FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
X Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 1997
___ Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Transition Period From ___________ To __________
Commission File Number 1-5502
ZURN INDUSTRIES, INC.
IRS Employer
State of Address and Identification
Incorporation Telephone Number Number
Pennsylvania 14801 Quorum Drive 25-1040754
Addison, Texas 75240-7584
972-560-2000
Former Address
One Zurn Place
Erie, Pennsylvania 16505
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
November 3, 1997 -- Common Stock, $.50 Par Value -- 12,509,642
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PART I - FINANCIAL INFORMATION
CONSOLIDATED FINANCIAL POSITION
(Thousands)
September 30, March 31,
1997 1997
Assets
Current assets
Cash and equivalents $ 10,849 $ 22,908
Marketable securities 6,421 8,489
Accounts receivable 125,393 110,194
Inventories
Finished products 72,246 80,473
Work in process 12,601 13,722
Raw materials and supplies 23,678 28,604
Contracts in process 14,583 11,467
123,108 134,266
Income taxes 60,630 59,551
Discontinued operations' net assets 15,428 4,313
Other current assets 9,252 8,323
Total current assets 351,081 348,044
Property, plant, and equipment 159,113 154,349
Less allowances for depreciation
and amortization 54,970 49,169
104,143 105,180
Goodwill 190,737 194,064
Investments 39,586 38,524
Other assets 46,056 40,545
$731,603 $726,357
Liabilities and Shareholders' Equity
Current liabilities
Trade accounts payable $ 36,005 $ 49,243
Other current liabilities 215,316 190,581
Total current liabilities 251,321 239,824
Debt obligations 150,423 160,957
Retirement obligations 68,266 68,346
Other liabilities 16,705 26,512
Shareholders' equity
Common stock 6,329 6,285
Other shareholders' equity 238,559 224,433
244,888 230,718
$ 731,603 $726,357
See notes to consolidated financial statements.
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CONSOLIDATED OPERATIONS
(Thousands Except Per Share Amounts)
Three Months Ended Six Months Ended
September 30 September 30
1997 1996 1997 1996
Net sales $166,212 $81,229 $322,597 $163,464
Cost of sales 117,631 58,889 227,576 118,487
Marketing and administration 29,941 14,619 60,395 28,350
Interest expense 4,611 334 9,374 651
Goodwill amortization 1,666 23 3,327 46
Interest income (758) (748) (1,460) (1,541)
Other income (896) (622) (1,477) (1,674)
Continuing operations income
before income taxes 14,017 8,734 24,862 19,145
Income taxes 6,050 3,200 10,690 7,090
Continuing operations income 7,967 5,534 14,172 12,055
Discontinued operations (4,255) (8,564)
Net income $ 7,967 $ 1,279 $14,172 $ 3,491
Earnings per share
Continuing operations $.63 $.44 $1.13 $.97
Net Income $.63 $.10 $1.13 $.28
Average shares outstanding 12,673 12,369 12,595 12,361
Cash dividends declared
per common share $.10 $.10 $.20 $.20
See notes to consolidated financial statements.
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CONSOLIDATED CASH FLOWS
(Thousands)
Six Months Ended
September 30
1997 1996
Operations
Net income $ 14,172 $ 3,491
Depreciation and amortization 9,444 2,822
Operating assets and liabilities (9,111) (2,727)
Discontinued operations (13,145) (4,539)
Miscellaneous 581 11
1,941 (942)
Investing
Long-term investments (6,772) (574)
Capital expenditures (4,806) (2,786)
Purchase of business (2,908)
Sales of operations 3,074 846
Marketable securities 2,068 (16,496)
Discontinued operations 2,110 19,944
Miscellaneous 46 602
(7,188) 1,536
Financing
Borrowings 30,000
Debt payments (25,302) (407)
Dividends paid (2,494) (2,470)
Stock options exercised 1,466
Discontinued operations (80) (1,974)
3,590 (4,851)
Cash and equivalents
Decrease (1,657) (4,257)
Foreign exchange rate effect 103
Beginning of year 12,403 16,195
End of period $ 10,849 $ 11,938
See notes to consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the results for the interim
periods presented. The results of operations for the six months ended
September 30, 1997 are not necessarily indicative of the results to be
expected for the full year.
Earnings per share are based on income and the average shares of common stock
and dilutive stock options outstanding during the period. Statement of
Financial Accounting Standards No. 128, "Earnings per Share," becomes
retroactively effective in the Company's fiscal 1998 third quarter and is
expected to marginally increase amounts reported herein.
During fiscal 1998's first quarter, the January 1997 credit agreement was
amended to increase the available line for revolving loans by $20 million. At
September 30, 1997, $12.9 million of letters of credit were outstanding.
United States Brass Corporation, an indirect wholly-owned subsidiary of the
Company and Eljer Industries, Inc. (Eljer), filed in 1994 a voluntary petition
for reorganization under Chapter 11 of the United States Bankruptcy Code for
the purpose of systematically resolving issues resulting from sales of
polybutylene plumbing systems and related litigation. US Brass, Eljer, and
its wholly-owned subsidiary Eljer Manufacturing, Inc. (EMI), have filed a
reorganization plan which they believe provides for payment, satisfaction, and
discharge of all claims, including those involving the polybutylene systems.
Currently, US Brass operates as a debtor-in-possession under Section 1108 of
the Bankruptcy Code subject to the supervision and orders of the bankruptcy
court which has approved the US Brass Fourth Amended Disclosure Statement and
distribution of the Fourth Amended Plan of Reorganization and set a
confirmation hearing for January 13, 1998.
The polybutylene system lawsuits allege the systems leaked and seek recovery
based on negligence, breach of warranty, strict tort liability and, in some
cases, fraud or misrepresentation. Defendants in various of the cases among
others include: US Brass; Eljer and EMI, neither of which ever manufactured or
sold the systems; Shell Chemical Company, the polybutylene resin manufacturer;
and Hoechst Celanese Corporation, the manufacturer of a resin for system
fittings. Data is not currently available to permit estimating the number of
installations that have failed or the number of claims that have been settled
by parties other than US Brass. Until July 1991, US Brass, Shell, and Hoechst
Celanese shared the costs of system repairs and replacements with insurance
carriers reimbursing substantial portions of the amounts paid by US Brass.
Some reimbursement of insurance payments may be required under reservations of
rights, retrospective premium adjustments, or indemnification agreements.
The polybutylene claimants committee in the bankruptcy proceeding had filed a
motion to convert the case from Chapter 11 to Chapter 7 of the Bankruptcy Code
which, if granted, would cause US Brass to be liquidated, but now has
indicated it supports approval of the reorganization plan. In connection with
settlements by various parties in two national class actions dealing with
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polybutylene plumbing systems, Eljer, EMI, and US Brass have entered into a
tentative settlement, contingent on confirmation of the reorganization plan
embodying the tentative settlement terms, which would require contribution to
a settlement fund of insurance proceeds, $53.4 million in cash, and a $20
million noninterest bearing note payable over ten years. In consideration for
such contribution, which has been provided for in the statement of
consolidated financial position, Eljer, EMI, and US Brass would receive relief
from polybutylene claims satisfactory to them and US Brass would remain an
indirect, wholly-owned operating subsidiary.
The Company operates plants that generate hazardous and nonhazardous wastes
which are subject to federal and state disposal laws and believes it is in
material compliance with such laws and related regulations. Several of the
Eljer facilities have implemented required remediation programs to remedy the
effects of past waste disposal and others have not undergone comprehensive
environmental studies. Included in the statement of financial position is a
$7.8 million reserve for environmental, health, and safety matters which
management believes is adequate and expects payments of substantial portions
to be made over the next three years.
In the normal course of business, financial and performance guarantees are
made in connection with major engineering and construction contracts and a
liability is recognized when a probable loss occurs. Also, there are various
other claims, legal, and environmental proceedings which management believes
will have no material effect on the Company's financial position or results of
operations when they are resolved.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition
Liquid assets amounted to $17.3 million and $20.9 million at September 30 and
March 31, 1997, respectively. The $10.5 million of restricted cash at March
31, 1997 (classified with cash and equivalents in the accompanying statement
of consolidated financial position) was released during the first quarter on
payment of the debt obligations it secured. Greater net sales caused an
increase in accounts receivable and a decrease in inventories. The increase
in discontinued operations' net assets was primarily caused by payment of the
operations' liabilities.
Trade accounts payable declined, primarily during the first quarter, in line
with the more efficient cash management practices instituted in fiscal 1996
and the payment of costs accrued in connection with the acquisition of Eljer
Industries, Inc. in January 1997. The decline in other long-term liabilities
is attributable to the transfer of Marysville, Ohio property to a party which
has assumed the Company's environmental remediation obligation.
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Results of Operations
The Company's sales were derived from:
Three Months Ended Six Months Ended
September 30 September 30
1997 1996 1997 1996
(Thousands)
Building Products
Plumbing Products $102,128 $ 43,934 $201,647 $ 87,021
Heating, Ventilating,
and Air Conditioning 40,095 74,230
Fire Protection Systems 10,512 10,618 23,154 20,627
152,735 54,552 299,031 107,648
Water Resource Construction 13,477 26,677 23,566 55,816
$166,212 $ 81,229 $322,597 $163,464
The Plumbing Products and HVAC sales increase and the increases in costs and
expenses primarily resulted from the acquisition of Eljer. In thousands of
dollars, the contribution of Eljer for the three and six month periods of
1997, respectively, to sales, operating income, and earnings (net of
acquisition financing effects) was: sales - $94,081 and $182,466; operating
income - $9,861 and $15,742; pretax income - $4,185 and $3,013; net income -
$2,225 and $1,018, or $.18 and $.08 per share. Eljer's revenues for the
quarter were off slightly from last year largely due to a soft German market
for HVAC products and currency exchange variations. The lower Water Resource
Construction revenues reflect the timing of Advanco Constructors' project
starts and the sale last year of Gary Concrete which contributed $5.4 and
$10.7 million to sales for the three and six month periods ended September 30,
1996.
The greater gross profit margin percentage in 1997 was attributable to Advanco
Constructors' larger profit on lower revenues. Goodwill amortization, which
is not deductible, increased the 1997 effective tax rate compared to the prior
year. The greater number of average outstanding shares of common stock,
resulting from the higher value of stock options as the market value of the
Company's stock increased over last year, diluted earnings for the six months
by $.02 per share.
The Company's backlog of unfilled orders was as follows:
September June September
1997 1997 1996
(Millions)
Building Products $ 57 $ 53 $ 30
Water Resource Construction 87 74 36
$144 $127 $ 66
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is not required to present the disclosures before its fiscal year
ending March 31, 1999.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
United States Brass Corporation Bankruptcy
On September 29, 1997, the United States Bankruptcy Court for the Eastern
District of Texas ("Bankruptcy Court") approved the Fourth Amended Disclosure
Statement filed by the Company's indirect, wholly-owned subsidiary, United
States Brass Corporation ("US Brass"), Eljer Manufacturing, Inc. ("EMI"), and
Eljer Industries, Inc. in connection with US Brass's 1994 voluntary petition
for reorganization under Chapter 11 of the Federal Bankruptcy Code.
Interested parties have until January 5, 1998 to vote on the Fourth Amended
Plan of Reorganization ("Plan") filed by US Brass. A confirmation hearing has
been set for January 13, 1998. The Official Polybutylene Claimants Committee
has indicated it supports approval of the Plan.
Environmental Matters
On July 30, 1997, EMI, an indirect wholly-owned subsidiary of the Company,
transferred the ownership of its Marysville, Ohio brass foundry which was
closed in 1987 to Industrial Recovery Capital Company of Ohio, L.L.C., a
Delaware limited liability company, ("Transferee") owned by Industrial
Recovery Capital Company of Ohio, Inc., a Delaware corporation, ("IRCC"). In
addition, EMI transferred the trust account established pursuant to a Consent
Order entered by the Court of Common Pleas for Union County, Ohio ("Court")
and agreed to pay $1.0 million on January 1, 1998 and 1999 to Transferee. In
consideration for the transfers, IRCC agreed to indemnify, reimburse, defend,
and hold harmless EMI for, from and against all third party claims in
connection with or arising out of the presence or existence of hazardous
substances, as defined, on the Marysville property, claims for remediation,
bodily injury, or property damage, and other specified claims. On August 5,
1997, the Court entered an order amending the Consent Order to recognize
Transferee as owner of the property and enjoining and ordering Transferee to
comply with the remaining provisions of the Consent Order.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the August 1, 1997 annual meeting of shareholders, votes were cast for the
election of directors and to ratify the appointment of auditors as follows:
Votes For Votes Withheld
Directors for a term of three years each:
Scott G. Arbuckle 11,348,956.911 75,097.329
Michael K. Brown 11,346,832.126 77,222.114
Robert D. Neary 11,349,041.058 75,013.182
Director for a term of two years:
John M. Sergey 11,349,228.126 74,826.114
Auditors:
Votes For 11,383,681.313 Abstentions 20,778.376
Votes Against 19,594.551 Broker Nonvotes -0-
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ITEM 5. OTHER INFORMATION
The Company's principal executive offices have moved to:
14801 Quorum Drive P.O. Box 709001
Addison, Texas 75240-7584 Dallas, Texas 75370-9998
Telephone 972-560-2000
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
The exhibits listed in the Exhibit Index to this report on Form 10-Q are
incorporated herein by reference. Management contracts and compensatory plan
arrangements are preceded by an asterisk (*) in the Exhibit Index.
Reports on Form 8-K
No reports were filed during the quarter for which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ZURN INDUSTRIES, INC.
(Registrant)
November 7, 1997 /s/ George W. Hanthorn
George W. Hanthorn
Vice President-General Counsel
and Secretary
November 7, 1997 /s/ John E. Rutzler III
John E. Rutzler III
Vice President-Controller
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EXHIBIT INDEX
3 Articles Of Incorporation And By-laws
Restated Articles of Incorporation with Amendments through Incorporated
April 22, 1996 filed as Exhibit 3.1 to Form 10-K for the by reference
year ended March 31, 1996
By-laws as of August 1995 filed as Exhibit 3.1 to Form Incorporated
10-Q for the quarter ended September 30, 1995 by reference
4 Instruments Defining The Rights Of Security Holders,
Including Indentures
Description of Common Stock contained in the prospectus Incorporated
dated July 26, 1972 beginning on page 18 ("Description of by reference
Capital Stock") forming a part of Amendment No. 3 to the
Form S-1 Registration Statement No. 2-44631
Description of Common Stock as set forth in the Restated Included in
Articles of Incorporation with Amendments through Exhibit 3.1
April 22, 1996 filed as Exhibit 3.1 to Form 10-K for the
year ended March 31, 1996
Description of Preferred Share Purchase Rights contained Incorporated
in the Form 8-A Registration Statement dated May 17, 1996 by reference
10 Material Contracts
* 1986 Stock Option Plan filed as Exhibit 28A to Form S-8 Incorporated
Post-Effective Amendment No. 1 Registration Statement No. by reference
33-19103
* 1989 Directors Stock Option Plan filed as Exhibit 28 to Incorporated
Form S-8 Registration Statement No. 33-30383 by reference
* 1991 Stock Option Plan filed as Exhibit 28 to Form S-8 Incorporated
Registration Statement No. 33-49224 by reference
* 1995 Directors Stock Option Plan filed as Exhibit 99 to Incorporated
Form S-8 Registration Statement No. 33-65219 by reference
* 1996 Employee Stock Plan filed as Exhibit 10.17 to Form Incorporated
10-K for the year ended March 31, 1997 by reference
* Supplemental Executive Retirement Plan of Zurn Incorporated
Industries, Inc. filed as Exhibit 10.1 to Form 10-Q for by reference
the quarter ended December 31, 1994
* 1986 Retirement Plan for Outside Directors of Zurn Incorporated
Industries, Inc. filed as Exhibit 10.16 to Form 10-Q for by reference
the quarter ended December 31, 1996
10.22* Zurn Long-Term Incentive Plan
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* Agreements Relating to Employment dated June 5, 1989 Incorporated
with J.A. Zurn filed as Exhibit 10H to Form 10-Q for the by reference
the quarter ended June 30, 1989; dated October 17, 1994
with R.R. Womack filed as Exhibit 10.2 to Form 10-Q for
the quarter ended December 31, 1994; dated May 1,1995
with D.L. Butynski and July 1, 1995 with J.R. Mellett
filed as Exhibit 10.8 to Form 10-Q for the quarter ended
June 30, 1995; dated August 14, 1995 with F.E. Sheeder
filed as Exhibit 10.11 to Form 10-Q for the quarter
ended September 30, 1995; dated April 21, 1997 with
W.J. Durbin, D. Haines, J.A. Harris, and B.F. Sherman
filed as Exhibit 10.18 to Form 10-K for the year ended
March 31, 1997
10.23* Agreement Relating to Employment dated July 9, 1997
with G.W. Hanthorn
* Employment Agreement dated January 22, 1996 with R.R. Incorporated
Womack filed as Exhibit 10.13 to Form 10-Q for the by reference
quarter ended December 31, 1995
* Zurn Industries, Inc. Deferred Compensation Plan for Non- Incorporated
Employee Directors filed as Exhibit 19E to Form 10-Q for by reference
the quarter ended June 30, 1989
* Zurn Industries, Inc. Deferred Compensation Plan for Incorporated
Salaried Employees filed as Exhibit 10.3 to Form 10-Q for by reference
the quarter ended December 31, 1994
* Zurn Industries, Inc. Optional Deferment Plan for Incorporated
Incentive Compensation Plan Participants filed as Exhibit by reference
10.4 to Form 10-Q for the quarter ended December 31, 1994
* Zurn Supplemental Pension Plan filed as Exhibit 10.5 to Incorporated
Form 10-Q for the quarter ended December 31, 1994 by reference
* Indemnity Agreements dated August 14, 1986 with E.J. Incorporated
Campbell, and J.A. Zurn filed as Exhibit 19J to Form 10-Q by reference
for the quarter ended September 30, 1986; dated October
20, 1986 with J.E. Rutzler III filed as Exhibit 10B to
Form 10-Q for the quarter ended December 31, 1988; dated
January 25, 1993 with W.E. Butler, April 1, 1993 with
D. Haines, and August 6, 1993 with Z. Baird filed as
Exhibit 10A to Form 10-Q for the quarter ended June 30,
1993; dated October 17, 1994 with R.R. Womack filed as
Exhibit 10.6 to Form 10-Q for the quarter ended December
31, 1994; dated May 1, 1995 with D.L. Butynski, June 8,
1995 with R.D. Neary, and July 1, 1995 with J.R. Mellett
filed as Exhibit 10.9 to Form 10-Q for the quarter ended
June 30, 1995; dated August 14, 1995 with F.E. Sheeder
filed as Exhibit 10.12 to Form 10-Q for the quarter ended
September 30, 1995; dated October 30, 1995 with M.K. Brown
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filed as Exhibit 10.14 to Form 10-Q for the quarter ended
December 31, 1995; dated October 28, 1996 with W.J. Durbin,
January 28, 1997 with S.G. Arbuckle, and June 4, 1997 with
J.M. Sergey filed as Exhibit 10.19 to Form 10-K for the
year ended March 31, 1997
10.24* Indemnity Agreement dated July 8, 1997 with G.W. Hanthorn
* Irrevocable Trust Agreements for the Grantor's: 1986 Incorporated
Retirement Plan for Outside Directors of Zurn Industries, by reference
Inc.; Deferred Compensation Plan for Non-Employee
Directors; Supplemental Executive Retirement Plan for
Zurn Industries, Inc.; Zurn Industries, Inc. Supplemental
Pension Plan for Participants in the Deferred Compensation
Plan for Salaried Employees; Deferred Compensation Plan
for Salaried Employees; Optional Deferment Plan for
Incentive Compensation Plan Participants filed as Exhibit
19I to Form 10-Q for the quarter ended September 30, 1986
* Second Irrevocable Trust Agreement for the Grantor's Incorporated
Indemnity Agreements filed as Exhibit 10A to Form 10-Q by reference
for the quarter ended December 31, 1988
* Zurn Industries, Inc. Executive Incentive Plan filed as Incorporated
Exhibit 10.20 to Form 10-K for the year ended March 31, by reference
1997
Amended and Restated Credit Agreement dated June 6, 1997 Incorporated
among Zurn Industries, Inc., Eljer Manufacturing, Inc., by reference
Various Lending Institutions, NationsBank, N.A., as
Documentation Agent and Bankers Trust Company, as
Administrative Agent filed as Exhibit 10.21 to Form 10-Q
for the quarter ended June 30, 1997
11 Statement Re Computation Of Per Share Earnings
Computation of Earnings Per Share
27 Financial Data Schedule
27.1 Financial Data Schedule Quarter Ended September 30, 1997 SEC Edgar
Filing Only
27.2 Restated Financial Data Schedule Quarter Ended June 30, SEC Edgar
1997 Filing Only
* - Management contracts and compensatory plan arrangements.
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EXHIBIT 10.22
ZURN LONG-TERM INCENTIVE PLAN
Section 1. Purpose.
1. Focus executives on long-term growth and returns on investment, in
order to create shareholder value.
2. Reward executives when superior long-term financial results are
achieved.
Section 2. Authority. The Company's 1996 Employee Stock Plan (the "Stock
Plan") provides for Awards in the form of, among other things, Performance
Units. The Zurn Long-Term Incentive Plan (the "LTIP") has been adopted by the
Management Development and Compensation Committee (the "Committee") as a
Schedule to the Stock Plan in order to set forth the terms and conditions of
Awards of Performance Units. Such Awards and this LTIP are subject to the
terms and conditions of the Stock Plan, which is hereby incorporated herein by
reference and deemed a part hereof. To the extent of any conflict between any
term or condition of this LTIP or any Award granted hereunder and any term or
condition of the Stock Plan, the term or condition of the Stock Plan shall
control.
Section 3. Definitions. The following terms, as used in this Schedule, shall
have the meaning specified. Capitalized terms not defined in this Schedule
shall have the same meaning as set forth in the Plan.
"Average ROE" means the simple average of the Company's ROE for each of
the three Fiscal Years in the Performance Cycle.
"Cumulative EPS" means the sum of the Company's EPS for each of the
three Fiscal Years in the Performance Cycle.
"Earnings" means, for any Fiscal Year, net income determined in
accordance with generally accepted accounting principles consistently
applied by the Company, but (i) excluding income from operations
discontinued prior to the 1998 Fiscal Year, and (ii) including income
from operations discontinued in Fiscal Year 1998 and thereafter, until
the operations are sold or otherwise disposed.
"EPS" means, for any Fiscal Year, basic earnings per share determined in
accordance with generally accepted accounting principles consistently
applied by the Company, but (i) excluding income from operations
discontinued prior to the 1998 Fiscal Year (i.e., begin plan with
"current, continuing operations"), and (ii) including income from
operations discontinued in Fiscal Year 1998 and thereafter, until the
operations are sold or otherwise disposed.
"Fiscal Year" means the Company's fiscal year.
"Performance Matrix" means the Performance Matrix established pursuant
to Section 5(b).
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"Performance Cycle" means a three Fiscal Year period over which
performance is measured. A new Performance Cycle may commence with each
Fiscal Year.
"Performance Threshold" means the level(s) of performance with respect
to Cumulative EPS and Average ROE, as set forth in the Performance
Matrix, below which no Awards will be payable.
"ROE" means, for any Fiscal Year, Earnings divided by the simple average
of total shareholder's equity, as shown on the Company's balance sheet,
as of the end of such Fiscal Year and as of the end of the immediately
preceding Fiscal Year.
"Target Award" means a dollar amount (expressed as a percentage of a
Participant's base annual salary in effect at the start of the
Performance Cycle) approved by the Committee as a Participant's Target
Award for purposes hereof.
Section 4. Participation. Based on recommendations from the Chief Executive
Officer, the Committee shall select those Employees who are to receive Awards
of Performance Units for each Performance Cycle. If, due to hiring or
promotion, the Committee determines that an Employee should become eligible
for an Award of Performance Units for the Performance Cycle, then the
Committee shall have the discretion to provide that such individual shall be
eligible for a prorated Award, as and to the extent it may determine. The
selection of an Employee as a Participant for a particular Performance Cycle
shall not entitle such individual to be selected as a Participant with respect
to any other Performance Cycle. However, under normal circumstances, employee
changes will be made at the beginning of the next performance cycle.
Section 5. Awards.
a. The Committee shall establish a Target Award for each Participant
with respect to the Performance Cycle, with the number of
Performance Units granted to a Participant being determined by
dividing the Participant's Target Award by one Dollar ($1.00).
Target Awards (and thereby the number of Performance Units)
granted may vary from Participant to Participant and Performance
Cycle to Performance Cycle.
b. The Committee shall establish a Performance Matrix for the
Performance Cycle setting forth (i) the percentage of a
Participant's Target Award payable at varying levels of Cumulative
EPS and Average ROE (ii) and the Performance Threshold. The
Performance Matrix may vary from Participant to Participant and
Performance Cycle to Performance Cycle.
c. The actual Award payable to a Participant will be determined by
multiplying the Participant's Target Award by the percentage
derived from the Performance Matrix based on Cumulative EPS and
Average ROE for the Performance Cycle; provided that no Awards
will be payable unless the Performance Threshold has been
achieved. All determinations regarding the achievement of
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performance levels and the determination of the amount of any
Award will be made by the Committee; provided that the Committee
may not increase the amount that would otherwise be payable in
accordance with the Performance Matrix.
d. If an Award would exceed $300,000, the amount in excess of
$300,000 will be deferred until such time as the payment thereof
would not be nondeductible by reason of Section 162(m) of the
Code. Amounts to be deferred will be credited with interest at a
fluctuating rate at all times equal to the prime rate as reported
in the Wall Street Journal.
e. As soon as practicable after the end of the Performance Cycle,
Awards will be paid in cash, Stock or a combination of cash and
Stock, as determined by the Committee. Except as provided in
Sections 6 and 7, no Award will be payable to a Participant who is
not an Employee on the day the Award is paid.
Section 6. Termination of Employment; Change of Status.
a. If a Participant's employment with the Company terminates due to
death or Disability, the Participant or his Beneficiary, as the
case may be, will be paid a prorated Award for each Performance
Cycle then in progress, provided the Participant worked at least
six (6) months during the Performance Cycle. Prorated Awards will
be determined and paid at the same time that Awards are determined
and paid generally under Section 5. Such prorated Award will be
determined by multiplying the amount of the Award that the
Participant would have received had his employment not so
terminated by a fraction, the numerator of which is the number of
full months in the Performance Cycle that the Participant was an
Employee, and the denominator of which is the number of months in
the Performance Cycle (36 months).
b. If a Participant's employment with the Company terminates due to
Retirement, the Participant may, in the sole discretion of the
Committee, be paid a prorated Award for each Performance Cycle
then in progress (determined and paid as if his employment had
terminated due to death or Disability); provided that no prorated
Award will be paid to a Participant who has not attained age 65 at
the time of such termination if, prior to the time that such an
Award would otherwise have been payable, he engages in any
business activity, whether as an employee, independent contractor
or otherwise (other than as a less than one percent (1%)
stockholder), that competes with the business of the Company.
c. If a Participant's employment with the Company is terminated by
the Company, whether or not for Cause, his right to the payment of
any Award(s) and all other rights under this Plan will be
forfeited, and no amount will be paid or payable hereunder to or
in respect of such Participant; provided, however, that if such
termination is other than for Cause, the Participant may, in the
-3-<PAGE>
sole discretion of the Committee, be paid a prorated Award for
each Performance Cycle then in progress (determined and paid as if
his employment had terminated due to death or Disability).
d. A transfer of the Employee from the Company to a Subsidiary or
affiliate of the Company, whether or not incorporated, or vice
versa, or from one Subsidiary or affiliate of the Company to
another, and a leave of absence, duly authorized in writing by the
Company, shall not be deemed a termination of service. The Award
payable to a Participant will be determined without regard to any
such transfer or leave or to any promotion or demotion, occurring
after the start of the Performance Cycle, except where any such
demotion results in the Participant no longer being eligible, in
which case a prorated Award will be payable, determined as if the
Participant's employment had terminated due to death or Disability
on the date of such demotion.
Section 7. Change in Control. Upon a Change in Control of the Company, the
Participant will, within ten (10) days thereafter, be paid a prorated Target
Award in cash for each Performance Cycle then in progress. Such prorated
Award will be determined by multiplying the Participant's Target Award for
such Performance Cycle by a fraction, the numerator of which is the number of
full months in such Performance Cycle through the date of the Change in
Control, and the denominator of which is the number of months in the
Performance Cycle (36 months).
Section 8. Miscellaneous.
a. No Award shall be assignable or transferable except by will or by
the laws of descent and distribution.
b. The Committee may amend this LTIP at any time, except that no
amendment may be made after the date on which an Employee is
selected as a Participant for a Performance Cycle which would
adversely affect the rights of such Participant with respect to
such Performance Cycle.
c. The Committee may, at it's sole discretion, restate targets or
make other changes as it deems appropriate in response to
regulatory or other changes including GAAP and tax law changes.
d. Grants of Performance Units made in accordance with this LTIP
shall be evidenced by Award Agreements (which may be in letter
form) setting forth the terms and conditions of the Award as
provided in this LTIP and the Stock Plan.
-4-
EXHIBIT 10.23 - AGREEMENT RELATING TO EMPLOYMENT
Agreement Relating to Employment in the form of the attached entered into with
the following Employee as of July 9, 1997:
G.H. Hanthorn
<PAGE>
DATE
(Name)
One Zurn Place
Erie, PA 16502
RE: Agreement Relating To Employment
Dear Mr. :
ZURN INDUSTRIES, INC, (the "Company") considers it in the best interests
of its stockholders to foster the continuous employment of key management
personnel. In this connection, the Board of Directors of the Company (the
"Board") recognizes that, the possibility of a change in control may exist and
that such possibility, and the uncertainty and questions which it may arise
among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders.
Therefore, in order to induce you to remain in the employment of the
Company, the Company agrees that you shall receive the severance benefits set
forth in this letter agreement ("Agreement") in the event your employment with
the Company is terminated subsequent to a "change in control of the Company"
(as defined in Section 2 hereof) under the circumstances described below.
1. TERM OF AGREEMENT. This Agreement shall commence on the date
hereof and shall continue in effect through December 31, 1997; and each
January 1, thereafter, the term of this Agreement shall automatically be
extended for one additional year, provided, if a change in control of the
Company shall have occurred during the original or extended term of this
Agreement, this Agreement shall continue in effect for a period of thirty-six
(36) months beyond the month in which such change in control occurred.
2. CHANGE IN CONTROL. No benefits shall be payable hereunder unless
there shall have been a change in control of the Company, as set forth below.
For purposes of this Agreement, a "change in control of the Company" shall be
deemed to have occurred if:
(a) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended [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 stockholders
of the Company in substantially the same proportions as their
ownership of stock of the Company) becomes the "beneficial owner"
(as defined in Rule 13d-3 promulgated under the Exchange Act),
directly or indirectly, of securities of the Company representing
20% or more of the combined voting power of the Company's then
outstanding securities;
-1-<PAGE>
(b) during any period of two consecutive years (not including any
period prior to the execution of this Agreement), individuals who
at the beginning of such period constitute the Board, 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 (a), (c) or (d) of this Section) whose
election by the Board or nomination for election by the Company's
stockholders 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;
(c) the stockholders of the Company approve a merger or consolidation
of the Company with any other Company, other than (1) 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 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 (2) a merger or consolidation effected to
implement a recapitalization of the Company (or similar
transaction) in which no "person" (as hereinabove defined)
acquires more than 50% of the combined voting power of the
Company's then outstanding securities; or
(d) the stockholders 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.
3. TERMINATION FOLLOWING CHANGE IN CONTROL. If any of the events
described in Section 2 hereof constituting a change in control of the Company
shall have occurred, you shall be entitled to the benefits provided in
Subsection 4(iv) hereof upon the subsequent termination of your employment
during the term of this Agreement unless such termination is (a) because of
your death, Disability or Retirement, (b) by the Company for Cause, or (c) by
you other than for Good Reason.
(i) DISABILITY; RETIREMENT. If, as a result of your incapacity due to
physical or mental illness, you shall have been absent from the
full-time performance of your duties with the Company for six (6)
consecutive months, and within thirty (30) days after written
notice of termination is given you shall have not returned to the
full-time performance of your duties, your employment may be
terminated for "Disability". Termination by the Company or you of
your employment based on "Retirement" shall mean termination in
accordance with the Company's retirement policy at normal
retirement age generally applicable to its salaried employees or
in accordance with any retirement arrangement established with
your consent with respect to you.
-2-<PAGE>
(ii) CAUSE. Termination by the Company of your employment for "Cause"
shall mean termination upon (a) the willful and continued failure
by you to substantially perform your duties with the Company
(other than any such failure resulting from your incapacity due to
physical or mental illness or any such actual or anticipated
failure after the issuance of a Notice of Termination, as defined
in Subsection 3(iv), by you for Good Reason) after a written
demand for substantial performance is delivered to you by the
Board, which demand specifically identifies the manner in which
the Board believes that you have not substantially performed your
duties, or (b) the willful engaging by you in conduct which is
demonstrably and materially injurious to the Company, monetarily
or otherwise. For purposes (of this Subsection, no act, or failure
to act, on your part shall be deemed "willful" unless done, or
omitted to be done, by you not in good faith and without
reasonable belief that your action or omission was in the best
interest of the Company. You may be terminated for Cause only
after there shall have been delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less then
two thirds (2/3) of the entire membership of the Board at a
meeting of the Board called and held for such purpose (after
reasonable notice to you and an opportunity for you, together with
your counsel, to be heard before the Board), finding that in the
good faith opinion of the Board you were guilty of conduct set
forth above in clauses (a) or (b) of the first sentence of this
Subsection and specifying the particulars thereof in detail.
(iii) GOOD REASON. You shall be entitled to terminate your employment
for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean, without your express written consent, any of the following:
(a) a substantial adverse alteration in the nature or status of your
responsibilities from those in effect immediately prior to a
change in control of the Company other than any such alteration
primarily attributable to the fact that the Company may no longer
be a public company;
(b) a reduction by the Company in your annual base salary as in effect
on the date hereof or as the same may be increased from time to
time;
(c) the failure of the Company, without your consent, to pay to you
any portion of your current compensation, or to pay to you any
portion of an installment of deferred compensation under any
deferred compensation program of the Company, within seven (7)
days of the date such compensation is due;
(d) the failure by the Company to continue in effect any compensation
plan in which you participate including but not limited to the
Company's Incentive Compensation Plan and the Company's Stock
Option Plan, or any substitute plans adopted prior to the change
in control, unless an equitable arrangement (embodied in an
-3-<PAGE>
ongoing substitute or alternative plan) has been made with respect
to such plan in connection with the change in control of the
Company, or the failure by the Company to continue your
participation therein on a basis not materially less favorable,
both in terms of the amount of benefits provided and the level of
your participation relative to other participants, as existed at
the time of the change in control;
(e) the failure by the Company to continue to provide you with
benefits substantially similar to those enjoyed by you under any
of the Company's pension, life insurance, medical, health and
accident, or disability plans in which you were participating at
the time of a change in control of the Company, the taking of any
action by the Company which would directly or indirectly
materially reduce any of such benefits or deprive you of any
material fringe benefits enjoyed by you at the time of the change
in control of the Company, or the failure by the Company to
provide you with the number of paid vacation days to which you are
entitled on the basis of years of service with the Company in
accordance with the Company's normal vacation policy in effect at
the time of the change in control;
(f) the failure of the Company to obtain a satisfactory agreement from
any successor to assume and agree to perform this Agreement, as
contemplated in Section 5 hereof; or
(g) any purported termination of your employment which is not effected
pursuant to a Notice of Termination satisfying the requirements of
Subsection (iv) below (and, if applicable, the requirements of
Subsection (ii) above); for purposes of this Agreement, no such
purported termination shall be effective.
(h) a determination by you in good faith that, following a change in
control, you are no longer able to perform your duties and
responsibilities with the Company.
Your right to terminate your employment pursuant to this Subsection shall be
affected by your incapacity due to physical or mental illness. Your continued
employment shall not constitute consent to, or a waiver of rights with respect
to, any circumstance constituting Good Reason hereunder.
(iv) NOTICE OF TERMINATION. Any purported termination of your employment by
the Company or by you shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 6
hereof. For purposes of this Agreement, a "Notice of Termination" shall
mean a notice which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of
your employment under the provision so indicated.
(v) DATE OF TERMINATION, ETC. "Date of Termination" shall mean (a)
if your employment is terminated for Disability, thirty (30) days
-4-<PAGE>
after Notice of Termination is given (provided that you shall not
have returned to the full-time performance of your duties during
such thirty (30) day period), and (b) if your employment is
terminated pursuant to Subsection (ii) and (iii) above or for any
other reason (other than Disability), the date specified in the
Notice of Termination which, in the case of a termination
pursuant to Subsection (ii) above shall not be less than thirty
(30) days, and in the case of a termination pursuant to Subsection
(iii) above shall not be less than thirty (30) nor more than sixty
(60) days, respectively, from the date such Notice of Termination
is given); provided that if within thirty (30) days after any
Notice of Termination is given the party receiving such Notice of
Termination notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be the
date on which the dispute is finally determined, either by mutual
written agreement of the parties, by a binding arbitration award,
or by a final judgment, order or decree of a court of competent
jurisdiction (which is not appealable or the time for appeal
therefrom having expired and no appeal having been perfected);
provided further that the Date of Termination shall be extended by
a notice of dispute only if such notice is given in good faith and
the party giving such notice pursues the resolution of such
dispute with reasonable diligence. Notwithstanding the pendency of
any such dispute, the Company will continue to pay you your full
compensation in effect when the notice giving rise to the dispute
was given (including, but not limited to, base salary) and
continue you as a participant in all compensation, benefit and
insurance plans in which you were participating when the notice
giving rise to the dispute was given, until the dispute is finally
resolved in accordance with this Subsection. Amounts paid under
this Subsection are in addition to all other amounts due under
this Agreement and shall not be offset against or reduce any other
amounts due under this Agreement except to the extent otherwise
provided in paragraph (c) of Subsection 4(iv).
4. COMPENSATION UPON TERMINATION OR DURING DISABILITY. Following a
change in Control of the Company, as defined by Section 2, upon
termination of your employment or during a period of disability
you shall be entitled to the following benefits:
(i) During any period that you fail to perform your full-time duties
with the Company as a result of incapacity due to physical or
mental illness, you shall continue to receive your base salary at
the rate in effect at the commencement of any such period,
together with all compensation payable to you under the Company's
long-term disability insurance program or other [plan during such
period, until this Agreement is terminated pursuant to Section
3(i) hereof. Thereafter, your benefits shall be determined in
accordance with the Company's insurance and retirement programs
then in effect.
-5-<PAGE>
(ii) If your employment shall be terminated by the Company for Cause or
by you other than for Good Reason, Disability, death or
Retirement, the Company shall pay you your full base salary
through the Date of Termination at the rate in effect at the time
Notice of Termination is given, plus all other amounts to which
you are entitled under any compensation plan of the Company at the
time such payments are due, and the Company shall have no further
obligations to you under this Agreement.
(iii) if your employment shall be terminated by you for Retirement, or
by reason of your death, your benefits shall be determined in
accordance with the Company's retirement and insurance programs
then in effect.
(iv) If your employment by the Company shall be terminated (a) by the
Company other than for Cause or Disability or (b) by you for Good
Reason or Retirement, then you shall be entitled to the benefits
provided below:
(A) the Company shall pay you your full base salary through the
Date of Termination at the rate in effect at the time Notice of
Termination is given, plus other amounts to which you are entitled
under any compensation plan of the Company, at the time such
payments are due except as otherwise provided below;
(B) in lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Company shall pay as
severance pay to you a lump sum severance payment (together with
payments provided in paragraphs C, D, and E below, the "Severance
Payment") equal to 300% of the greater of (i,) your annual base
salary in effect on the Date of Termination or (ii) your annual
base salary in effect immediately prior to the change in control
of the Company and 300% of the average of the annual bonus paid to
you for the three full fiscal years preceding the termination.
(C) If any of the Severance Payments will be subject to the tax
(the "Excise Tax") imposed by section 4999 of the Internal Revenue
Code, (or any similar tax that may hereafter be imposed) the
Company shall pay to you at the time specified in Subsection (D),
below, an additional amount (the "Gross-Up Payment") such that the
net amount retained by you, after deduction of any Excise Tax on
the Total Payments (as hereinafter defined) and any federal, state
and local income tax and Excise Tax upon the payment provided for
by this subsection, shall be equal to the Total Severance
Payments. For purposes of determining whether any of the
Severance Payments will be subject to the Excise Tax and the
amount of such Excise Tax, (a) any other payments or benefits
received or to be received by you in connection with a change in
control of the Company or your termination of employment (whether
pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any person whose
actions result in a change in control of the Company or any person
-6-<PAGE>
affiliated with the Company or such person) (which together with
the Severance Payments, constitute the "Total Payments") shall be
treated as "parachute payments" within the meaning of section
28OG(b)(2) of the Code, and all "excess parachute payments" within
the meaning of section 28OG(b)(1) shall be treated as subject to
the Excise Tax, unless in the opinion of tax counsel selected by
the Company's independent auditors and acceptable to you such
other payments or benefits (in whole or in part) do not
constitute parachute payments, or such excess parachute payments
(in whole or in part) represent reasonable compensation for
services actually rendered within the meaning of section
28OG(b)(4) of the Code in excess of the base amount within the
meaning of section 28OG(b)(3) of the Code, or are otherwise not
subject to the Excise Tax, (b) the amount of the Total Payments
which shall be treated as subject to the Excise Tax shall be equal
to the lesser of (1) the total amount of the Total Payments of (2)
the amount of excess parachute payments within the meaning of
section 28OG(b)(1) (after applying clause (q) above, and (c) the
value of any non-cash benefits or any deferred payment or benefit
shall be determined by the Company's independent auditors in
accordance with the principles of section 28OG(d)(3) and (4) of
the Code. For purposes of determining the amount of the Gross-Up
Payment, you shall be deemed to pay federal income taxes at the
highest marginal rate of federal income taxation in the calendar
year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rate of taxation in the
state and locality of your residence on the Date of Termination,
net of the maximum reduction in federal income taxes which could
be obtained from deduction of such state and local taxes. In the
event that the Excise Tax is subsequently determined to be less
than the amount taken into account hereunder at the time of
termination of your employment, you shall repay to the Company at
the time that the amount of such reduction in Excise Tax is
finally determined the portion of the Gross-Up Payment
attributable to such reduction (plus the portion of the Gross-Up
Payment attributable to the Excise Tax and federal and state and
local income tax imposed on the Gross-Up Payment being repaid by
you if such repayment results in a reduction in Excise Tax and/or
a federal and state and local income tax deduction) plus interest
on the amount of such repayment at the rate provided in section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at
the time of the termination of your employment (including by
reason of any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the Company shall
make an additional gross-up payment in respect of such excess
(plus any interest payable with respect to such excess) at the
time that the amount of such excess is finally determined.
(D) The payment provided for in paragraph (B), above, shall be
made not later than the fifth day following the Date of
Termination, provided, however, that if the amounts of such
-7-<PAGE>
payments, and the limitation on such payments set forth in
paragraph (C), above, cannot be finally determined on or before
such day, the Company shall pay to you on such day an estimate, as
determined in good faith by the Company, of the minimum amount of
such payments and shall pay the remainder of such payments
(together with interest at the rate provided in Section
1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined but in no event later than the thirtieth day after the
Date of Termination. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been
due, such excess shall constitute a loan by the Company to
you, payable on the fifth day after demand by the Company
(together with interest at the rate provided in Section
1274(b)(2)(B) of the Code).
(E) The Company shall also pay to you all legal fees and expenses
incurred by you as a result of such termination (including all
such fees and expenses, if any, incurred in contesting or
disputing any such termination or in seeking to obtain or enforce
early right or benefit provided by this Agreement).
(v) If your employment shall be terminated (a) by the Company other
than for Cause, Retirement or Disability or (b) by you for Good
Reason, then for a twenty-four (24) month period after such
termination, the Company shall arrange to provide you with life,
disability, accident and health insurance benefits substantially
similar to those which you are receiving immediately prior to the
Notice of Termination.
(vi) You shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided
for in this Section 4 be reduced by any compensation earned by you
as the result of employment by another employer, by retirement
benefits, by offset against any amount claimed to be owing by you
to the Company, or otherwise.
(vii) In addition to all other amounts payable to you under this Section
4, you shall be entitled to receive all benefits payable to you
under the Company's retirement programs.
5. SUCCESSORS; BINDING AGREEMENT
(i) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business and/or assets of the Company
to expressly assume and agree to perform this Agreement in the
same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place.
Failure of the Company to obtain such assumption and agreement
prior to the effectiveness of any such succession shall be a
breach of this Agreement and shall entitle you to compensation
-8-<PAGE>
from the Company in the same amount and on the same terms as you
would be entitled hereunder if you terminate your employment for
Good Reason following a change in control of the Company, except
for purposes of implementing the foregoing, the date on which any
succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you
should die while any amount would still be payable to you
hereunder if you had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other designee
or, if there is no such designee, to your estate.
6. PRIOR AGREEMENT. This Agreement is in full and complete
substitution for any prior employment agreement including, if applicable, the
certain Employment Agreement dated December 1, 1981 and the certain agreement
dated October 20, 1988.
7. NOTICE. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notice to the Company shall be directed to the attention of the Board
with a copy to the Secretary of the Company, or to such other address as
either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
receipt.
8. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed
to in writing and signed by you and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same
or at any prior or subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
The validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the Commonwealth of Pennsylvania. All
reference to sections of the Exchange Act or the Code shall be deemed also to
refer to any successor provisions to such sections. Any payments provided for
hereunder shall be paid net of any applicable withholding required under
federal, state or local law. The obligations of the Company under Section 4
shall survive the expiration of the term of this Agreement.
-9-<PAGE>
9. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
10. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
11. ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Erie, Pennsylvania in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award
in any court having jurisdiction; provided, however, that you shall be
entitled to seek specific performance of your right to be paid until the Date
of Termination during the pendency of any dispute or controversy arising under
or in connection with this Agreement.
Upon your acceptance of the terms set forth in this letter by signing and
returning a copy to the Secretary of the Company, this letter will then
constitute an agreement of the Company.
Very truly yours,
Chairman, Management Development and
Compensation Committee of the Board of Directors
AGREED TO this day
of 1997.
SIGNATURE
-10-
EXHIBIT 10.24 - INDEMNITY AGREEMENT
Indemnity Agreement in the form of the attached entered into with the
following Indemnitee as of the date indicated:
G.H. Hanthorn - July 8, 1997
<PAGE>
INDEMNITY AGREEMENT
This Agreement is made as of the day of
, 1997, by and between ZURN INDUSTRIES, INC., a Pennsylvania
corporation (the "Corporation"), and
, ("Indemnitee"), a Director.
WHEREAS, it is essential to the Corporation to retain and attract as
Directors and Officers the most capable persons available, and
WHEREAS, the substantial increase in corporate litigation subjects
Directors and Officers to expensive litigation risks and Directors' and
Officers' liability insurance is expensive and contains many limitations,
deductibles, and exclusions, and
WHEREAS, it is now and has always been the express policy of the
Corporation to indemnify its Directors and Officers so as to provide them with
the maximum possible protection permitted by the Pennsylvania Business
Corporation Law (the "Law") and the Corporation's By-Laws, and
WHEREAS, the parties recognize the potential inadequacy of the
protection available under the Law, the Corporation's By-Laws, and by
Directors' and Officers' liability insurance, and
WHEREAS, such Law and By-Laws specifically provide that they are not
exclusive, and thereby contemplate that agreements may be entered into between
the Corporation and Directors and Officers with respect to indemnification of
such Directors and Officers, and
WHEREAS, in order to resolve such questions and thereby induce Directors
and Officers to serve in their respective capacities, the Corporation has
determined and agreed to enter into this Agreement with the Indemnitee.
NOW THEREFORE, in consideration of Indemnitee's continued service after
the date hereof, the Corporation and Indemnitee do hereby agree as follows:
1. Agreement to Serve.
Indemnitee agrees to serve as a Director or Officer (as applicable) of
the Corporation for so long as he is duly elected or appointed or until such
time as he tenders his resignation in writing.
2. Definitions.
As used in this Agreement:
(a) The term "Proceeding" shall include any threatened, pending or
completed action, suit or proceeding, whether brought by or in the
right of the Corporation or otherwise and whether of a civil,
criminal, administrative or investigative nature, in which
Indemnitee may be or may have been involved as a party or
otherwise, by reason of the fact
-1-<PAGE>
that Indemnitee is or was a Director or Officer of the
Corporation, by reason of any action taken by his or of any
inaction on his part while acting as a Director or Officer, or by
reason of the fact that he is or was serving at the request of the
Corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other
enterprise; in each case whether or not he is acting or serving in
any such capacity at the time any liability or expense is incurred
for which indemnification or reimbursement can be provided under
this Agreement.
(b) The term "Expenses" shall include, without limitation, expenses of
investigations, judicial or administrative proceedings, or
appeals, judgments, fines and penalties, amounts paid in
settlement by or on behalf of Indemnitee, attorneys' fees and
disbursements, and any expenses of establishing a right to
indemnification under Paragraph 7.
3. Indemnity in Third-Party Proceedings.
The Corporation shall indemnify Indemnitee in accordance with the
provisions of this Paragraph 3 if Indemnitee is a party to or threatened to be
made a party to or otherwise involved in any Proceeding (other than a
Proceeding by or in the right of the Corporation) by reason of the fact that
Indemnitee is or was a Director or Officer of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust, or other
enterprise, against all Expenses actually and reasonably incurred by
Indemnitee in connection with the defense or settlement of such Proceeding,
but only if Indemnitee acted in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Corporation and,
in the case of a criminal proceeding, in addition, had no reasonable cause to
believe that his conduct was unlawful. The termination of any such Proceeding
by judgment, order of court, settlement, conviction, or upon a plea of nolo
contendere, or its equivalent, shall not, of itself, create a presumption that
Indemnitee did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Corporation, and
with respect to any criminal proceeding, that such person had reasonable cause
to believe that his conduct was unlawful.
4. Indemnity in Proceedings by or in the Right of the Corporation.
(a) In the event the Corporation has purchased and has in effect
policies of Directors' and Officers' liability insurance at the
time of request by Indemnitee for indemnification thereunder, the
Corporation shall, subject to the provisions of Paragraph 4(c),
indemnify Indemnitee as follows: if Indemnitee is a party to or
threatened to be made a party to any Proceeding by or in the right
of the Corporation by reason of the fact that Indemnitee is or was
a Director or Officer of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee,
or agent of another corporation, partnership, joint venture,
-2-<PAGE>
trust, or other enterprise, against all Expenses actually and
reasonably incurred by Indemnitee in connection with the defense
or settlement of such Proceeding, but only if he acted in good
faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation.
(b) In the event the Corporation is not covered by policies of
Directors' and Officers' Liability insurance which are applicable
to the indemnification claim being made by Indemnitee for
indemnification thereunder, the Corporation shall, subject to the
provisions of Paragraph 4(c), indemnify Indemnitee as follows: 1)
to the fullest extent of the coverage provided for the benefit of
Directors and Officers in the case of a Proceeding by or in the
right of the Corporation pursuant to the policy of insurance in
effect on the date of this Agreement; 2) if Indemnitee is a party
to or threatened to be made a party to any Proceeding by or in the
right of the Corporation by reason of the fact that Indemnitee is
or was a Director or Officer of the Corporation, or is or was
serving at the request of the Corporation as a director, officer,
employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against all Expenses actually
and reasonably incurred by Indemnitee in connection with the
defense or settlement of such Proceeding, but only if he acted in
good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the Corporation; and 3) to
the fullest extent as may be provided to Indemnitee by the
Corporation under the Agreement, the By-Laws of the Corporation,
and the Law. The foregoing provisions shall be taken cumulatively
and construed as being consistent with one another.
(c) No indemnification for Expenses shall be made under Paragraphs
4(a) and 4(b):
(1) in respect to remuneration paid to Indemnitee if it shall be
determined by a final judgment or other final adjudication that
such remuneration was in violation of law;
(2) on account of any suit in which judgment is rendered against
Indemnitee for an accounting of profits made from the purchase or
sale by Indemnitee of securities of Corporation pursuant to the
provisions of Section 16(b) of the Securities Exchange Act of 1934
and amendments thereto or similar provisions of any federal,
state, or local law;
(3) on account of Indemnitee's conduct which is finally adjudged
to have been knowingly fraudulent, deliberately dishonest, or
willful misconduct;
(4) if a final decision by a Court having jurisdiction in the
matter shall determine that such indemnification is not lawful.
-3-<PAGE>
5. Indemnification of Expenses of Successful Party.
Notwithstanding any other provision of this Agreement, to the extent
that Indemnitee has been successful on the merits or otherwise in defense of
any Proceeding or in defense of any claim, issue, or matter therein, including
dismissal without prejudice, Indemnitee shall be indemnified against all
Expenses incurred in connection therewith.
6. Advances of Expenses.
Expenses incurred by the Indemnitee pursuant to Paragraphs 3 and
4 shall be paid by the Corporation in advance upon the written request
of the Indemnitee if Indemnitee shall undertake to repay such amount to the
extent that it is ultimately determined that Indemnitee is not entitled to
indemnification.
7. Right of Indemnitee to Indemnification Upon Application.
Any indemnification under Paragraphs 3 and 4 shall be made no later than
45 days after receipt by the Corporation of the written request of Indemnitee,
unless a determination is made within said 45-day period by (1) the Board of
Directors by a majority vote of a quorum consisting of directors who are not
parties to such Proceeding or (2) independent legal counsel, which counsel
shall be appointed if the quorum of the Board of Directors specified in
Paragraph 7(1) is not obtainable, in a written opinion that the Indemnitee has
not met the relevant standards for indemnification set forth in Paragraphs 3
and 4.
The right to indemnification or advances as provided by this Agreement
shall be enforceable by Indemnitee in any court of competent jurisdiction. The
burden of proving that indemnification is not appropriate shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors or independent legal counsel) to have made a determination prior to
the commencement of such action that indemnification is proper in the
circumstances because Indemnitee has met the applicable standard of conduct,
nor an actual determination by the Corporation (including its Board of
Directors or independent legal counsel) that Indemnitee has not met such
applicable standard of conduct, shall bar the action or create an irrefutable
presumption that Indemnitee has not met the applicable standard of conduct.
Indemnitee's expenses reasonably incurred in connection with successfully
establishing his right to indemnification, in whole or in part, in any such
Proceeding shall also be indemnified by the Corporation.
8. Indemnification Thereunder Not Exclusive.
The indemnification provided by this Agreement shall not be deemed
exclusive of any other rights to which Indemnitee may be entitled under the
Bylaws, any agreement, any vote of shareholders or disinterested Directors,
Law, or otherwise, both as to action in his official capacity and as to action
in any capacity while holding such office.
The indemnification under this Agreement shall continue as to Indemnitee
even though Indemnitee may have ceased to be a Director or Officer.
-4-<PAGE>
9. Partial Indemnification.
If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Corporation for a portion of the Expenses actually and
reasonably incurred by him in the investigation, defense, appeal, or
settlement of any Proceeding but not, however, for the total amount thereof,
the Corporation shall nevertheless indemnify Indemnitee for the portion of
such Expenses to which Indemnitee is entitled.
The Corporation shall not be liable to indemnify Indemnitee under this
Agreement for any amounts paid in settlement of any action or claim effected
without its written consent. The Corporation shall not settle any action or
claim in any manner which would impose any penalty or limitation on Indemnitee
without Indemnitee's written consent. Neither the Corporation nor the
Indemnitee will unreasonably withhold their consent to any proposed
settlement.
10. Saving Clause.
If this Agreement or any portion thereof shall be invalidated on any
ground by any court of competent jurisdiction, the Corporation shall
nevertheless indemnify Indemnitee as to Expenses with respect to any
Proceeding to the full extent permitted by any applicable portion of this
Agreement that shall not have been invalidated or by any other applicable law.
11. Notice.
Indemnitee shall, as a condition precedent to his right to be
indemnified under this Agreement, give to the Corporation notice in writing as
soon as practicable of any claim for which indemnification will or could be
sought under this Agreement. Notice to the Corporation shall be directed to
Zurn Industries, Inc., One Zurn Place, P.O. Box 2000, Erie, PA 16514-2000,
Attention: President (or such other address as the Corporation shall designate
in writing to Indemnitee). Notice shall be deemed received three days after
the date postmarked if sent by prepaid mail properly addressed. In addition,
Indemnitee shall give the Corporation such information and cooperation as it
may reasonably require.
12. Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall constitute the original.
13. Applicable Law.
This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Pennsylvania.
14. Successors and Assigns.
This Agreement shall be binding upon the Indemnitee and upon the
Corporation, its successors and assigns, and shall inure to the benefit of the
-5-<PAGE>
Indemnitee's heirs, personal representatives, and assigns and to the benefit
of Corporation, its successors and assigns.
IN WITNESS WHEREOF, the parties thereby have caused this Agreement to be
duly executed and signed as of the day and year first above written.
ZURN INDUSTRIES, INC.
By:
Chairman, Management Development
and Compensation Committee
INDEMNITEE:
This Agreement was approved by stockholders of Zurn Industries, Inc. at the
Annual Meeting on August 1, 1986.
-6-
EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
(Thousands Except Per Share Amounts)
Three Months Ended Six Months Ended
September 30 September 30
1997 1996 1997 1996
Primary Earnings Per Share
Net income $ 7,967 $ 1,279 $14,172 $ 3,491
Preferred stock dividends 1 1
$ 7,967 $ 1,279 $14,171 $ 3,490
Shares outstanding
Weighted average common shares 12,394 12,344 12,376 12,343
Net common shares issuable on
exercise of stock options 279 25 219 18
Average common shares outstanding
as adjusted 12,673 12,369 12,595 12,361
Primary earnings per share $.63 $.10 $1.13 $.28
Fully Diluted Earnings Per Share
Net income $ 7,967 $ 1,279 $14,172 $ 3,491
Shares outstanding
Average common shares as adjusted
for primary computation 12,673 12,369 12,595 12,361
Common shares issuable if the
preferred stock was converted
at the beginning of the year 4 4 4 4
Additional common shares issuable
on exercise of stock options 106 44 94 25
Average common shares outstanding
as adjusted 12,783 12,417 12,693 12,390
Fully diluted earnings per share $.62 $.10 $1.12 $.28
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE STATEMENTS OF CONSOLIDATED FINANCIAL
POSITION AND CONSOLIDATED OPERATIONS INCLUDED IN PART I OF
THIS REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> SEP-30-1997
<PERIOD-TYPE> 6-MOS
<CASH> 10,849
<SECURITIES> 6,421
<RECEIVABLES> 125,393
<ALLOWANCES> 0
<INVENTORY> 123,108
<CURRENT-ASSETS> 351,081
<PP&E> 159,113
<DEPRECIATION> 54,970
<TOTAL-ASSETS> 731,603
<CURRENT-LIABILITIES> 251,321
<BONDS> 150,423
0
0
<COMMON> 6,329
<OTHER-SE> 238,559
<TOTAL-LIABILITY-AND-EQUITY> 731,603
<SALES> 322,597
<TOTAL-REVENUES> 0
<CGS> 227,576
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,374
<INCOME-PRETAX> 24,862
<INCOME-TAX> 10,690
<INCOME-CONTINUING> 14,172
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,172
<EPS-PRIMARY> 1.13
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE RESTATED STATEMENTS OF CONSOLIDATED
FINANCIAL POSITION AND CONSOLIDATED OPERATIONS FOR THE
QUARTER ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> JUN-30-1997
<PERIOD-TYPE> 3-MOS
<CASH> 17,467
<SECURITIES> 6,450
<RECEIVABLES> 112,057
<ALLOWANCES> 0
<INVENTORY> 131,779
<CURRENT-ASSETS> 345,598
<PP&E> 157,704
<DEPRECIATION> 52,249
<TOTAL-ASSETS> 730,187
<CURRENT-LIABILITIES> 241,739
<BONDS> 157,646
0
0
<COMMON> 6,292
<OTHER-SE> 230,241
<TOTAL-LIABILITY-AND-EQUITY> 730,187
<SALES> 156,385
<TOTAL-REVENUES> 0
<CGS> 109,945
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,763
<INCOME-PRETAX> 10,845
<INCOME-TAX> 4,640
<INCOME-CONTINUING> 6,205
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,205
<EPS-PRIMARY> .50
<EPS-DILUTED> 0
</TABLE>
