unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be
expected to result in death or which can be expected to last for a
continuous period of not less than twelve months;
(iii) If the Optionee of the option no longer is an employee or a
director of Zaring National or an Affiliated Company by reason of his or
her voluntary resignation or for cause, the latest date on which he or
she was such an employee or director. For purposes of the Plan, the
Optionee's loss of his or her employee and/or director position shall be
deemed to be "for cause" if it occurs by reason of or as a result of his
or her participation in conduct consisting of fraud, felony, willful
misconduct, or commission of any act which causes or may reasonably be
expected to cause substantial damage to Zaring National or any
Affiliated Company; and
(iv) If the Optionee of the option no longer is an employee or a
director of Zaring National or an Affiliated Company for any reason
other than his or her death, his or her disability, his or her voluntary
resignation, or for cause, the date which is 60 days after the latest
date on which he or she was such an employee or director;
(7) shall indicate that it is not intended to be an incentive stock
option within the meaning of Section 422 of the Code; and
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(8) shall be subject to any additional terms (but not inconsistent
with the above conditions) as are specified in the applicable written
option agreement.
(i) Adjustments for Changes in Capitalization of Zaring National.
Notwithstanding any other provision of the Plan, the number and class of shares
subject to the options granted under the Plan and the Option Prices of such
options shall be proportionately adjusted in the event of changes in the
outstanding Common Shares by reason of stock dividends, stock splits,
recapitalizations, mergers, consolidations, combinations or exchanges of shares,
split-ups, split-offs, spin-offs, liquidations or other similar changes in
capitalization, or any distribution to common shareholders other than cash
dividends, and, in the event of any such change in the outstanding Common
Shares, the aggregate number and class of shares available under the Plan and
the number of shares as to which options shall be granted shall be appropriately
adjusted.
(j) Miscellaneous Items Concerning Operation of Plan.
(1) Any option granted under the Plan may be exercised as of any date only
by written notice to the Secretary of Zaring National, signed by the Optionee of
the option or such other person who is entitled to exercise the option and
received during normal business hours on such date by the office of the
Secretary of Zaring National. The notice shall state the number of shares with
respect to which the option is being exercised and shall be accompanied by
payment in full of the Option Price for such shares. If the option is exercised
by anyone other than the Optionee, the notice shall be accompanied by proof of
the right of such person to exercise the option. Payment for the shares shall be
made in cash (which, for purposes hereof, shall be deemed to include payment in
currency or by certified check, bank draft, cashier's check, or money order).
(2) At the time of the transfer of Common Shares as a result of the
exercise of an option, the Committee shall, in order to ensure that all federal,
state, local, and other taxes required to be withheld in connection with the
exercise of such option are paid to the applicable governments, have the right,
in its discretion, either: (i) to direct Zaring National to retain or sell
(without notice to the applicable Optionee or such other person who exercises
the option) a sufficient number of Common Shares to cover the amount of such
taxes, remitting only the balance to the Optionee or such other person who
exercises the option; (ii) to direct Zaring National and the Affiliated
Companies to deduct the amount of such taxes from any other amounts payable by
Zaring National and the Affiliated Companies to the Optionee (or his or her
legal representatives or beneficiaries); (iii) to require that the Optionee or
such other person who exercises the option to pay to Zaring National the amount
of such taxes; or (iv) to use a combination of such methods.
(3) For purposes of the Plan, the fair market value of a Common Share on
any date shall be deemed to be: (i) the closing price on such date of a Common
Share on the largest national securities exchange on which the Common Shares are
then listed; or (ii) if there have been no sales of Common Shares on such
exchange on such date, the average of the highest bid and lowest asked prices on
such exchange at the close of business on such date; or (iii) if there are no
bid or asked prices on such exchange on such date or if no national securities
exchange then lists the Common Shares on such date, the fair market value of a
Common Share as is determined by the Committee in good faith. For purposes
hereof, the NASDAQ National Market will be considered a national securities
exchange as long as the information reported daily for Common Shares is
substantially the same as that reported for securities listed on national
securities exchanges.
(4) If at any time the Committee shall determine, in its discretion, that
the listing of the Common Shares with respect to which any option is granted
under the Plan on any securities exchange, the registration or qualification of
such shares under any state or federal law, or the consent or approval of any
governmental regulatory body is necessary or desirable as a condition of, or in
connection with, the granting of an option or the purchase, issue, or transfer
of the Common Shares with respect to which an option is granted, then such
option may not be exercised in whole or in part unless and until one of the
following conditions is satisfied: (i) such listing, registration,
qualification, consent, or approval shall have been effected or obtained free of
any conditions not acceptable to the Committee, or (ii) the Optionee of the
option or such other person who exercises the option shall have agreed that the
Common Shares may be issued or transferred to him or her subject to any
restrictions that will make it unnecessary to effect or obtain such listing,
registration, qualification, consent, or approval.
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(k) Administration.
(1) The Plan shall be administered by the Committee.
(2) The Committee shall have prepared and shall approve a form of written
option agreement, which form shall comply with all provisions set forth in this
Plan, to use in issuing options required under this Plan. The grant of options
under the Plan shall made by the Committee and shall be effected by the
execution of written option agreements in the form approved by the Committee and
signed by a member of the Committee (or any person designated as its agent for
this purpose).
(3) The Committee shall, subject to the applicable provisions of the Plan,
have full authority and discretion to interpret the Plan, to prescribe, amend,
and rescind rules and regulations relating to the Plan, and to make all other
determinations necessary or advisable for the administration of the Plan. The
Committee's determination as to any matter relating to the interpretation of the
Plan shall be conclusive on all persons.
(l) No Right of Employment. Nothing contained in the Plan or any option
granted pursuant to the Plan shall confer on any Key Employee any right to be
continued as Chairman of the Board of Directors of Zaring National or in the
employment of Zaring National or any Affiliated Company or to interfere in any
way with the right of the shareholders of Zaring National to remove him or her
from the Board of Directors of Zaring National or the right of Zaring National
or any Affiliated Company to terminate his or her employment at any time, in the
same manner as though the Plan or any options granted hereunder were not in
effect.
(m) Amendment or Termination of Plan. The Board of Directors of Zaring
National shall have the right to amend, suspend, or terminate this Plan at any
time; provided, however, that: (i) no action shall affect adversely the rights
of any Optionee under any option granted under this Plan prior to such
amendment, suspension, or termination; and (ii) no amendment changing the class
of employees or persons eligible to receive options hereunder, changing the
aggregate number of shares to be subject to options granted hereunder, or
materially increasing the benefits accruing to eligible persons hereunder may be
made without, in any of such cases, approval by the favorable vote of a majority
of the outstanding shares of Zaring National present, or represented, and
entitled to vote at a meeting duly held in accordance with the applicable laws
of the state in which Zaring National is incorporated.
(n) Approval of Plan and Corporate Conditions on Effectiveness of Options.
This Plan, as amended and restated effective as of January 1, 1998, shall be
approved by the favorable vote of a majority of the outstanding shares of Zaring
National present, or represented, and entitled to vote at a meeting duly held in
accordance with the applicable laws of the state in which Zaring National is
incorporated. Notwithstanding any other provision of the Plan to the contrary,
any option granted under the Plan on or after January 1, 1998 shall not be
exercisable prior to such shareholder approval.
A-5
<PAGE> 28
APPENDIX B
ZARING NATIONAL CORPORATION
OUTSIDE DIRECTORS STOCK OPTION PLAN
(AS AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 1, 1998)
(a) Purpose: The purpose of this plan, which is named the Zaring National
Corporation Outside Directors Stock Option Plan (such plan herein called the
"Plan"), is to offer to the Outside Directors of Zaring National the opportunity
to acquire Common Shares through written offers of Zaring National (each offer
continuing for a stated period of time at a set price) to sell such stock (such
written offers herein called "options"). This Plan document amends and restates
the Plan effective as of January 1, 1998 and does not affect any options granted
under the Plan prior to such date.
(b) General Definitions. Unless otherwise required by the context and
except as otherwise provided under the following provisions of the Plan, the
following terms when used in the Plan shall have the meanings hereinafter set
forth:
(1) "Affiliated Company" means any corporation or limited liability
company (other than Zaring National) which is part of an unbroken chain of
corporations and limited liability companies (i) that begins with Zaring
National and (ii) in which each corporation or limited liability company in
such chain, other than the last corporation or limited liability company in
such chain, owns at least 50% of the total combined voting power of all
classes of stock or membership interests in one of the other corporations
or limited liability companies in such chain;
(2) "Board of Directors" means the Board of Directors of Zaring
National;
(3) "Common Shares" means common shares of Zaring National;
(4) "Optionee" means, with respect to any option which is granted
under the Plan, the person to whom such option is granted;
(5) "Option Price" means, with respect to any option granted under the
Plan, the price at which any Common Share subject to the option may be
purchased;
(6) "Outside Director" means, as of any point in time, any person who
is then a member of the Board of Directors and who is not then a common law
employee of Zaring National or any Affiliated Company; and
(7) "Zaring National" means Zaring National Corporation, or any
corporate successor thereto.
(c) Type of Options to be Granted Under Plan: Options issued pursuant to
the Plan shall be options which do not qualify as incentive stock options within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended.
(d) Aggregate Number of Shares Available for Options: The aggregate number
of Common Shares which may be delivered upon the exercise of options granted
pursuant to the Plan on or after January 1, 1998 (and not including Common
Shares which may be delivered upon the exercise of options granted pursuant to
the Plan prior to January 1, 1998) shall be 75,000 Common Shares. Upon the
expiration or termination of any option (including an option granted under the
Plan prior to January 1, 1998) that has not been exercised in full, unpurchased
Common Shares covered by such option may be made available for other options to
be granted under the Plan.
(e) Persons Eligible for Options: Options may be granted under the Plan (at
such times as are indicated in, and in accordance with, the provisions of
paragraph (f) below) to, and only to, persons who are Outside Directors of
Zaring National at the times the options are granted.
(f) Automatic Grant of Options: On the date of the 1998 Annual Meeting of
Shareholders of Zaring National, and on the date of each Annual Meeting of
Shareholders of Zaring National thereafter as long as the Plan is in effect and
still has available any Common Shares that can be delivered upon the exercise of
options granted on such date, an option to purchase a number of Common Shares
that is equal to the quotient produced
B-1
<PAGE> 29
by dividing $25,000 by the fair market value of a Common Share on the date of
the applicable Annual Meeting of Shareholders of Zaring National shall be
granted automatically to each person who is then an Outside Director who
continues in such office after such Annual Meeting. If on the date of any such
Annual Meeting there are not sufficient Common Shares available under the Plan
for granting all of the options called for by this paragraph (f), the number of
Common Shares for which options shall be granted shall be prorated equally among
the Outside Directors entitled to receive such options.
(g) Requirements of Options: Each option granted under this Plan to an
Outside Director (herein called the "Optionee" of the option):
(1) shall be granted only with respect to Common Shares and in
accordance with the provisions of paragraph (f) of the Plan;
(2) shall call for an Option Price which is equal to the fair market
value of the Common Shares as to which the option is granted on the date on
which such option is granted;
(3) shall not be transferable by the Optionee of the option except by
will or the laws of descent and distribution, and during the Optionee's
lifetime shall be exercisable only by him or her;
(4) shall, subject to the provisions of subparagraphs (5) and (6)
below, be exercisable on any date after (but not before) the date on which
occurs the first Annual Meeting of Shareholders of Zaring National which
follows the date of the Annual Meeting of Shareholders on which the option
was granted;
(5) shall be nonexercisable and void, on the date on which occurs the
first Annual Meeting of Shareholders of Zaring National which follows the
date of the Annual Meeting of Shareholders on which the option was granted,
as to all Common Shares which were subject to such option if the Optionee
of the option has failed to attend at least 75% of the meetings of the
Board of Directors of Zaring National which occurred in the fiscal year of
Zaring National during which the option was granted;
(6) shall not in any event be exercisable as to any Common Shares with
respect to which the option is granted (including, to the extent
applicable, both Common Shares with respect to which the option has not
earlier become exercisable under the other provisions of the Plan and
Common Shares with respect to which the option has become exercisable but
has not earlier been exercised) after the earlier of the expiration of ten
years from the date the option is granted or the date determined in
accordance with the following provisions:
(i) If the Optionee of the option dies while still an Outside
Director of Zaring National or within 30 days after he or she ceases to
be an Outside Director (or within one year after he or she ceases to be
an Outside Director if such termination as an Outside Director occurs by
reason of the Optionee's disability), the date which is one year after
the date of the Optionee's death;
(ii) If the Optionee of the option ceases to be an Outside Director
of Zaring National by reason of having become disabled, the date which
is one year after the date the Optionee ceases to be an Outside
Director. For purposes of the Plan, an Optionee will be considered
disabled only if the Optionee is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or which can
be expected to last for a continuous period of not less than twelve
months; or
(iii) If the Optionee of the option ceases to be an Outside
Director of Zaring National for any reason other than death or
disability, the date which is three months after the date the Optionee
ceases to be an Outside Director; and
(7) shall be subject to any additional terms (but not inconsistent
with the above conditions) as are specified in the applicable written
option agreement.
(h) Adjustments for Changes in Capitalization of Zaring National:
Notwithstanding any other provision of the Plan, the number and class of shares
subject to the options granted under the Plan and the Option Prices of such
options shall be proportionately adjusted in the event of changes in the
outstanding Common Shares by reason of stock dividends, stock splits,
recapitalizations, mergers, consolidations, combinations or exchanges of shares,
split-ups, split-offs, spin-offs, liquidations or other similar changes in
capitalization, or any distribution to
B-2
<PAGE> 30
common shareholders other than cash dividends, and, in the event of any such
change in the outstanding Common Shares, the aggregate number and class of
shares available under the Plan and the number of shares as to which options may
be granted shall be appropriately adjusted.
(i) Miscellaneous Items Concerning Operation of Plan:
(1) Any option granted under the Plan may be exercised as of any date
only by written notice to the Secretary of Zaring National, signed by the
Optionee of the option or such other person who is entitled to exercise the
option and received during normal business hours on such date by the office
of the Secretary of Zaring National. The notice shall state the number of
shares with respect to which the option is being exercised and shall be
accompanied by payment in full of the Option Price for such shares. If the
option is exercised by anyone other than the Optionee, the notice shall be
accompanied by proof of the right of such person to exercise the option.
Payment for the shares shall be made in cash (which, for purposes hereof,
shall be deemed to include payment in currency or by certified check, bank
draft, cashier's check, or money order).
(2) At the time of the transfer of Common Shares as a result of the
exercise of an option, the Board of Directors shall, in order to ensure
that all federal, state, local, and other taxes required to be withheld in
connection with the exercise of such option are paid to the applicable
governments, have the right, in its discretion, either: (i) to direct
Zaring National to retain or sell (without notice to the applicable
Optionee or such other person who exercises the option) a sufficient number
of Common Shares to cover the amount of such taxes, remitting only the
balance to the Optionee or such other person who exercises the option; (ii)
to direct Zaring National and the Affiliated Companies to deduct the amount
of such taxes from any other amounts payable by Zaring National and the
Affiliated Companies to the Optionee (or his or her legal representatives
or beneficiaries); (iii) to require that the Optionee or such other person
who exercises the option to pay to Zaring National the amount of such
taxes; or (iv) to use a combination of such methods.
(3) For purposes of the Plan, the fair market value of a Common Share
on any date shall be deemed to be: (i) the closing price on such date of a
Common Share on the largest national securities exchange on which the
Common Shares are then listed; or (ii) if there have been no sales of
Common Shares on such exchange on such date, the average of the highest bid
and lowest asked prices on such exchange at the close of business on such
date; or (iii) if there are no bid or asked prices on such exchange on such
date or if no national securities exchange then lists the Common Shares on
such date, the fair market value of a Common Share as is determined by the
Board in good faith. For purposes hereof, the NASDAQ National Market will
be considered a national securities exchange as long as the information
reported daily for Common Shares is substantially the same as that reported
for securities listed on national securities exchanges.
(4) If at any time the Board of Directors shall determine, in its
discretion, that the listing of the Common Shares with respect to which any
option is granted under the Plan on any securities exchange, the
registration or qualification of such shares under any state or federal
law, or the consent or approval of any governmental regulatory body is
necessary or desirable as a condition of, or in connection with, the
granting of an option or the purchase, issue, or transfer of the Common
Shares with respect to which the option is granted, then such option may
not be exercised in whole or in part unless and until one of the following
conditions is satisfied: (i) such listing, registration, qualification,
consent, or approval shall have been effected or obtained free of any
conditions not acceptable to the Board of Directors, or (ii) the Optionee
of the option or such other person who exercises the option shall have
agreed that the Common Shares may be issued or transferred to him or her
subject to any restrictions that will make it unnecessary to effect or
obtain such listing, registration, qualification, consent, or approval.
(j) Administration:
(1) Subject to any duties or powers concerning the Plan which are
given other parties under the other provisions of the Plan, the Plan shall
be administered by the Board of Directors.
(2) The grant of options under the Plan shall be effected by the
execution of written option agreements in such form as is approved by the
Board of Directors, which form shall comply with all provisions set forth
B-3
<PAGE> 31
in this Plan, and signed by a member of the Board of Directors (or any
person designated as its agent for this purpose).
(3) The Board shall, subject to the applicable provisions of the Plan,
have full authority and discretion to interpret the Plan, to prescribe,
amend, and rescind rules and regulations relating to the Plan, and to make
all other determinations necessary or advisable for the administration of
the Plan. The Board of Directors' determination as to any matter relating
to the interpretation of the Plan shall be conclusive on all persons.
Nothing herein shall give the Board of Directors the power to change the
number of Common Shares subject to each option (except as provided in
paragraph (h) above), the persons eligible to be granted options under the
Plan, or any provision of an option required under the other provisions of
the Plan.
(k) No Right of Director Employment: Nothing contained in the Plan or any
option granted pursuant to the Plan shall confer on any Outside Director any
right to be continued in such office or interfere in any way with the right of
the shareholders of Zaring National to terminate his or her employment as a
Director of Zaring National at any time, in the same manner as though the Plan
or any options granted hereunder were not in effect.
(l) Amendment or Termination of Plan: The Board of Directors shall have the
right to amend, suspend, or terminate this Plan at any time; provided, however,
that: (i) no action shall affect adversely the rights of any Optionee under any
option granted under this Plan prior to such amendment, suspension, or
termination; and (ii) no amendment changing the class of persons eligible to
receive options hereunder, changing the aggregate number of shares to be subject
to options granted hereunder, changing the amount and Option Price of the Common
Shares to be awarded under any option or the timing of any grant of an option,
or materially increasing the benefits accruing to eligible persons hereunder may
be made without, in any of such cases, approval by the favorable vote of a
majority of the outstanding shares of Zaring National present, or represented,
and entitled to vote at a meeting duly held in accordance with the applicable
laws of the state in which Zaring National is incorporated.
(m) Approval of Plan and Corporate Conditions on Effectiveness of Options:
This Plan, as amended and restated effective as of January 1, 1998, shall be
approved by the favorable vote of a majority of the outstanding shares of Zaring
National present, or represented, and entitled to vote at a meeting duly held in
accordance with the applicable laws of the state in which Zaring National was
incorporated. Notwithstanding any other provision of the Plan to the contrary,
any option granted under the Plan on or after January 1, 1998 shall not be
exercisable prior to such shareholder approval.
B-4
<PAGE> 32
ZARING NATIONAL CORPORATION
PROXY - ANNUAL MEETING OF SHAREHOLDERS, APRIL 23, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder appoints Allen G. Zaring, III, John R.
Brooks and John H. Wyant and each of them, as attorneys, with full power of
substitution, to vote all shares in ZARING NATIONAL CORPORATION (the "Company")
that the undersigned is entitled to vote at the annual meeting of the Company's
shareholders to be held on Thursday, April 23, 1998 at 9:00 A.M. at the Manor
House Banquet & Conference Center, 7440 Mason-Montgomery Road, Mason, Ohio 45040
and at any adjournment thereof, upon the matters indicated below and fully
described in the Company's proxy statement dated on or about March 25, 1998 as
well as upon any other matter properly coming before the meeting.
The shares represented by this proxy will be voted as directed or, if
no direction is specified, will be voted FOR the election of Directors, FOR the
approval of amendments to the Company's Key Employees Stock Option Plan, FOR the
approval of amendments to the Company's Outside Directors Stock Option Plan and
FOR confirmation of the appointment of independent auditors.
1. Election of Directors.
FOR all nominees [ ] WITHHOLD AUTHORITY [ ]
(except as noted below) to vote for all nominees
Nominees: Allen G. Zaring, III, John R. Brooks, Murat H. Davidson, Daniel W.
Geeding, Robert N. Sibcy and John H. Wyant
For,except votes withheld from the following nominee(s): ___________________
2. To approve amendments to the Company's Key Employees Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued, and to be dated and signed on the reverse side)
<PAGE> 33
3. To approve amendments to the Company's Outside Directors Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To confirm appointment of Arthur Andersen LLP as independent auditors of the
Company for fiscal year 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In their discretion, to act upon such other matters as may properly come
before the meeting.
Please sign name(s) exactly as printed
hereon. In signing as attorney,
administrator, executor, guardian or
trustee, please give title as such.
Date:
__________________________, 1998
________________________________________
Signature
________________________________________
Signature if held jointly
PLEASE MARK, SIGN AND RETURN THIS PROXY
CARD PROMPTLY, USING THE ENVELOPE
PROVIDED.
<PAGE> 34
ZARING NATIONAL CORPORATION
PROXY INSTRUCTION - ANNUAL MEETING OF SHAREHOLDERS, APRIL 23, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE TRUSTEE OF THE
ZARING NATIONAL CORPORATION RETIREMENT BENEFIT PLAN
The undersigned shareholder instructs PNC Bank, National Association
("PNC"), as Trustee for the Zaring National Corporation Retirement Benefit Plan
(the "RBP Plan"), to vote all shares of ZARING NATIONAL CORPORATION (the
"Company") that are held in the RBP Plan and as to which the undersigned has the
right under the policies of the RBP Plan to instruct the vote at the annual
meeting of the Company's shareholders to be held on Thursday, April 23, 1998 at
9:00 A.M. at the Manor House Banquet & Conference Center, 7440 Mason-Montgomery
Road, Mason, Ohio 45040 and at any adjournment thereof, in the manner indicated
below and fully described in the Company's proxy statement dated on or about
March 25, 1998.
The shares represented by this proxy will be voted as directed or, if
this proxy is signed and returned to PNC but no direction as to the matters
noted below is specified, will be voted FOR the election of Directors, FOR the
approval of amendments to the Company's Key Employees Stock Option Plan, FOR the
approval of amendments to the Company's Outside Directors Stock Option Plan and
FOR confirmation of the appointment of independent auditors.
1. Election of Directors.
FOR all nominees [ ] WITHHOLD AUTHORITY [ ]
(except as noted below) to vote for all nominees
Nominees: Allen G. Zaring, III, John R. Brooks, Murat H. Davidson, Daniel W.
Geeding, Robert N. Sibcy and John H. Wyant
For, except votes withheld from the following nominee(s): ___________________
2. To approve amendments to the Company's Key Employees Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued, and to be dated and signed on the reverse side)
<PAGE> 35
3. To approve amendments to the Company's Outside Directors Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To confirm appointment of Arthur Andersen LLP as independent auditors of the
Company for fiscal year 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Please sign name(s) exactly as printed
hereon.
Date:
_________________________________, 1998
________________________________________
Signature
VOTES MUST BE INDICATED (X) IN BLACK OR
BLUE INK. PLEASE MARK, SIGN AND RETURN
THIS PROXY CARD PROMPTLY TO PNC, USING
THE ENVELOPE PROVIDED.
