SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the Appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
ZURN INDUSTRIES, INC.
(Name Of Registrant As Specified In Its Charter)
(Name Of Person(s) Filing Proxy Statement If Other Than The Registrant)
Payment of Filing Fee (check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3)
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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:
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:<PAGE>
(ZURN LOGO)
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
June 27, 1996
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders.
We look forward to meeting all who are able to attend.
Whether or not you plan to attend, please take a few minutes now to
complete, sign, and return the enclosed proxy or voting instructions to ensure
that your shares will be represented at the meeting. Proxy voting is one of
your important rights as a Zurn Shareholder and a vital link between you and
your Company.
If your stock is registered in the name of a bank, broker, or other
nominee, you still have the right to vote by sending your voting instruction
form to the record holder.
Thank you for your continuing interest in Zurn Industries.
Very truly yours,
/s/ Robert R. Womack
ROBERT R. WOMACK
Chairman and Chief Executive Officer
Please mail your proxy to:
KeyCorp Shareholder Services, Inc.
Corporate Trust Division
P.O. Box 97112
Cleveland, Ohio, U.S.A. 44197-1123<PAGE>
(ZURN LOGO)
NOTICE OF ANNUAL MEETING
TO OUR SHAREHOLDERS:
The Annual Meeting of Shareholders of Zurn Industries, Inc. will be held
at the Pittsburgh Airport Marriott Hotel, Parkway West-Montour Run Exit, 100
Aten Road, Coraopolis, Pennsylvania, on Friday, August 2, 1996, at 9:30 a.m.,
EDT, for the following purposes:
1. To elect two (2) directors for terms of three (3) years each.
2. To adopt the 1996 Employee Stock Plan.
3. To adopt amendments to the 1995 Directors Stock Option Plan.
4. To ratify the appointment of Ernst & Young LLP as independent
auditors for the current fiscal year.
5. To consider and act upon such other business as may properly come
before the meeting.
The Board of Directors has fixed the close of business on June 21, 1996,
as the record date for the determination of Shareholders entitled to notice of
and to vote at this Annual Meeting.
ZURN INDUSTRIES, INC.
DENNIS HAINES
General Counsel and Secretary
Erie, Pennsylvania
June 27, 1996
EVERY SHAREHOLDER'S VOTE IS IMPORTANT.
PLEASE COMPLETE, SIGN, AND RETURN YOUR PROXY.<PAGE>
ZURN INDUSTRIES, INC.
ONE ZURN PLACE
ERIE, PENNSYLVANIA 16505
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Zurn Industries, Inc. (hereinafter the "Company") of
proxies for the Annual Meeting of Shareholders to be held Friday, August 2,
1996. You are requested to sign and return the enclosed proxy card to ensure
that your shares are voted. A Shareholder giving this proxy has the power to
revoke it at any time before it is exercised by giving notice to the Secretary
of the Company. The cost of proxy solicitation will be borne by the Company.
Once the Notice of Annual Meeting, this Proxy Statement, and the proxy form
have been mailed, employees of the Company may solicit proxies by personal
interview, mail, telephone, or telegraph. The Company has retained Morrow &
Co., Inc. to aid in the solicitation of certain proxies at an anticipated fee
of $5,000 plus out-of-pocket expenses. A copy of the Annual Report for the
fiscal year ended March 31, 1996, accompanies this Proxy Statement or has been
mailed to Shareholders entitled to vote at this Annual Meeting. This Proxy
Statement is first being mailed to Shareholders on or about June 27, 1996.
On the record date, June 21, 1996, there were outstanding 12,341,309
shares of common stock and 2,074 shares of preferred stock entitled to notice
of and to vote at the meeting. Each share of common stock and each share of
preferred stock is entitled to one vote and holders of common and preferred
stock will vote together as a single class.
AGENDA ITEM NO. 1
ELECTION OF DIRECTORS
Two (2) directors are to be elected for a term of three (3) years each.
It is intended that the shares represented by the proxies will be voted in
favor of nominees proposed by the Board of Directors who are listed in the
following paragraphs along with brief statements setting forth their present
principal occupations and other information. In the event that any nominee for
director shall not be a candidate for election, votes will be cast for such
substitute nominee as may be nominated by the Board of Directors. A majority
of the votes cast is required to elect a director. Abstentions and broker
nonvotes will not be counted as votes cast.
Nominees For a Term of Three Years Each
Zoe Baird
Age 44, Director since August 1993, and member of the Audit Committee
and of the Corporate Governance and Nominating Committee. Senior Vice
President and General Counsel, Aetna Life and Casualty Company
(multiline insurance company). Former Counsellor and Staff Executive,
General Electric Company (aerospace, broadcasting, and electrical
equipment manufacturer). Director of Southern New England
Telecommunications Corporation and The Southern New England Telephone
Company.
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William E. Butler
Age 65, Director since November 1992, Chair of the Audit Committee, and
member of the Management Development and Compensation Committee and of
the Corporate Governance and Nominating Committee. Retired Director,
Chairman and Chief Executive Officer, Eaton Corporation (manufacturer of
vehicle powertrain components and controls). Director of Bearings Inc.,
Ferro Corporation, The Goodyear Tire & Rubber Company, and Pitney-Bowes,
Inc.
Directors Whose Terms of Office Continue Until 1997
Michael K. Brown
Age 58, Director since October 1995, and member of the Corporate
Governance and Nominating Committee. Director and Senior Advisor, Brown
Brothers Harriman (HK) Ltd. and former Area General Manager, Standard
Chartered Bank, Singapore. Also, inter alia, former director, Export
Credit Insurance Corporation of Singapore, Hong Kong Government Industry
Development Board, and Hong Kong Government Textiles Advisory Board.
Robert D. Neary
Age 62, Director since June 1995, and member of the Audit Committee and
of the Corporate Governance and Nominating Committee. Former Co-
Chairman, Ernst & Young LLP (international accounting and consulting
firm). Trustee, Armada Funds and Director, Cold Metal Products, Inc.
Directors Whose Terms of Office Continue Until 1998
Edward J. Campbell
Age 68, Director since August 1986, Chair of the Executive and Finance
Committee, and member of the Management Development and Compensation
Committee and of the Corporate Governance and Nominating Committee.
Former President, J I Case Co. (farm and construction machinery and
equipment) and Newport News Shipbuilding (shipbuilding and repairing).
Director of Global Marine, Inc. and Titan Wheel International.
Robert R. Womack
Age 58, Director since October 1994, and member of the Executive and
Finance Committee and of the Corporate Governance and Nominating
Committee. Chairman and Chief Executive Officer, Zurn Industries, Inc.
Associated with the Company since 1994. Formerly an independent
consultant, former Vice Chairman and Chief Executive Officer, IMO
Industries, Inc. (controls, pumps and engineered power products) and
former Director, President and Chief Operating Officer, Ranco, Inc.
Director Who is Retiring
David W. Wallace
Age 72, Director since August 1986, Chair of the Management Development
and Compensation Committee and of the Corporate Governance and
Nominating Committee, and member of the Executive and Finance Committee.
Director, Chairman and Chief Executive Officer, Lone Star Industries,
Inc. (cement and concrete products). Director of Emigrant Savings
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Bank and Northstar Mutual Funds. Former Chairman, National Securities
and Research Corporation (mutual fund investment manager) and former
Chairman and Chief Executive Officer of Todd Shipyards Corporation,
Bangor Punta Corp. and The Putnam Trust Company of Greenwich.
Mr. Wallace will not stand for re-election in accordance with the
Board's retirement policy. He has given generously of his time and has
contributed significantly to the Company's progress.
Upon Mr. Wallace's retirement, the number of directors will be six, and
all but one of the directors, Mr. Womack, will be nonmanagement directors.
Committees of the Board of Directors
As part of an ongoing examination of the Company's corporate-governance
policies and procedures, the Board recently undertook a review of its
Committees and their functions. Effective June 3, 1996, the Board
restructured its Committees as follows:
The Audit Committee considers accounting and auditing matters concerning
the Company and makes recommendations to the Board of Directors as the
Committee deems appropriate. Its responsibilities also include recommending
to the Board the engagement of independent public accountants to audit the
financial statements of the Company, reviewing compliance with environmental
and other laws, and reviewing the scope, adequacy, and results of the
Company's internal audit and control procedures. This Committee consists
exclusively of nonmanagement directors.
The Executive and Finance Committee possesses and may exercise all of
the powers of the Board of Directors in the management of the Company's
business between meetings of the Board. The Committee also establishes
investment policies for the Company's cash and pension funds, reviews and
recommends to the Board actions with respect to borrowing and credit
agreements and the payment of dividends, and will review charitable
contributions.
The Management Development and Compensation Committee reviews plans for
developing successor executive officers and senior operating management. It
also approves the adoption of compensation plans and the payments or grants
made under the plans. Like the Audit Committee, this Committee consists
exclusively of nonmanagement directors.
The Corporate Governance and Nominating Committee selects and recommends
to the Board nominees for election as directors and will consider nominees
recommended by Shareholders.(1) In addition, this Committee, on which all of
__________________________________
(1) Recommendations by Shareholders must be forwarded to the Secretary
of the Company at least 90 days prior to the Annual Meeting and should
identify the nominee by name and provide pertinent information concerning the
nominee's background and experience.
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the Board's directors serve, will address Shareholder proposals and formulate
policies and procedures pertaining to corporate governance.
The Public Policy Committee, which initiated the most recent review of
Committee structure, has been disbanded based on its own recommendation. The
Committee determined, and the Board agreed, that items recently on the
Committee's agenda either overlapped with items on the agendas of the other
Committees, and could readily be addressed by them, or should be heard by the
Board as a whole, in light of their importance.
The Board also now meets in executive session prior to every regular
meeting of the Board as a means of allowing candid interchange of ideas and
concerns. These sessions are held in the presence of the Chairman, who is
also the Chief Executive Officer, but outside the presence of other management
personnel. There is no prescribed list of issues or length for these
sessions. This has proven to be a valuable means to the understanding of the
formal agenda and facilitates informed action. Nonmanagement directors meet
outside the presence of the Chief Executive Officer to discuss the performance
of the Chief Executive Officer and other matters as may be deemed appropriate.
During the prior fiscal year, the Management Development and
Compensation Committee and Audit Committee met three times, and the Public
Policy Committee, Executive and Finance Committee and Nominating Committee met
two times. Eight meetings of the Board of Directors, including three
telephonic meetings, were conducted. Each Director attended more than 75% of
the meetings of the Board and the committees on which he or she served.
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Security Ownership Of Common Stock
Beneficial ownership of the Common Stock of the Company as of June 10,
1996 (except as stated in the footnotes), by each party known to the directors
to own more than 5%, by each director and Named Executive Officer, and by
directors and executive officers as a group, was:
Number of Shares
Sole Investment Shared Investment Percent of
Name and Voting Power (1) and Voting Power Class (2)
Owners of More Than 5%:
Fidelity Management &
Research Co. (3) 1,251,200 9.7%
First Manhattan Capital
Management (4) 1,245,525 9.6
Systematic Financial
Management Incorporated (5) 1,015,350 7.8
Directors and Named
Executive Officers:
Zoe Baird 3,200
Michael K. Brown 1,000
Donald L. Butynski 31,500
William E. Butler 3,300
Edward J. Campbell 8,270
Donald F. Fessler 49,865
John R. Mellett 7,250
Robert D. Neary 3,000
Frank E. Sheeder 326
David W. Wallace 9,000 2,000
Robert R. Womack 7,000
Directors and Executive
Officers as a group (6) 234,664 14,860 1.8
_________________________
(1) Includes shares that may be acquired within 60 days after June 10, 1996,
upon the exercise of options: Z. Baird - 3,000; W.E. Butler - 3,000; D.L.
Butynski - 27,500; E.J. Campbell, 7,000; D.F. Fessler - 46,750; J.R.
Mellett - 6,250; R.D. Neary - 2,000; D.W. Wallace - 7,000; all directors
and executive officers as a group - 137,650.
(2) No entry means that the named party owns less than 1% of outstanding
common stock and shares deemed to be outstanding in accordance with rules
of the Securities and Exchange Commission.
(3) 82 Devonshire Street, Boston, MA 92109. Data as of June 11, 1996.
(4) 437 Madison Avenue, New York, NY 10022. Data as of June 6, 1996.
(5) Executive Drive, Fort Lee, NJ 07024. Data as of March 31, 1996.
(6) Includes 50,448 shares held by an estate in which an Executive Officer, as
Executor, has no current beneficial interest.
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Summary Compensation Table
The following sets forth the compensation of the Company's Chief Executive
Officer and the other four most highly compensated executive officers (the
"Named Executive Officers") for the past three fiscal years ended March 31.
The Company's stock option plan is its only long-term compensation plan.
Long-Term
Compensation
Number of
Annual Securities
Compensation Underlying
Name and Position Year Salary Bonus Other Stock Options
Robert R. Womack (1) 1996 $320,833 $125,000 25,000
Chairman and Chief 1995 137,500 $74,447 (2) 75,000
Executive Officer
Donald F. Fessler 1996 215,000 100,000 7,000
Executive Vice 1995 211,250 100,000 19,000
President 1994 200,000 80,000 15,000
Donald L. Butynski (3) 1996 237,917 22,000
Group Vice President
Frank E. Sheeder (3) 1996 162,116 60,000 13,450 (2) 25,000
Group Vice President
John R. Mellett (3) 1996 166,667 60,000 32,102 (2) 25,000
Senior Vice President-
Chief Financial Officer
_________________________________
(1) R.R. Womack was appointed Chief Executive Officer effective October 17,
1994, and was elected Chairman effective April 1, 1995.
(2) Income taxes arising from the reimbursement of relocation expenses.
(3) D.L. Butynski, F.E. Sheeder, and J.R. Mellett were appointed effective May
1, 1995, August 14, 1995, and July 1, 1995, respectively.
The Named Executive Officers and one other executive officer have entered into
agreements with the Company which become effective only in the event of a
change in control of the Company as defined in the agreements. The agreements
provide, in general, that if employment is terminated following a change in
control, the Company shall pay a severance payment equal to three times current
annual salary and average incentive compensation paid in the last three years
of employment.
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Stock Option Grants
The Company's stock option plan provides for the granting of options to
officers and key employees to purchase common stock at its market value on the
grant date. The following sets forth the grants of stock options to the Named
Executive Officers in the year ended March 31, 1996. As granted, the options
have a ten-year term and, except for those granted to D.F. Fessler, they become
exercisable in 25% increments over the first four years following the grant.
The options granted D.F. Fessler become exercisable upon retirement. The
potential realizable values are based on appreciation rates prescribed by the
Securities and Exchange Commission and are not intended to forecast the
possible future appreciation of the Company's shares to the approximately $33
to $40 per share at 5% and $52 to $63 per share at 10% implicit in the amounts
shown in the table at the end of the ten-year option periods.
Potential Realizable
Individual Grants Value at Assumed
Number of Percent Annual Rates of
Securities of Total Exercise Stock Price
Underlying Options Price Appreciation for
Options Granted to Per Expiration Option Term
Name Granted Employees Share Date 5% 10%
R.R. Womack 25,000 11.9% $24.375 12/04/2005 $383,233 $917,187
D.F. Fessler 7,000 3.3 20.75 6/30/2001 51,388 117,230
D.L. Butynski 22,000 10.5 20.75 4/16/2005 287,090 727,543
F.E. Sheeder 25,000 11.9 20.75 8/13/2005 326,239 826,754
J.R. Mellett 25,000 11.9 20.00 6/30/2005 314,447 796,871
Stock Option Exercises And Fiscal Year End Option Values
The following sets forth Named Executive Officers' stock options
outstanding at March 31, 1996. No shares were acquired on the exercise of
stock options during Fiscal 1996.
Number
of Securities Value
Underlying of Unexercised
Unexercised In-The-Money
Shares Options Options
Acquired at March 31, 1996 at March 31, 1996
on Value Exer- Unexer- Exer- Unexer-
Name Exercise Realized cisable cisable cisable cisable
R.R. Womack None None None 100,000 None $140,625
D.F. Fessler None None 36,250 44,500 None None
D.L. Butynski None None 19,750 49,250 None None
F.E. Sheeder None None None 25,000 None None
J.R. Mellett None None None 25,000 None 12,500
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Pension Plans
The Company's Retirement Plan for the group in which the Company's
executive officers participate provides monthly pensions for each year of
credited service at normal retirement age of 65 (62 for employees joining the
plan prior to January 1987) at the rate of .95% (1.25% before 1987 and .65%
before 1967) of a participant's average base salary during the five highest
calendar years of earnings within the last ten calendar years of credited
service. From 1987 through 1990, the rate of 1.4% of a participant's average
monthly base salary that was over a covered compensation limit applied to those
employees who elected to make contributions to the plan. The Company's
Supplemental Pension Plan provides for the payment of any pension benefits that
would be paid by the Retirement Plan if not for federal laws precluding the
payment of qualified plan benefits attributable to deferred compensation and
compensation exceeding $150,000 per year.
Mr. Womack, Mr. Fessler and one other executive officer are participants
in the Supplemental Executive Retirement Plan (SERP). This is a noncontributory
plan that provides, at normal retirement age of 62, for monthly pensions equal
to 1.8% (2% before 1991) of the participant's average base salary and incentive
compensation during the five highest calendar years of earnings within the last
ten calendar years of employment for each year of employment by the Company, up
to a maximum of 25 years. Pension benefits under the plan are either
straight-life or 50% joint and survivor (if married) annuities and are subject
to reduction for (1) benefits that would be payable under the Company's
Retirement Plan assuming participation in that plan from the first date of
eligibility and (2) the employer-provided portion of any benefit to which a
participant is entitled under any qualified pension plan maintained by any
previous employer of the participant. By contract with the Company, Mr.
Womack's SERP benefits vest if he is employed as Chief Executive Officer
through October 17, 1998, and begin on the later of his attaining 65 and
retirement. The applicable rate is 2.25% of the last three years of
compensation for each year of his service as Chief Executive Officer.
The following table sets forth, at the normal retirement age, the
estimated total amount of the annual straight-life annuity retirement benefits,
which are not subject to reduction for Social Security benefits, under: (1) the
Retirement Plan and Supplemental Pension Plan combined, assuming the .95%
benefit rate applies to all years of service; and (2) the Supplemental
Executive Retirement Plan, assuming the 2% benefit rate applies to all years of
service and without regard to any offsets. The compensation covered by the
plans is the average salary and bonuses, as applicable, included in the Summary
Compensation Table.
Combined Retirement Supplemental Executive
and Supplemental Plans Retirement Plan
Benefits Benefits
Years of Service Years of Service
Remuneration 10 20 25 10 20 25
$200,000 $19,000 $ 38,000 $ 47,500 $ 40,000 $ 80,000 $100,000
400,000 38,000 76,000 95,000 80,000 160,000 200,000
600,000 57,000 114,000 142,500 120,000 240,000 300,000
800,000 76,000 152,000 190,000 160,000 320,000 400,000
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Name Years of Credited Service Years of Credited Service
R.R. Womack 1.42 1.42
D.F. Fessler 40.42 25.00
D.L. Butynski 9.25 Not applicable
F.E. Sheeder .67 Not applicable
J.R. Mellett .83 Not applicable
Director's Compensation
Nonemployee members of the Board of Directors currently receive an annual
fee of $21,000 and a fee of $700 for each meeting. Under the Company's
Deferred Compensation Plan for Nonemployee Directors, directors may elect to
defer all or any part of their remuneration for such period as they elect.
Amounts deferred earn interest at the prime rate.
As discussed below, under Agenda Item No. 3, the Board proposes to amend
the 1995 Directors Stock Option Plan (the "Directors Stock Plan") to provide
for the annual issuance of 500 shares of restricted Common Stock of the
Company. Subject to Shareholder approval of the proposed amendments to the
Directors Stock Plan, the Board has elected to terminate the Company's
Retirement Plan for Outside Directors (the "Director Retirement Plan"). Under
the Director Retirement Plan, which was adopted in 1986, an outside director
who meets plan service requirements (five years of service or total disability,
whichever comes first) is granted an annual pension, commencing at retirement
after age 65. The pension amount is 50% of the annual director retainer fee in
effect at the date of retirement and is payable for the number of years of
service, subject to cessation in the event of the director's death. Upon
termination of the Director Retirement Plan, outside directors who have not yet
met the service requirements (all directors except Mr. Campbell) would receive
the net present value of accrued benefits in the form of restricted Common
Stock of the Company. Mr. Campbell, who has served on the Company's Board of
Directors since 1986 and whose benefits have thus vested, would retain benefits
that have accrued to date, with a freeze on any further accumulation of years
of service. Mr. Wallace, who is retiring, and all directors who have previously
retired, would not be affected by the termination of the Director Retirement
Plan. If the proposed amendments to the Directors Stock Plan are not approved
by Shareholders, the Director Retirement Plan will continue in effect.
The present value of unvested accrued benefits as of August 2, 1996,
under the Director Retirement Plan of the directors who will receive Common
Stock of the Company having the same restrictions as set forth in the
amendments to the Directors Stock Plan and the number of shares they will
receive if the amendments are approved by Shareholders are:
Present Value
of Unvested
Director Accrued Benefit Number of Shares*
Z. Baird $ 4,038 193
M.K. Brown 3,079 147
W.E. Butler 21,357 1,023
R.D. Neary 5,784 277
Total $34,258 1,640
_____________________
*Based on the June 10, 1996, price of the common stock of $20.875.
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Related-Party Transactions
Mr. Brown is a director and senior advisor of Brown Brothers Harriman
(HK) Ltd., a wholly-owned subsidiary of Brown Brothers Harriman & Co., which
participates in a revolving line of credit with other lending institutions on
which the Company is entitled to draw. The maximum participation of Brown
Brothers Harriman & Co. is $5 million. Brown Brothers Harriman & Co. also
performed certain incidental services for the Company in the last fiscal year
by way of cash management and other similar services and may perform like
services in the current fiscal year. The fees paid on account of these
services in the last fiscal year or expected to be paid in the current fiscal
year are substantially less than five percent of Brown Brothers Harriman &
Co.'s consolidated gross revenue for the last fiscal year.
Management Development and Compensation Committee Report
The Management Development and Compensation Committee (the "Committee") is
comprised entirely of nonemployee independent members of the Board of
Directors. The Committee reviews the plans for developing successor executive
officers and senior operating management. It also approves the adoption of
compensation plans and the payments or grants made under the plans. This report
describes the Company's compensation philosophy and programs and, for Fiscal
1996, the bases on which the Named Executive Officers' compensation were
determined by the Committee.
The Company's success is largely dependent on the employees and their
performance. High performance levels are encouraged by providing challenging
careers, stimulating work environments, career development, and competitive
compensation. The compensation programs are designed to attract and retain
qualified individuals and are intended to link total compensation to financial
results and enhanced Shareholder value. The Committee takes into consideration
the Company's performance over a number of years, as well as expectations for
the future, when determining the total amount and form of compensation for any
one year rather than using formula-based criteria to measure executive
officers' performance in a single year.
Executive compensation has three components: (1) base salary; (2) annual
incentive compensation generally based on the Company's earnings; and (3) stock
options which create ownership opportunity and compensation aligned with
Shareholders' interests. The Committee periodically reviews these programs to
ensure that they are competitive and meet the Committee's philosophy which
emphasizes performance-related compensation over base salary. The Committee's
policy is to position the value of salary, annual incentives, and stock option
grants at the median of similarly-sized industrial companies. This peer group
consists of companies participating in published pay surveys and, therefore, is
broader than the group of companies in the Dow Jones Heavy Construction Index
used in the Company's performance graph. The Company designs and administers
its compensation program to retain tax deductibility pursuant to section 162
(m) of the Internal Revenue Code.
Base salary is governed by a salary administration plan having position
levels with pay ranges based on job evaluations by an employee benefits
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consulting firm and numerous compensation surveys by nationally recognized
firms. Within the salary structure, executive officers are paid based on
individual capabilities and contributions. These assessments, within the
framework of total compensation, are made by the Committee with respect to the
Chief Executive Officer, and his recommendations for the other executive
officers are evaluated and approved by the Committee.
The Committee administers the Company's Incentive Compensation Plan. This
Plan provides that an amount equal to 4% of earnings before income taxes in
excess of a 10% return on the Company's net worth, plus 4% of earnings before
income taxes in excess of a 20% return on the Company's net worth, is available
to the Committee to make incentive compensation payments. The distributable
amount may be modified by the Committee in circumstances it views as
appropriate (e.g., when the Company incurs an unusual gain or loss). Using both
financial and nonfinancial criteria to measure performance, the Committee
determines the amount to be awarded to the Chief Executive Officer and, based
on his recommendations and their evaluation, to each other executive officer.
In Fiscal 1996, the Company as a whole and certain of its businesses exceeded
criteria for incentive awards as previously established by the Committee. The
Chief Executive Officer's incentive compensation was based upon his sustained
leadership in improving Company performance and restructuring the organization
to position it for future growth. Officers and managers of qualifying
businesses were granted incentive awards in proportion to performance and pre-
defined nonbudgetary objectives. In the case of Mr. Sheeder and Mr. Mellett,
the awards were adjusted downward to reflect their having less than a full
fiscal year's service.
On April 22, 1996, the Board adopted an Executive Incentive Plan to
replace the aforementioned Incentive Compensation Plan. Beginning with Fiscal
1997, the Chief Executive Officer and each executive selected by the Committee
will have the opportunity to earn incentive compensation equal to a pre-defined
target percentage of his salary based upon the achievement of specific pretax
profit targets and other performance goals. Actual payouts may range from zero
to 200 percent of the target percentage of salary.
The Company's 1991 Employee Stock Option Plan allows the Committee to
provide to executive officers and other key employees incentive rewards for
their efforts if the value of the Company's common stock appreciates. Option
awards generally are made annually based on total compensation considerations,
including previous awards, and the Committee's assessment of the individual's
ability to enhance Shareholder value. In Fiscal 1996, Mr. Womack was granted
25,000 shares. The Board is recommending that Shareholders approve the adoption
of a new stock incentive plan to replace the 1991 Stock Option Plan which
expires in 1996. This will enable the Committee to continue to make stock
option and other long-term incentive awards.
The Company's compensation plans allow executive officers and certain
others to defer until retirement 10% or more of salary and 25% to 100% of
incentive compensation awards. Amounts deferred earn interest at the prime
rate, or 25% or more of deferred incentive compensation may be accounted for
as if it were invested in shares of the Company's Common Stock.
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In 1996, the Company adopted guidelines for stock ownership levels by
directors and management. Compliance with the voluntary guidelines is actively
encouraged by the Board.
MANAGEMENT DEVELOPMENT AND
COMPENSATION COMMITTEE
David W. Wallace, Chairman
William E. Butler
Edward J. Campbell
Performance Graph
The graph below compares the change in the value of the Company's common
stock to the S&P 500 Composite Stock Price Index and the Dow Jones Heavy
Construction Industry Group Index, a published industry index. Each of the
cumulative total returns presented assume a $100 investment on March 31, 1991,
and reinvestment of dividends.
(GRAPH)
Fiscal Year Ended March 31
1991 1992 1993 1994 1995 1996
Zurn Industries, Inc. $100.00 $ 98.45 $103.53 $ 67.60 $ 55.35 $ 62.90
S&P 500 Composite 100.00 111.04 127.95 129.84 150.05 198.22
Dow Jones Heavy
Construction 100.00 82.43 87.55 109.44 94.85 127.05
-12-<PAGE>
AGENDA ITEM NO. 2
PROPOSAL TO APPROVE 1996 EMPLOYEE STOCK PLAN
The Board of Directors of the Company has adopted the 1996 Employee
Stock Plan, as approved and recommended by the Management Development and
Compensation Committee of the Board, subject to Shareholder approval.
The complete text of the Plan appears as Exhibit A of this Proxy
Statement.
Purpose
The purpose of the Plan is to: promote the long-term interests of the
Company by providing incentive compensation to executives and other key
employees who contribute to the growth and success of the Company and its
subsidiaries; attract and retain individuals of outstanding ability; and
further align the interests of executives and key employees with the interests
of the Company's Shareholders.
Term
If approved by Shareholders, the Plan will become effective August 5,
1996, and will terminate three (3) years thereafter. No awards may be granted
after termination; however, awards outstanding on that date may be exercised
and/or paid in accordance with their terms.
Administration
The Plan will be administered by a Committee of three or more members of
the Board of Directors (the "Committee"). Each member of the Committee is
required to be a "disinterested person" within the meaning of Rule 16b-3 under
the Securities and Exchange Act of 1934, as amended, as well as an "outside
director" within the meaning of Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code"). The Board's Management Development and
Compensation Committee will serve as the Committee. Subject to the terms of the
Plan, the Committee will have the exclusive authority to interpret, administer,
and make determinations under the Plan, including the exclusive authority to
select participants and make awards. The Committee also has the authority to
establish rules and regulations for purposes of administering the Plan.
Participation
Participation in the Plan is limited to employees selected by the
Committee whose performance will benefit the future success of the Company.
The granting of awards under the Plan is at the discretion of the Committee.
Therefore, it is not possible to indicate which employees may receive awards
under the Plan in the future or the amount of the awards. Currently,
approximately 50 employees are eligible to be selected by the Committee to
receive awards.
-13-<PAGE>
Types of Awards
Awards under the Plan may be in the form of any of the following: (1)
Nonqualified Stock Options and Incentive Stock Options; (2) Stock Equivalent
Units; (3) Performance Units; and (4) Annual Incentive Stock Awards.
Shares Available for Awards and Closing Quotation
The maximum number of shares of Company common stock which may be issued
for all purposes under the Plan is 500,000. Shares of common stock with
respect to the unexercised or undistributed portion of any terminated or
forfeited award, and shares of common stock tendered in payment of the purchase
price of common stock subject to option, may be reissued under the Plan.
On June 10, 1996, the closing price of the Company's common stock as reported
on the New York Stock Exchange Composite Tape was $20.875.
Stock Options
The Plan provides that the option price pursuant to which common stock
may be purchased will be not less than 100% of the fair market value of the
Company's common stock on the date the stock option is awarded. The term of
each option, which may not exceed ten (10) years, will be fixed by the
Committee and evidenced in an agreement. Payment of the option price may be
made in any combination of cash, check, delivery of shares of common stock
which have been owned for more than six months having a fair market value on
the exercise date equal to the option price, or such other method as may be
permitted by the Committee. While the Plan provides for both Nonqualified Stock
Options and Incentive Stock Options, the Committee does not currently intend to
grant Incentive Stock Options absent changes in the income tax law reducing
the capital gains tax rate or otherwise widening the spread between ordinary
income and capital gains tax rates (see "Federal Income Tax Consequences"
below). The Committee reserves the right to grant Incentive Stock Options even
absent such a change in federal income tax law.
Stock Equivalent Units
A Stock Equivalent Unit is an award unit having a value equivalent to,
and that fluctuates with, the fair market value of one share of common stock.
The Committee may make awards of Stock Equivalent Units on such terms and
conditions and with such restrictions as it determines, which may include, but
are not limited to, achievement of specific business objectives and other
measurements of individual, business unit, Company or subsidiary performance
including, but not limited to, earnings per share, after-tax net income, total
shareholder return, cash flow, return on shareholders' equity and cumulative
return on net assets. Such terms and conditions may include the manner in which
such Stock Equivalent Units are held and the circumstances under which such
units will be forfeited. The Committee may provide for the automatic award of
additional Stock Equivalent Units at such times as any dividends are paid by
the Company on shares of common stock. To the extent that the Committee deems
it advisable to ensure that payments are deductible for tax purposes, the
Committee intends to establish performance goals associated with grants of
-14-<PAGE>
Stock Equivalent Units to participants who may be "covered employees" as such
term is defined in Section 162(m) of the Code, which performance goals are
intended to qualify under that section with regard to preserving the Company's
tax deduction for certain compensation paid in excess of $1 million (discussed
below under the heading "Federal Income Tax Consequences"). No more than
15,000 Stock Equivalent Units may be granted to any participant in any twelve-
month period.
Performance Units
The Committee may make awards of Performance Units which are based on the
attainment over a specified period of specific business objectives and other
means of measuring individual, business unit, Company, or subsidiary
performance, as it may determine, including, but not limited to, earnings per
share, net after-tax income, total shareholder return, cash flow, return on
shareholders' equity and cumulative return on net assets. To the extent that it
deems advisable to ensure that payments are deductible for tax purposes, the
Committee intends to establish performance goals associated with grants of
Performance Units to participants who may be "covered employees" as such term
is defined in Section 162(m) of the Code, which performance goals are intended
to qualify under such section with regard to preserving the Company's tax
deduction for certain compensation paid in excess of $1 million (as discussed
below under the heading "Federal Income Tax Consequences"). The maximum amount
that may be paid to any participant in any twelve-month period with respect to
an award of Performance Units shall be $300,000.
Annual Incentive Stock Awards
The Committee also may grant common stock under the Plan to executives
who are subject to Section 16 of the Securities and Exchange Act of 1934, as
amended, in lieu of cash grants under the Company's Annual Incentive Plan.
Settlement of Awards
At the Committee's discretion, awards may be settled in cash, shares of
common stock, or a combinations thereof. The Committee may determine the manner
in which federal, state or local tax withholding obligations of the Company
will be satisfied including, but not limited to, the reduction in the amount of
stock or cash to be delivered or paid to the participant or reimbursement by
the participant in cash.
$1 Million Limitation on Deductibility
The Committee may establish performance goals for awards of Stock
Equivalent Units and Performance Units which are intended to qualify such
awards as "performance-based compensation," as defined in Section 162(m) of the
Code, in order to preserve tax deductions by the Company with respect to any
such compensation in excess of $1 million paid to "covered employees," i.e.,
the Company's Chief Executive Officer and the four highest compensated other
executive officers of the Company who are officers on the last day of the year
in question.
-15-<PAGE>
The material terms of the applicable performance goals are set forth above. To
qualify options as "performance-based compensation" for federal income tax
purposes, the Plan limits the total number of shares of common stock subject to
options awarded to any one participant as set forth above. Awards of common
stock to covered employees in settlement of awards under the Company's Annual
Incentive Plan will not qualify as "performance-based compensation" and will be
subject to the limitation on deductibility under Section 162(m) of the Code.
Federal Income Tax Consequences
The description of the federal income tax consequences set forth below is
necessarily general in nature, and is subject to the above discussion regarding
the $1 million limitation on deductibility. Tax consequences under applicable
state and local income tax laws may not be the same as under the federal income
tax law.
Incentive Stock Options (ISO). With respect to ISOs, generally, the participant
will recognize no taxable gain or loss when the ISO is granted or exercised,
and upon exercise, the difference between the fair market value and the
exercise price will be an item of tax preference for purposes of the
participant's alternative minimum tax. If the shares acquired upon the exercise
of an ISO are held for at least one year after exercise and two years after
grant (the "Holding Periods"), the participant will recognize any gain or loss
realized sale of the shares as long-term capital gain or loss. The Company will
not be entitled to a tax deduction. If the shares are not held for the Holding
Periods, the participant will recognize ordinary income in an amount equal to
the difference between the exercise price and the fair market value of common
stock on the date the option is exercised. The Company will be entitled to a
tax deduction equal to the amount of any ordinary income so recognized. If
the shares are not held for the Holding Periods and the amount realized upon
sale is less than the grant price, such difference will be a capital loss to
the participant.
Nonqualified Stock Options. With respect to Nonqualified Stock Options, the
participant will recognize no taxable income at the time of grant. Upon
exercise of a Nonqualified Stock Option, the participant will recognize
ordinary income equal to the difference between the exercise price and the fair
market value of the shares on the date of exercise. The participant will
recognize as a capital gain or loss any profit or loss realized on the sale or
exchange of any share disposed of or sold. The Company will be entitled to
deduct an amount equal to the difference between the exercise price and the
fair market value of the shares on the date of exercise.
Stock Swaps. If previously owned shares are used to exercise Nonqualified Stock
Options, no additional income results unless other property, including money,
is received by the participant in the exchange. Assuming no gain or loss is
recognized, the participant's tax basis and holding period of the previously
owned shares will be carried over to the equivalent number of shares received
on exercise. Any additional shares received upon exercise will result in the
participant recognizing taxable compensation equal to the fair market value of
the shares on the date of exercise. The tax basis of the additional shares
will be equal, in the aggregate, to the taxable compensation recognized by the
-16-<PAGE>
participant plus any cash paid. The holding period will begin on the day after
the tax basis of the shares is determined. However, if the previously owned
shares had been acquired on the exercise of an Incentive Stock Option and the
holding period requirement for those shares was not satisfied at the time they
were used to exercise a Nonqualified Stock Option, such use would constitute a
disposition of such previously owned shares resulting in the recognition of
ordinary income as described above.
Stock Equivalent Units. A participant granted Stock Equivalent Units recognizes
income in the amount of the award of those units when they vest and are no
longer subject to forfeiture and he is entitled to receive the value of the
award. The Company receives a deduction for the same amount in the year that
income is recognized by the participant.
Performance Units. A participant granted Performance Units recognizes income in
the amount of the award of those units when they vest and are no longer subject
to forfeiture and he is entitled to receive the value of the award. The Company
receives a deduction for the same amount in the year that income is recognized
by the participant.
Annual Incentive Stock. A participant who receives shares of common stock in
settlement of an award under the Company's Annual Incentive Plan includes the
fair market value of such shares in income when restrictions, if any, lapse.
The Company generally will be entitled to a deduction in the amount of the
ordinary income recognized by the participant for the Company's taxable year in
which the participant recognizes such income.
Other Provisions
In the event of a "Change of Control", as defined in the Plan, in
addition to any action required or authorized by the terms of an award
agreement, the Committee may in its sole discretion accelerate time periods for
purposes of vesting in, or realizing gain from, any outstanding award, offer to
purchase any outstanding award from the holder for its equivalent cash value,
or make adjustments or modifications to outstanding awards to maintain and
protect the rights and interests of participants. Except as otherwise
determined by the Committee, no award shall be transferable by a participant
other than by will or laws of descent and distribution. The Plan also provides
for adjustments upon certain changes in the stock, and for tax withholdings.
The Board of Directors at any time may amend or terminate the Plan provided
that no such action may impair the rights of a participant without the
participant's consent. Furthermore, the Board intends that no amendment shall,
without Shareholder approval, effectuate a change for which Shareholder
approval is required for the Plan to continue under Rule 16b-3 under the
Securities and Exchange Act of 1934.
Plan Awards
No awards have been granted under the Plan and the amounts of any awards
that may be payable to participants in future years cannot currently be
determined. If the Plan had been in effect as of April 1, 1995, and if 30% of
the incentive compensation awards under the Company's Incentive Compensation
-17-<PAGE>
Plan for fiscal 1996 had been settled in common stock under the Plan, payments
to Named Executive Officers, all executive officers as a group, and all
employees other than executive officers would have been made as follows:
Participant Number of Shares Dollar Amount*
R.R. Womack 1,796 $ 37,491
D.F. Fessler 1,437 29,997
D.L. Butynski None None
F.E. Sheeder 862 17,994
J.R. Mellett 862 17,994
All Executive
Officers as a group 5,990 125,041
All employees other than
Executive Officers 19,167 400,111
_____________________
*Based on the June 10, 1996, price of the common stock of $20.875.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ADOPTION OF THE
1996 EMPLOYEE STOCK PLAN. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE
SO VOTED UNLESS OTHERWISE SPECIFIED. A MAJORITY OF THE VOTES CAST IS REQUIRED
FOR ADOPTION OF THE PLAN. ABSTENTIONS AND BROKER NONVOTES WILL NOT BE COUNTED
AS VOTES CAST.
AGENDA ITEM NO. 3
PROPOSAL TO AMEND THE 1995 DIRECTORS STOCK OPTION PLAN
The Board of Directors of the Company has approved amendments to the
Directors Stock Plan, as approved and recommended by the Management Development
and Compensation Committee of the Board, subject to Shareholder approval.
Subject to Shareholder approval of such amendments, the Board has amended and
partially terminated the 1986 Retirement Plan for Outside Directors (see
"Directors' Compensation," above).
The complete text of the amendments appears as Exhibit B of this Proxy
Statement.
Purpose
The purpose of the amendments is to promote the interests of the Company
by providing restricted stock awards to directors, and thereby attract and
retain individuals to serve as directors and further align the interests of
directors with the interests of the Company's Shareholders.
Restricted Stock Awards
On the first business day after the Annual Meeting at which this
amendment is approved by Shareholders and on the first business day after each
subsequent Annual Meeting of Shareholders, an award of 500 shares of common
stock shall be automatically awarded to each individual who is a nonemployee
member of the Company's Board of Directors. These awards would be in addition
to the annual grant of options on 2,000 shares of common stock as provided in
the Directors Stock Plan, but would be made without further authorization of
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shares, using shares authorized by the approval of the Directors Stock Plan
last year.
The common stock shall be subject to the restrictions of the Plan for a
period (the "Restricted Period") of five years or, if earlier, until the first
to occur of the events set forth below; provided, however the restrictions
shall remain in effect for not less than six months from the date of the
award.
(a) the director attains age 65 and completes five years of service as
a director, including service prior to the date of the award;
(b) the director's service on the Board terminates as a result of not
being nominated for re-election by the Board, but not as a result
of the director's declining to serve again;
(c) the director's service on the Board terminates because the
director, although nominated for re-election by the Board, is not
re-elected;
(d) the director is unable to serve because of disability;
(e) the director dies; or
(f) a "Change in Control" as defined in the Plan.
If the date a director's service on the Board terminates is before the
end of the Restricted Period with respect to an award of shares of common
stock, the director shall forfeit and return to the Company all such common
stock.
The common stock shall be subject to the following restrictions, among
others, during the Restricted Period:
(a) The common stock shall be subject to forfeiture to the Company as
provided in the Plan and described above.
(b) The common stock may not be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of and neither the right to
receive common stock nor any interest under the Plan may be
assigned by a director.
Federal Income Tax Consequences
A director granted shares of restricted stock is not required to include
the value of such shares in income until the first time such director's rights
in the shares are transferable or are not subject to a substantial risk of
forfeiture, whichever occurs earlier, unless such director timely files an
election under Internal Revenue Code Section 83(b) to be taxed on the receipt
of the shares. In either case, the amount of such income will be equal to the
fair market value of the stock at the time the income is recognized. The
Company generally will be entitled to a deduction, in the amount of the
ordinary income recognized by the director, for the Company's taxable year in
which the director recognizes such income.
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Plan Awards
No awards have been made under the Plan. If the Plan is approved by
Shareholders, awards will be made as follows:
Director Number of Shares Dollar Amount*
Z. Baird 500 $10,437
M.K. Brown 500 10,437
W.E. Butler 500 10,437
E.J. Campbell 500 10,437
R.D. Neary 500 10,437
Total 2,500 $52,187
_____________________
*Based on the June 10, 1996, price of the common stock of $20.875.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ADOPTION OF THE
1995 DIRECTORS STOCK OPTION PLAN AMENDMENTS. PROXIES SOLICITED BY THE BOARD OF
DIRECTORS WILL BE SO VOTED UNLESS OTHERWISE SPECIFIED. A MAJORITY OF THE
VOTES CAST IS REQUIRED FOR ADOPTION OF THE AMENDMENTS. ABSTENTIONS AND BROKER
NONVOTES WILL NOT BE COUNTED AS VOTES CAST.
AGENDA ITEM NO. 4
APPOINTMENT OF AUDITORS
The Board of Directors, acting upon the recommendation of its Audit
Committee, has appointed the firm of Ernst & Young LLP as independent auditors
of the Company for the fiscal year ending March 31, 1997, subject to
ratification by the Shareholders at the Annual Meeting. This firm has acted in
this capacity since 1968. Representatives of Ernst & Young LLP will be present
at the meeting with the opportunity to make statements and be available to
respond to appropriate questions.
OTHER MATTERS
The Board of Directors does not intend to present at the meeting any
matters other than those hereinbefore mentioned, and does not know of any other
matters to be presented. However, if any other matters properly come before
the meeting, it is the intention of the persons named in the enclosed proxy to
vote thereon in accordance with their judgment on such matters.
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SHAREHOLDER PROPOSALS FOR 1997
Proposals intended to be presented by Shareholders at the 1997 Annual
Meeting must be received for inclusion in the proxy statement for that meeting
by February 28, 1997.
BY ORDER OF THE BOARD OF DIRECTORS
DENNIS HAINES
General Counsel and Secretary
Erie, Pennsylvania
June 27, 1996
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EXHIBIT A
1996 EMPLOYEE STOCK PLAN
Section 1. Purpose
The purpose of the Plan is to promote the long-term interests of the
Company by: (i) providing incentive compensation to executives and other key
Employees who contribute to the growth and success of the Company and its
Subsidiaries; (ii) attracting and retaining executives and other key Employees
of outstanding ability; and (iii) further aligning the interests of such
individuals with the interests of the Company's shareholders.
Section 2. Definitions
The following terms, as used herein, shall have the meaning specified:
a. "Award" means an award granted pursuant to Section 4.
b. "Award Agreement" means an agreement described in Section 6 entered
into between the Company and a Participant, setting forth the terms
and conditions applicable to the award granted to the Participant.
c. "Board of Directors" means the Board of Directors of the Company as
it may be comprised from time to time.
d. "Cause" means (i) a felony conviction of an Employee; (ii) the
commission by an Employee of an act of fraud or embezzlement against
the Company and/or a Subsidiary; (iii) the Employee's willful
misconduct or gross negligence materially detrimental to the Company
and/or a Subsidiary; (iv) the Employee's failure to perform his
duties and responsibilities in accordance with the standards and
criteria established by the Company therefor and communicated to the
Employee; (v) the Employee's wrongful dissemination or use of
confidential or proprietary information of the Company and/or
Subsidiary or of confidential or proprietary information of a third
party in breach of a contractual or other obligation of the Company
and/or Subsidiary; or (vi) the intentional and habitual neglect by
the Employee of his duties to the Company and/or a Subsidiary.
e. "Change in Control" means Change in Control as defined in Section 10.
f. "Code" means the Internal Revenue Code of 1986, and any successor
statute, as it or they may be amended from time to time.
g. "Committee" means the Committee as defined in Section 8.
h. "Common Stock" means shares of common stock of the Company, $.50 par
value, or any security of the Company issued in substitution,
exchange or in lieu thereof.
i. "Company" means Zurn Industries, Inc., and any successor company.
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j. "Covered Employee" means a covered employee within the meaning of
Code section 162(m)(3).
k. "Disability" means (i) total disability within the meaning of the
Company's long-term disability plan as an in effect from time to time
or (ii) if there is no such plan at the applicable time, physical or
mental incapacity as determined solely by the Committee.
l. "Effective Date" means the Effective Date as defined in Section
11(k).
m. "Employee" means officers, executives and other key employees of the
Company or a Subsidiary.
n. "Exchange Act" means the Securities Exchange Act of 1934, and any
successor statute, as it or they may be amended from time to time.
o. "Fair Market Value" means the closing price of the Common Stock as
reported on the New York Stock Exchange Composite Tape for the
relevant date, or if no sale of such Common Stock is reported for
such date, the next preceding day for which there is a reported
sale.
p. "Insider" means any person who is subject to Section 16 of the
Exchange Act, and any successor statutory provision, as it or they
may be amended from time to time.
q. "Participant" means any Employee who has been granted an award.
r. "Plan" means this 1996 Employee Stock Plan.
s. "Retirement" means retirement at or after age 65 or, with the advance
consent of the Committee, before age 65.
t. "Subsidiary" means any company in which the Company, directly or
indirectly, controls fifty percent (50%) or more of the total
combined voting power of all classes of such company's common
stock.
u. "Ten-Percent Shareholder" means any person who owns, directly or
indirectly, on the relevant date securities having ten percent (10%)
or more of the combined voting power of all classes of the Company's
securities or the securities of its parent or subsidiaries. For
purposes of determining the foregoing ten percent (10%), the rules of
Code section 425(d) shall apply.
Section 3. Eligibility
Persons eligible for awards shall be Employees who contribute to the
growth and success of the Company and/or its Subsidiaries as the Committee may
in its sole discretion determine.
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Section 4. Employee Awards
The Committee may grant Employees any of the following types of awards,
either singly, in tandem, or in combination with other types of awards, as the
Committee may in its sole discretion determine:
a. Nonqualified Stock Options. A Nonqualified Stock Option is an
option to purchase a specific number of shares of Common Stock
exercisable at such time or times six months after the grant date,
and during such specified time not to exceed ten years, as the
Committee may determine, at a price not less than one hundred
percent (100%) of the fair market value of the Common Stock on the
date that the option is granted. The purchase price of the Common
Stock subject to the option may be paid in cash, by the tender of
Common Stock which has been owned for more than six months (the
value of such Common Stock shall be its Fair Market Value on the
date of exercise), or through a combination of Common Stock and
cash, or through such other means as the Committee determines are
consistent with the Plan's purpose and applicable law. No
fractional shares of Common Stock will be issued or accepted.
b. Incentive Stock Options. An Incentive Stock Option is an award in
the form of an option to purchase a specified number of shares of
Common Stock that complies with the requirements of Code section
422, which option shall, subject to the following provisions, be
exercisable at such time or times, and during such specified time,
as the Committee may determine. For the purposes of the plan, the
term Incentive Stock Option includes any option to purchase Common
Stock that is granted pursuant to any other plan of the Company or
its Subsidiaries that complies with Code section 422.
i. The aggregate Fair Market Value (determined at the time of
the grant of the award) of the shares of Common Stock subject
to Incentive Stock Options which are exercisable by one
person for the first time during a particular calendar year
shall not exceed $100,000.
ii. No Incentive Stock Option may be granted under the Plan on or
after the third anniversary of the effective date of the
Plan.
iii. No Incentive Stock Option may be exercisable more than:
A) in the case of an Employee who is not a Ten-Percent
Shareholder on the date that the option is granted, ten
years after the date the option is granted; and
B) in the case of an Employee who is a Ten-Percent
Shareholder on the date the option is granted, five
years after the date the option is granted.
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iv. The exercise price of any Incentive Stock Option shall not be
less than:
A) in the case of an Employee who is not a Ten-Percent
Shareholder on the date that the option is granted, the
Fair Market Value of the Common Stock subject to the
option on such date; and
B) in the case of an Employee who is a Ten-Percent
Shareholder on the date that the option is granted, one
hundred ten percent of the Fair Market Value of the
Common Stock subject to the option on such date.
v. The Committee may provide that the option price under an
Incentive Stock Option may be paid by one or more of the
methods available for paying the option price of a
Nonqualified Stock Option.
c. Stock Equivalent Units. A Stock Equivalent Unit is an award based
on the Fair Market Value of one share of Common Stock. All or part
of any Stock Equivalent Units award may be subject to conditions
and restrictions established by the Committee, including, but not
limited to, achievement of specific business objectives, and other
measurements of individual, business unit, Company or Subsidiary
performance, including, but not limited to, earnings per share, net
after-tax income, total shareholder return, cash flow, return on
shareholders' equity, and cumulative return on net assets. Without
limiting the generality of the foregoing, it is intended that the
Committee, as and to the extent it deems advisable to ensure that
payments are deductible by the Corporation for federal income tax
purposes by reason of Code section 162(m), shall establish
performance goals applicable to Stock Equivalent Units granted to
Participants who, in the judgment of the Committee, may be Covered
Employees in such manner as shall permit payments with respect
thereto to qualify as "performance-based compensation" as described
in section 162(m)(4)(C) of the Code. The Committee also may
provide for automatic awards of additional Stock Equivalent Units
on each date that dividends are paid on the Common Stock in an
amount equal to (i) the product of the dividend per share on the
Common Stock times the total number of Stock Equivalent Units held
by the Participant as of the record date with respect to such
dividend, divided by (ii) the Fair Market Value of the Common Stock
on the dividend payment date. Stock Equivalent Units may be
settled in Common Stock or cash or both.
d. Performance Units. A Performance Unit is an award denominated in
cash, the amount of which may be based on the achievement of
specific business objectives, and other measures of individual,
business unit, Company or Subsidiary performance over a specified
period of time including, but not limited to, earnings per share,
net after-tax income, total shareholder return, cash flow, return
on shareholders' equity, and cumulative return on net assets.
-25-<PAGE>
Without limiting the generality of the foregoing, it is intended
that the Committee, as and to the extent it deems advisable to
ensure that payments are deductible by the Corporation for federal
income tax purposes by reason of Code section 162(m), shall
establish performance goals applicable to Performance Units granted
to Participants who, in the judgment of the Committee, may be
Covered Employees in such a manner as shall permit payments with
respect thereto to qualify as "performance-based compensation" as
described in section 162(m)(4)(C) of the Code and that the maximum
amount of such compensation that may be paid to any one Participant
with respect to any one year shall be $300,000. Performance Units
may be settled in Common Stock or cash or both.
e. Annual Incentive Stock Awards. The Committee may from time to time
grant Common Stock to Insiders in settlement of awards under the
Company's annual incentive plan.
Section 5. Shares of Common Stock Available Under Plan
a. Subject to the adjustment provisions of Section 9, the number of
shares of Common Stock with respect to which awards may be granted
under the Plan shall not exceed 500,000 shares. No single
Participant shall receive awards (i) in the form of options,
whether Nonqualified Stock Options or Incentive Stock Options, with
respect to more than 125,000 of the shares of Common Stock
available under the Plan in any twelve-month period, (ii) in the
form of Stock Equivalent Units, with respect to more than 15,000
shares of Common Stock in any twelve-month period, and (iii)
pursuant to Section 4(e), for more than 30,000 shares of Common
Stock in any twelve-month period.
b. Shares of Common Stock with respect to the unexercised or
undistributed portion of any terminated or forfeited award and
shares of Common Stock tendered in payment of the purchase price of
the Common Stock subject to option shall be available for further
awards in addition to the 500,000 shares of Common Stock available
under Section 5(a). Additional rules for determining the number of
shares of Common Stock granted under the Plan may be adopted by the
Committee as it deems necessary and appropriate.
c. The Common Stock that may be issued pursuant to an award under the
Plan may be treasury or authorized but unissued Common Stock, or
Common Stock may be acquired, subsequently or in anticipation of
the transaction, in the open market to satisfy the requirements of
the Plan.
Section 6. Award Agreements
Each award under the Plan shall be evidenced by an Award Agreement. Each
Award Agreement shall set forth the number of shares of Common Stock, Stock
Equivalent Units, and/or Performance Units subject to the award and shall
include the terms set forth below and such other terms and conditions
-26-<PAGE>
applicable to the award, as determined by the Committee, not inconsistent
with the terms of the Plan, including but not limited to the term of the award,
vesting provisions, any other restrictions or conditions (including performance
requirements) on the award and the method by which restrictions or conditions
lapse, provisions permitting the surrender of outstanding awards or securities
held by the Participant in order to exercise or realize rights under other
awards, or in exchange for the grant of new awards under similar or different
terms, the effect on the award of a Change in Control of the Company, the
price, amount or value of awards, and the terms, if any, pursuant to which a
Participant may elect to defer the receipt of cash or Common Stock under an
award. In the event of any conflict between an Award Agreement and the Plan,
the terms of the Plan shall govern.
a. Nonassignability. Except as and to the extent otherwise determined
by the Committee, a provision that no award shall be assignable or
transferable except by will or by the laws of descent and
distribution and that, during the lifetime of a participant, the
award shall be exercised only by such Participant or by his or her
guardian or legal representative.
b. Termination of Service.
i. A provision describing the treatment of an award in the event
of the Retirement, Disability, death or other termination of
a Participant's service with the Company or a Subsidiary,
including but not limited to terms relating to the vesting,
time for exercise, forfeiture or cancellation of an award in
such circumstances.
ii. A provision that for purposes of the Plan, (A) a transfer of
an Employee from the Company to a Subsidiary or affiliate of
the Company, whether or not incorporated, or visa versa, or
from one Subsidiary or affiliate of the Company to another,
and (B) a leave of absence, duly authorized in writing by the
Company, shall not be deemed a termination of service.
iii. A provision stating that in the event an Participant's
service is terminated for Cause, anything else in the Plan or
the Award Agreement to the contrary notwithstanding, all
unvested awards granted to such Participant and all
unexercised options held by such Participant, whether vested
or unvested, shall immediately terminate and be forfeited.
c. Rights as a Shareholder. A provision stating that a Participant
shall have no rights as a shareholder with respect to any Common
Stock covered by an award until the date the Participant becomes
the holder of record thereof. Except as provided in Section 9, no
adjustment shall be made for dividends or other rights, unless the
Award Agreement specifically requires or permits such adjustment.
d. Withholding. A provision requiring the withholding of applicable
taxes required by law from or with respect to all awards. A
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participant may satisfy the withholding obligation by paying the
amount of any taxes in cash or, with the approval of the Committee,
shares of Common Stock may be deducted from the payment to satisfy
the obligation in full or in part. The amount of the withholding
and the number of shares of Common Stock to be deducted shall be
determined with reference to the Fair Market Value of the Common
Stock when the withholding is required to be made.
e. Execution. A provision stating that no award is enforceable until
the Award Agreement has been signed by the Participant and the
Company. By executing the Award Agreement, a Participant shall be
deemed to have accepted and consented to any action taken under the
Plan by the Committee, the Board of Directors or their delegates.
f. Holding Period. To the extent necessary to satisfy the applicable
requirements of rule 16b-3 under the Exchange Act, in the case of
an award to an Insider of: (i) an equity security, a provision
stating (or the effect of which is to require) that such security
must be held for at least six months (or such longer period as
the Committee it its discretion specifies) from the date of
acquisition; or (ii) a derivative security with a fixed exercise
price within the meaning of Section 16 of the Exchange Act, a
provision stating (or the effect of which is to require) that at
least six months (or such longer period as the Committee in its
discretion specifies) must elapse from the date of acquisition of
such derivative security to the date of disposition of the
derivative security (other than upon exercise or conversion) or its
underlying equity security.
g. Treatment of Options. Each award of an option shall state whether
it will or will not be treated as an Incentive Stock Option.
Section 7. Amendment and Termination
The Board of Directors may at any time amend or terminate the Plan, in
whole or in part, or amend any or all Award Agreements under the Plan to the
extent permitted by law, but no such action shall impair the rights of any
holder of an award without the holder's consent, except to preserve the Plan's
qualification as a safe harbor plan under Section 16 of the Exchange Act.
Section 8. Administration
a. The Plan and all awards shall be administered by a Committee of the
Board of Directors, which Committee shall consist of not less than
three (3) members of the Board of Directors and shall be
constituted so as to permit the Plan to comply with the
administration requirements of rule 16b-3(c)(2)(I) of the Exchange
Act and Code section 162(m)(4)(C). The members of the Committee
shall be designated by the Board of Directors. A majority of the
members of the Committee shall constitute a quorum. The vote of a
majority of a quorum shall constitute action by the Committee.
-28-<PAGE>
b. The Committee shall have full and complete authority, in its sole
and absolute discretion, (i) to exercise all of the powers granted
to it under the Plan, (ii) to construe, interpret and implement the
Plan and any related document, (iii) to prescribe, amend and
rescind rules relating to the Plan, (iv) to make all determinations
necessary or advisable in administering the Plan, and (v) to
correct any defect, supply any omission and reconcile any
inconsistency in the Plan. The actions and determinations of the
Committee on all matters relating to the Plan and any awards will
be final and conclusive. The Committee's determinations under the
Plan need not be uniform and may be made by it selectively among
Employees who receive, or who are eligible to receive, awards under
the Plan, whether or not such persons are similarly situated.
c. The Committee may appoint such accountants, counsel, and other
experts as it deems necessary or desirable in connection with the
administration of the Plan. The Committee may delegate to the
officers or employees of the Company and its Subsidiaries the
authority to execute and deliver such instruments and documents, to
do all such acts and things, and to take all such other steps
deemed necessary, advisable or convenient for the effective
administration of the Plan in accordance with its terms and
purpose, except that the Committee may not delegate any
discretionary authority with respect to substantive decisions or
functions regarding the Plan or awards thereunder as these relate
to Insiders or Covered Employees, including but not limited to
decisions regarding the timing, eligibility, pricing, amount or
other material terms of such awards.
d. The Committee and others to whom the Committee has delegated such
duties shall keep a record of all their proceedings and actions and
shall maintain all such books of account, records and other data as
shall be necessary for the proper administration of the Plan.
e. The Company shall pay all reasonable expenses of administering the
Plan, including, but not limited to, the payment of professional
fees.
f. It is the intent of the Company that the Plan and awards thereunder
satisfy, and be interpreted in a manner that satisfy, in the case
of Participants who are or may be Insiders, the applicable
requirements of rule 16b-3 of the Exchange Act, so that such
persons will be entitled to the benefits of rule 16b-3, or other
exemptive rules under section 16 of the Exchange Act, and will not
be subjected to avoidable liability thereunder. If any provision of
the Plan or of any award would otherwise frustrate or conflict with
the intent expressed in this Section, that provision to the extent
possible shall be interpreted and deemed amended so as to avoid
such conflict. To the extent of any remaining irreconcilable
conflict with such intent, such provision shall be deemed void as
applicable to Insiders.
-29-<PAGE>
Section 9. Adjustment Provisions
If there shall occur any recapitalization, stock split (including a
stock split in the form of a stock dividend), reverse stock split, merger
combination, consolidation, or other reorganization or any extraordinary
dividend or other extraordinary distribution in respect of the Common Stock
(whether in the form of cash, Common Stock or other property), or any split-up,
spin-off, extraordinary redemption, or exchange of outstanding Common Stock, or
there shall occur any other similar corporate transaction or event in respect
of the Common Stock, or a sale of substantially all the assets of the Company,
then the Committee shall, in the manner and to the extent, if any, as it deems
appropriate and equitable to the Participants and consistent with the terms of
the Plan, and taking into consideration the effect of the event on the holders
of the Common Stock proportionately adjust any or all of: (a) the number and
type of shares of Common Stock and Stock Equivalent Units which thereafter may
be made the subject of awards (including the specific maximums and numbers of
shares of Common Stock or Stock Equivalent Units set forth elsewhere in the
Plan); (b) the number and type of shares of Common Stock, other property, Stock
Equivalent Units or cash subject to any or all outstanding awards; (c) the
grant, purchase or exercise price, or conversion ratio of any or all
outstanding awards, or of the Common Stock, other property or Stock Equivalent
Units underlying the awards; (d) the securities, cash or other property
deliverable upon exercise or conversion of any or all outstanding awards; (e)
subject to Sections 4(c) and (d), the performance targets or standards
applicable to any outstanding performance-based awards; or (f) any other terms
as are affected by the event.
Notwithstanding the foregoing, in the case of an Incentive Stock Option,
no adjustment shall be made which would cause the Plan to violate section
424(a) of the Code or any successor provisions thereto, without the written
consent of the Participant adversely affected thereby. The Committee may act
prior to an event described in this Section (including at the time of an award
by means of more specific provisions in the Award Agreement) if deemed
necessary or appropriate to permit the Participant to realize the benefits
intended to be conveyed by an award in respect of the Common Stock.
Section 10. Change in Control
a. In the event of a Change in Control, in addition to any action
required or authorized by the terms of an Award Agreement, the
Committee may, in its sole discretion, take any of the following
actions as a result, or in anticipation, of any such event to
assure fair and equitable treatment of Participants:
i. accelerate time periods for purposes of vesting in, or
realizing gain from, any outstanding awards made pursuant to
the Plan;
ii. offer to purchase any outstanding awards made pursuant to the
Plan from the holder for their equivalent cash value, as
determined by the Committee, as of the date of the Change in
Control; or
-30-<PAGE>
iii. make adjustments or modifications to outstanding awards as
the Committee deems appropriate to maintain and protect the
rights and interests of Participants following such Change
in Control.
Any such action approved by the Committee shall be conclusive and
binding on the Company and all participants.
b. A Change in Control shall be deemed to occur if (i) any "person"
(as such term is used in sections 13(d) and 14(d) of the Exchange
Act) other than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or any
Company owned, directly or indirectly, by the shareholders of the
Company in substantially the same proportions as their ownership of
Common Stock of the Company), becomes the "beneficial owner" (as
defined in rule 13d-3 of the Exchange Act), directly or indirectly,
of securities of the Company representing twenty percent (20%) or
more of the combined voting power of the Company's then outstanding
securities; (ii) during any period of two consecutive years (not
including any period prior to the grant of an option or award),
individuals who at the beginning of such period constitute the
Board of Directors, and any new director (other than a director
designated by a person who has entered into an agreement with the
Company to effect a transaction described in clauses (i), (iii) or
(iv) of this paragraph) whose election by the Board of Directors or
nomination for election by the Company's shareholders was approved
by a vote at least two-thirds of the directors then still in office
who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved
cease for any reason to constitute a majority thereof, (iii) the
shareholders of the Company approve (A) a merger or consolidation
of the Company with any other company, other than a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than fifty
percent (50%) of the combined voting power of the voting securities
of the Company or such surviving entity outstanding immediately
after such merger or consolidation or (B) a merger or consolidation
effected to implement a recapitalization of the Company (or similar
transaction) in which no "person" (as herein above defined)
acquires more than fifty percent (50%) of the combined voting power
of the Company's then outstanding securities; or (iv) the
shareholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the
Company of all of substantially all of the Company's assets.
Section 11. Miscellaneous
a. Other Payments or Awards. Nothing contained in the Plan shall be
deemed in any way to limit or restrict the Company or a Subsidiary
from making any award or payment to any person under any other plan,
-31-<PAGE>
arrangement or understanding, whether now existing or hereafter in
effect.
b. Payments to Other Persons. If payments are legally required to be
made to any person other than the person to whom any amount is made
available under the Plan, payments shall be made accordingly. Any
such payment shall be a complete discharge of the liability
hereunder.
c. Unfunded Plan. The Plan shall be unfunded. No provision of the Plan
or any Award Agreement shall require the Company or a Subsidiary,
for the purpose of satisfying any obligations under the Plan, to
purchase assets or place any assets in a trust or other entity to
which contributions are made or otherwise to segregate any assets,
nor shall the Company or a Subsidiary maintain separate bank
accounts, books, records or other evidence of the existence of a
segregated or separately maintained or administered fund for such
purposes. Participants shall have no rights under the Plan other
than as unsecured general creditors of the Company or a Subsidiary.
d. Limits of Liability. Any liability of the Company or a Subsidiary
to any Participant with respect to an award shall be based solely
upon contractual obligations created by the Plan and the Award
Agreement. Neither the Company or its Subsidiaries, nor any member
of the Board of Directors or of the Committee, nor any other person
participating in any determination of any question under the Plan,
or in the interpretation, administration or application of the
Plan, shall have any liability to any party for any action taken,
or not taken, in good faith under the Plan.
e. Rights of Employees. Status as an eligible Employee shall not be
construed as a commitment that any award shall be made under the
Plan to such Employee or to Employees generally. Nothing contained
in the Plan or in any Award Agreement shall confer upon any
Employee any right to continue in the service of the Company or a
Subsidiary.
f. Section Headings. The section headings contained herein are for the
purpose of convenience only, and in the event of any conflict, the
text of the Plan, rather than the section headings, shall control.
g. Gender, Etc. In interpreting the Plan, the masculine gender shall
include the feminine, the neuter gender shall include the masculine
or feminine, and the singular shall include the plural unless the
context clearly indicates otherwise.
h. Validity. If any term or provision contained herein or in any Award
Agreement shall to any extent be invalid or unenforceable, such
term or provision shall be reformed so that it is valid, and such
invalidity or unenforceability shall not affect any other provision
or part thereof.
i. Applicable Law. The Plan, the Award Agreements and all actions taken
-32-<PAGE>
hereunder or thereunder shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Pennsylvania
without regard to the conflict of law principles thereof.
j. Compliance with Laws. Notwithstanding anything contained herein or
in any Award Agreement to the contrary, the Company shall not be
required to sell or issue shares of Common Stock hereunder or
thereunder if the issuance thereof would constitute a violation by
the Participant or the Company of any provisions of any law or
regulation of any governmental authority or any national securities
exchange; and, as a condition of any sale or issuance, the Company
may require such agreements or undertakings, if any, as the Company
may deem necessary or advisable to assure compliance with any such
law or regulation.
k. Effective Date and Term. The Plan was adopted by the Board of
Directors effective as of August 5, 1996, subject to approval by
the Company's shareholders. The Plan shall remain in effect until
all awards under the Plan have been exercised or terminated under
the terms of the Plan and applicable Award Agreements, provided
that awards under the Plan may only be granted within three years
from the effective date.
-33-<PAGE>
EXHIBIT B
AMENDMENT TO 1995 DIRECTORS STOCK OPTION PLAN
The 1995 Directors Stock Option Plan is amended as of August 5, 1996 by
adding the following provisions:
VIII. Restricted Stock Awards
On the first business day after the Annual Meeting of Shareholders at
which this provision is approved by Shareholders, and on the first
business day after each subsequent Annual Meeting of Shareholders, an
award of 500 shares of the Company's Common Stock shall be automatically
awarded to each individual who is a nonemployee member of the Company's
Board of Directors on such date.
As promptly as practical thereafter, the Company shall issue certificates
("Certificates"), registered in the name of each participant receiving an
award, representing the number of shares of Common Stock covered by the
award. The Common Stock shall have the rights and be subject to the
restrictions and other terms and conditions of the Plan. Upon issuance
of the Certificates, the participants in whose names they are registered
shall, subject to the restrictions of the Plan, have all of the rights of
a Shareholder with respect to such Common Stock, including the right to
vote the Common Stock and receive dividends and other distributions
thereon.
The Common Stock shall be subject to the restrictions of the Plan for a
period ("Restricted Period") of five years or, if earlier, until the
first to occur of the events set forth below; provided, however, the
restrictions shall remain in effect for not less than six months from the
date of the awards.
a. The Director attains age 65 and completes five years of service as
a Director including service prior to the date of the award;
b. The Director's service on the Board terminates as a result of not
being nominated for re-election by the Board, but not as a result
of the Director's declining to serve again;
c. The Director's service on the Board terminates because the
Director, although nominated for re-election by the Board, is not
re-elected;
d. The Director is unable to serve because of disability;
e. The Director dies; or
f. The occurrence of a Change in Control.
If the date that a Director's service on the Board terminates is before
the end of the Restricted Period with respect to an award of shares of
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Common Stock, the Director shall forfeit and return to the Company all
such Common Stock. If a Director's date of termination is at or after
the end of the Restricted Period, the Director shall receive, free and
clear of the restrictions of the Plan, all such Common Stock.
The Common Stock shall be subject to the following restrictions during
the Restricted Period:
a. The Common Stock shall be subject to forfeiture to the Company as
provided in the Plan.
b. The Common Stock may not be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of and neither the right to
receive Common Stock nor any interest under the Plan may be
assigned by a Director, and any attempted assignment shall be void.
c. The Certificates shall be held by the Company and shall, at the
option of the Company, bear an appropriate restrictive legend and
be subject to appropriate stop transfer orders. The Director shall
deliver to the Company a stock power endorsed in blank to the
Company.
d. Any additional Common Stock or other property (other than cash)
that may be issued with respect to Common Stock awarded under the
Plan as a result of any stock dividend, stock split, business
combination or other event, shall be subject to the restrictions
and other terms and conditions of the Plan.
e. A Director shall not be entitled to receive any Common Stock prior
to the completion of any registration or qualification of the
Common Stock under any federal or state law or governmental rule or
regulation that the Company, in its sole discretion, determines to
be necessary or advisable.
IX. Administrative Changes
Notwithstanding the above, the number of shares of Common Stock to be
awarded to nonemployee Directors pursuant to the Plan and when and under
what circumstances each award will be granted shall not be amended more
than once every six months other than to conform with changes in the
Internal Revenue Code of 1986, as amended, the Employee Retirement Income
Security Act of 1974, as amended, or the rules and regulations thereunder.
-35-<PAGE>
ZURN INDUSTRIES, INC.
Proxy Solicited by the Board of Directors
P The undersigned appoints Robert R. Womack and Dennis Haines, or either of
them, as proxies to vote in their discretion, all shares of the undersigned
R as fully as the undersigned could do if personally present at the Annual
Meeting of Stockholders to be held at the Pittsburgh Airport Marriott Hotel,
O Coraopolis, Pennsylvania, on August 2, 1996, at 9:30 a.m. and at any
adjournment thereof, on all matters coming before said meeting. Shares
X represented by this Proxy will be voted as designated.
Y Directors Recommend a Vote For: (change of address)
For a term of three years: ________________________
Zoe Baird and William E. Butler ________________________
________________________
________________________
(If you have written in the
above space, please mark
the corresponding box on
the reverse side of this
card.)
You are encouraged to specify your choices by marking the appropriate boxes,
SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in
accordance with the Board of Directors' recommendations. The proxies cannot
vote your shares unless you sign and return this card.
___________
[See Reverse]
[ Side ]
[___________]
<PAGE>
_____
[ ] Please mark your SHARES IN YOUR NAME REINVESTMENT SHARES
[ X ] votes as in this
[_____] example.
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of ____ ____ 2. Adoption of 1996 ____ ____ ____
Directors [ ] [ ] Stock Employee [ ] [ ] [ ]
(see reverse) [____] [____] Plan [____] [____] [____]
For, except vote withheld from 3. Adoption of ____ ____ ____
the following nominee(s): amendments to [ ] [ ] [ ]
1995 Director [____] [____] [____]
______________________________ Stock Option Plan
____ ____ ____
4. Ratify appoint- [ ] [ ] [ ]
ment of auditors [____] [____] [____]
Change ____
of [ ]
Address [____]
PLEASE DATE, SIGN, AND RETURN
IN THE ENCLOSED ENVELOPE --
NO POSTAGE NECESSARY
SIGNATURES(S) __________________________________________ DATE______________
SIGNATURES(S) __________________________________________ DATE______________
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
