<PAGE>
SCHEDULE 14A
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
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Materials Pursuant to s. 240.14a-11(c) or s.
240.14a-12
Watts Industries, Inc.
(Name of Registrant as Specified In Its Charter)
Thomas J. White, Esq.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2).
[ ] $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:
_______________________________________________________
<PAGE>
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:1
_______________________________________________________
4) Proposed maximum aggregate value of transaction:
_______________________________________________________
1 Set forth the amount on which the filing fee is calculated and state how it
was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration number, or the
Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
VIA EDGAR
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: Watts Industries, Inc.
Dear Sir/Madam:
Electronically transmitted for filing please find the above named Company's
Proxy Statement, forms of Proxy and Notice of Annual Meeting of Stockholders
for the October 17, 1995 Annual Meeting of Stockholders of Watts Industries,
Inc. These proxy materials are to be mailed on September 14, 1995 to
stockholders of record at the close of business on September 1, 1995. A $125
filing fee for these materials has been deposited in the Securities and
Exchange Commission's lockbox with the Mellon Bank in Pittsburgh, PA. The CIK
number for Watts Industries, Inc. is 0000795403.
Seven (7) copies of the Company's Annual Report to Stockholders have been
mailed today to the Commission pursuant to Rule 14a-3(c) of Regulation 14A and
Rule 101(b)(1) of Regulation S-T. The Annual Report is not deemed to be
"filed" with the Commission. It is being provided to the Commission solely for
its information.
Shares of Watts Industries, Inc. Class A Common Stock that may be issued
under the Watts Industries, Inc. Management Stock Purchase Plan will be
registered under the Securities Act of 1933 as soon as practicable after
approval of such plan by Watts Industries' stockholders.
Sincerely,
/s/ Thomas J. White
Thomas J. White
TJW/s
cc: Suzanne M. Zabitchuck, Esq.
Robert P. Whalen, Jr., Esq.
<PAGE>
[GRAPHIC OF WATTS INDUSTRIES, INC. LOGO]
Watts Industries, Inc.
September 14, 1995
Dear Stockholder:
We cordially invite you to attend our 1995 Annual Meeting, which will be held
on Tuesday, October 17, 1995 at 10:00 a.m., in the Phillips Room of The
Andover Inn at Phillips Academy, Chapel Avenue, Andover, Massachusetts 01810.
The purposes of the Annual Meeting are (i) to elect Directors as set forth in
Proposal 1, (ii) to ratify the selection of independent auditors for the
current fiscal year as set forth in Proposal 2, and (iii) to approve the Watts
Industries, Inc. Management Stock Purchase Plan as set forth in Proposal 3.
The Board of Directors recommends that you vote in favor of these proposals
and urges you to read the proxy statement which describes these proposals and
presents other important information.
Your support of our efforts is important to the other Directors and to me
regardless of the number of shares you own. Accordingly, we urge you to
complete, sign and return your proxy promptly in the envelope provided for
your convenience.
Following the completion of the scheduled business, we will report on the
Company's operations and plans and answer questions from the floor. We hope
that you will be able to join us on October 17th.
Sincerely,
/s/ Timothy P. Horne
Timothy P. Horne
Chairman of the Board, President
and Chief Executive Officer
<PAGE>
WATTS INDUSTRIES, INC.
815 Chestnut Street
North Andover, MA 01845
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on October 17, 1995
To the Stockholders of
Watts Industries, Inc.
Notice is hereby given that the Annual Meeting of Stockholders of Watts
Industries, Inc. will be held in the Phillips Room of The Andover Inn at
Phillips Academy, Chapel Avenue, Andover, Massachusetts 01810, on Tuesday,
October 17, 1995, at 10:00 a.m., for the following purposes:
1. To elect to the Board of Directors of Watts Industries, Inc. eight
Directors to hold office until the next Annual Meeting of Stockholders and
until their successors are duly elected and qualified;
2. To ratify the selection of Ernst & Young as the independent auditors of
the Company for the current fiscal year;
3. To approve the Watts Industries, Inc. Management Stock Purchase Plan; and
4. To consider and act upon any matters incidental to the foregoing or any
other matters which may properly come before the meeting or any adjournment(s)
or postponement(s) thereof.
Only stockholders of record at the close of business on September 1, 1995 will
be entitled to notice of and to vote at the meeting or any adjournment(s) or
postponement(s) thereof.
By Order of the Board of Directors
/s/ KENNETH J. McAvoy
KENNETH J. McAvoy
Secretary
North Andover, Massachusetts
September 14, 1995
<PAGE>
IMPORTANT
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING OF
STOCKHOLDERS. ACCORDINGLY, YOU ARE URGED TO PLEASE COMPLETE, SIGN, DATE AND
PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE PAID ENVELOPE.
IF YOU SO CHOOSE, YOU MAY VOTE YOUR SHARES IN PERSON AT THE ANNUAL MEETING.
<PAGE>
WATTS INDUSTRIES, INC.
ANNUAL MEETING OF STOCKHOLDERS
October 17, 1995
PROXY STATEMENT
INFORMATION CONCERNING
SOLICITATION AND VOTING
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Watts Industries, Inc. (the "Company")
for use at the Company's 1995 Annual Meeting of Stockholders to be held on
Tuesday, October 17, 1995 and at any adjournment(s) or postponement(s)
thereof. Shares represented by duly executed proxies will be voted for the
election of the nominees named herein for Director, for the ratification of
the selection of Ernst & Young as the independent auditors of the Company for
the current fiscal year, and for approval of the Watts Industries, Inc.
Management Stock Purchase Plan, unless authority is withheld or different
instructions are given.
Proxies may be revoked by a written revocation received by the Secretary of
the Company at the address of the Company set forth below or in open meeting
at any time prior to the voting thereof. Submission of a later dated proxy
will revoke any earlier dated proxy. Unless previously revoked, proxies
delivered will be voted at the meeting. Where a choice or instruction is
specified by the stockholder thereon, the proxy will be voted in accordance
with such specification. Where a choice or instruction is not specified by the
stockholder, the proxy will be voted as recommended by the Directors. Shares
held for customers of brokers which are not voted on a proposal because of a
lack of instructions from such brokers' customers are not considered entitled
to vote on that proposal, but if represented by proxy will be treated as
present at the meeting. Because Directors are elected by a plurality of the
votes cast, withholding authority to vote for a nominee has the same effect as
a vote against such nominee.
Stockholders of record at the close of business on September 1, 1995 are
entitled to receive notice of and to vote at the meeting. Each share of Class
A Common Stock of the Company outstanding on the record date is entitled to
one vote, and each share of Class B Common Stock of the Company outstanding on
the record date is entitled to ten votes. As of the close of business on
September 1, 1995, there were outstanding and entitled to vote 18,269,138
shares of Class A Common Stock and 11,365,627 shares of Class B Common Stock.
This proxy statement and the enclosed proxy are being mailed together by the
Company on or about September 14, 1995 to stockholders of record as of
September 1, 1995. The Company's Annual Report for the fiscal year ended June
30, 1995 is also being mailed to such stockholders of the Company with this
proxy statement.
The principal executive offices of the Company are located at 815 Chestnut
Street, North Andover, Massachusetts 01845.
The expenses of preparing, printing and assembling the materials used in the
solicitation of proxies will be borne by the Company. In addition to the
solicitation of proxies by use of the mails, the Company may also use the
services of some of its officers and employees (who will receive no
compensation therefor in addition to their regular salaries) to solicit
proxies personally and by mail, telephone and telegraph. Brokerage houses,
nominees, fiduciaries and other custodians will be requested to forward
solicitation materials to the beneficial owners of shares held of record by
them and will be reimbursed for their reasonable expenses.
<PAGE>
At the date hereof the management of the Company has no knowledge of any
business other than the matters set forth in the Notice of Annual Meeting of
Stockholders and described above that will be presented for consideration at
the meeting. If any other business should come before such meeting, the
persons appointed by the enclosed form of proxy will have discretionary
authority to vote all such proxies as they shall decide. Each of the persons
appointed by the enclosed form of proxy present and acting at the meeting, in
person or by substitute, shall have and may exercise all of the powers and
authority of the proxies.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors of the Company has fixed the number of Directors at
eight and nominated the individuals named below for election as Directors. If
elected, the nominees will serve until the next Annual Meeting of Stockholders
and until their successors shall have been duly elected and qualified. Proxies
will be voted for the nominees named below unless otherwise specified in the
proxy. All of the nominees are presently members of the Board of Directors.
Management does not contemplate that any of the nominees will be unable to
serve, but in that event, proxies solicited hereby will be voted either for
the election of another person or persons to be designated by the Board of
Directors or to fix the number of Directors at a lesser number and elect the
nominees able to serve. Holders of voting rights sufficient to elect each of
the nominees named below have indicated an intention to vote in favor of such
nominees.
INFORMATION AS TO NOMINEES FOR DIRECTOR
Set forth below is the name and age of each nominee for Director, who are the
current Directors of the Company, his or her principal occupation for the past
five years, the year each became a Director of the Company and the names of
certain other companies in which he or she serves as a Director. The
information is as of
August 16, 1995.
<PAGE>
Present Principal Employment and Director
Name Age Prior Business Experience(1) Since (1)
Timothy P. Horne 57 Chairman of the Board since 1986
and Chief Executive Officer since 1962
1978; President since 1994. Mr.
Horne joined the Company in 1959.
David A. Bloss, Sr 45 Executive Vice President since
July 1993. Prior to July 1993, Mr. 1994
Bloss was associated for five
years with the Norton Company, a
manufacturer of abrasives and
cutting tools, serving as President
of its Superabrasives Division from
1991 to 1993.
Frederic B. Horne 45 Corporate Vice President since 1987;
Vice President and General 1980
Manager from 1978 to 1987. Mr. Horne
joined the Company in 1973.
Kenneth J. McAvoy 55 Chief Financial Officer and Treasurer
since 1986; Vice President 1994
of Finance from 1984 to 1994;
Executive Vice President of European
Operations since 1994; Secretary since
1985. Mr. McAvoy joined the Company in
1981.
Noah T. Herndon 63 Partner of Brown Brothers Harriman &
Co., private bankers, since 1974. Mr. 1981
Herndon is a Director of Fieldcrest
Cannon, Inc. and National Auto
Credit, Inc.
Wendy E. Lane 45 Chairman of Lane Holdings, Inc., an
investment banking firm, since 1994
1992. Prior to forming Lane Holdings,
Ms. Lane was a Principal and
Managing Director of Donaldson,
Lufkin & Jenrette, an investment
banking firm, serving in these and
other positions from 1980 to 1992.
Gordon W. Moran 57 President and Chief Executive Officer of
Hollingsworth & Vose Company, a 1990
paper manufacturer, since 1983.
Mr. Moran is a Director
of Associated Industries of
Massachusetts, the American Paper
Institute and the South Norfolk
County Association for Retarded
Citizens, Inc.
<PAGE>
Daniel J.
Murphy, III 53 Chairman of Northmark Bank, a
commercial bank, since August 1986
1987. Prior to forming Northmark
Bank in 1987, Mr. Murphy was a
Managing Director of Knightsbridge
Partners, Incorporated, a venture
capital firm, from January to August
1987 and President and a
Director of Arltru Bancorporation, a
bank holding company, and its
wholly owned subsidiary, Arlington Trust
Company, from 1980 to 1986.
Mr. Murphy is a Director of Bay State
Gas Company.
(1) All positions with the Company indicated for periods prior to January 1,
1986 were held with Watts Regulator Co. The Company became the parent company
of Watts Regulator Co. and its various subsidiaries pursuant to a
reorganization effective as of January 1, 1986.
Timothy P. Horne and Frederic B. Horne are brothers.
<PAGE>
FEES TO CERTAIN DIRECTORS
Each non-employee Director receives a fee of $15,000 per year and $500 per
Board of Directors or committee meeting attended and also receives
reimbursement for out-of-pocket expenses incurred in connection with attending
such meetings. In addition, each non-employee Director is eligible to receive
grants of stock options under the Company's 1991 Non-Employee Directors'
Nonqualified Stock Option Plan. Directors of the Company who are employees of
the Company receive no compensation for their services as Directors.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Company's Board of Directors held nine meetings during the fiscal year
ended June 30, 1995. Each of the Directors of the Company attended at least
three-quarters of the meetings of the Board and of the committees on which
such Director served, except for Gordon W. Moran. The Company's Board of
Directors has a standing Audit Committee and a standing Stock Option and
Compensation Committee. The Audit Committee held three meetings, and the Stock
Option and Compensation Committee held one meeting, during the fiscal year
ended June 30, 1995. The Audit Committee reviews audit performance, recommends
appropriate action on the basis of audit results and receives and reviews the
auditors' "management letters" and management's responses thereto. The Stock
Option and Compensation Committee is responsible for administering the
Company's 1986 Incentive Stock Option Plan and its 1989 Nonqualified Stock
Option Plan pursuant to authority delegated to it by the Board of Directors
and for approving the compensation arrangements of the principal executive
officers of the Company. During the fiscal year ended June 30, 1995, Messrs.
Herndon and Moran and Ms. Lane comprised the Audit Committee and Messrs.
Murphy and Herndon and Ms. Lane comprised the Stock Option and Compensation
Committee.
<PAGE>
PRINCIPAL AND MANAGEMENT STOCKHOLDERS
The following table sets forth as of August 16, 1995 (except as otherwise
indicated) certain information concerning shares of Class A Common Stock and
Class B Common Stock held by (i) all beneficial owners of 5% or more of either
class of the Company's common stock, (ii) each Director or person nominated
for election as a Director of the Company and (iii) the Chief Executive
Officer, the four other most highly compensated executive officers listed in
the Summary Compensation Table and, as a group, all executive officers and
Directors or persons nominated for election as Directors of the Company.
<TABLE>
<CAPTION>
Number of
Shares
Beneficially Total Percent(1)
Name of Beneficial Owner(2) Owned(3) Equity Voting
<S> <C> <C> <C>
Timothy P. Horne(4) 10,654,388 (5)(6) 35.9% 79.6%
Frederic B. Horne(4) 10,976,472 (6)(7) 37.0 82.2
George B. Horne(4)(8) 2,200,000 (6)(8)(9) 7.4 16.6
Daniel W. Horne(4)(10) 1,335,840 (6)(9)(10) 4.5 10.1
Deborah Horne(4)(11) 1,335,840 (6)(9)(1l) 4.5 10.1
Peter W. Horne(4)(12) 1,335,840 (6)(12) 4.5 9.8
Nicholas Company, Inc. 2,555,100 (13)(14) 8.6 1.9
First Pacific Advisors, Inc. 1,040,800 (13)(15) 3.5 *
Noah T. Herndon 11,000 (13)(17) * *
Wendy E. Lane 8,000 (13)(16) * *
Daniel J. Murphy, III 10,000 (13)(17) * *
Gordon W. Moran 9,000 (13)(17) * *
David A. Bloss, Sr. 16,000 (13)(20) * *
Kenneth J. McAvoy 18,000 (13)(18) * *
Robert T. McLaurin 31,950 (19)(22) * *
All executive officers and
Directors as a group
(12 persons) 11,599,505 (21)(22) 38.9 85.0
_____________
* Less than 1%.
</TABLE>
(1) The percentages have been determined as of August 16, 1995 in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). At that date, a total of 29,623,886 shares were
outstanding, of which 11,404,470 were shares of Class B Common Stock entitled
to ten votes per share and 18,219,416 were shares of Class A Common Stock
entitled to one vote per share. Each share of Class B Common Stock is
convertible into one share of Class A Common Stock.
<PAGE>
(2) The address of Nicholas Company, Inc. is 700 North Water Street,
Milwaukee, Wisconsin 53202. The address of First Pacific Advisors, Inc. is
11400 West Olympic Boulevard, Los Angeles, California 90064. The address of
each other stockholder in the table is c/o Watts Industries, Inc., 815
Chestnut Street, North Andover, Massachusetts 01845.
(3) "Beneficial ownership" means the sole or shared power to vote, or to
direct the voting of, a security, or the sole or shared investment power with
respect to a security (i.e., the power to dispose of, or to direct the
disposition of, a security). A person is deemed, as of any date, to have
"beneficial ownership" of any security that such person has the right to
acquire within 60 days after such date.
(4) Timothy P. Horne, Frederic B. Horne, George B. Horne, Daniel W.
Horne, Deborah Horne and Peter W. Horne, together with Judith Rae Horne (as
trustee and custodian for her minor daughter) may be deemed a "group" as that
term is used in Section 13(d)(3) of the Exchange Act.
Shares of Class B Common Stock of the Company held by each member of the
Horne family named in the above table and any voting trust certificates in
respect thereof are subject to a right of first refusal in favor of the other
Horne family members named in the table and two other Horne family members not
named in the table. The Company has granted registration rights with respect
to the shares of Class B Common Stock beneficially owned by such Horne family
members.
(5) Includes (i) 2,823,962 shares, of which 72,742 shares are Class A
Common Stock, beneficially owned by Timothy P. Horne (for purposes of this
footnote, "Mr. Horne"), (ii) 1,355,166 shares owned by Frederic B. Horne, Mr.
Horne's brother, (iii) 1,335,840 shares held for the benefit of Daniel W.
Horne, Mr. Horne's brother, under a revocable trust for which Mr. Horne serves
as sole trustee, (iv) 1,335,840 shares held for the benefit of Deborah Horne,
Mr. Horne's sister, under a trust for which Mr. Horne serves as sole trustee,
which trust is revocable with the consent of the trustee, (v) 1,285,840 shares
held for the benefit of Peter W. Horne, Mr. Horne's brother, under a revocable
trust for which Frederic B. Horne serves as sole trustee, (vi) 2,200,000
shares held for the benefit of George B. Horne, Mr. Horne's father, under a
revocable trust for which Mr. Horne serves as co-trustee, (vii) 50,000 shares
owned by Tara V. Horne, Mr. Horne's daughter, (viii) 50,000 shares held by
Judith Rae Horne, Mr. Horne's wife, as trustee for Mr. Horne's minor daughter
and (ix) 60,000 shares issuable upon the exercise of stock options exercisable
presently or within 60 days of August 16, 1995. Also includes 157,740 shares
held by Judith Rae Horne, Mr. Horne's wife, as trustee or custodian for Mr.
Horne's minor daughter, of which Mr. Horne disclaims beneficial ownership. A
total of 2,751,220 of the shares of Class B Common Stock noted in clause (i),
the shares noted in clauses (ii) through (v), 2,000,000 of the shares noted in
<PAGE>
clause (vi), and the shares noted in clauses (vii) and (viii) of this footnote
(10,163,906 shares in the aggregate) are held in a voting trust for which Mr.
Horne serves as co-trustee. See footnote 6. All shares beneficially owned or
which may be deemed beneficially owned by Mr. Horne are Class B Common Stock
except 72,742 of the 2,823,962 shares noted in clause (i) and all of the
shares noted in clause (ix) of this footnote.
(6) All shares of Class B Common Stock beneficially owned by Timothy P.
Horne, all shares of Class B Common Stock beneficially owned by trusts for the
benefit of Daniel W. Horne, Deborah Horne and Peter W. Horne, 1,355,166 shares
of Class B Common Stock beneficially owned by Frederic B. Horne, 2,000,000
shares beneficially owned by a trust for the benefit of George B. Horne,
50,000 shares of Class B Common Stock beneficially owned by Tara V. Horne and
50,000 shares of Class B Common Stock beneficially owned by a trust for the
benefit of Timothy P. Horne's minor daughter (10,163,906 shares in the
aggregate) are subject to the terms of the Horne Family Voting Trust
Agreement_1991 (the "Voting Trust"). Under the terms of the Voting Trust, the
two trustees (currently Timothy P. Horne and Frederic B. Horne) have sole
power to vote all shares subject to the Voting Trust. However, as long as
Timothy P. Horne and Frederic B. Horne are serving as trustees of the Voting
Trust, Timothy P. Horne generally has the right to vote all shares subject to
such trust in the event that the trustees do not concur with respect to any
proposed action, including any exercise of the trustee's right to authorize
the withdrawal of shares from the Voting Trust (the "Determination Power").
The sole exception to the Determination Power is that the concurrence of
Timothy P. Horne and Frederic B. Horne is required for the voting of shares in
connection with any vote involving the election or removal of Directors of the
Company. Under the terms of the Voting Trust, Timothy P. Horne, the Chairman
of the Board of Directors, President and Chief Executive Officer of the
Company, Frederic B. Horne, a Corporate Vice President and a Director of the
Company, and George B. Horne, the father of Timothy P. Horne and Frederic B.
Horne, may designate up to two successor trustees to succeed Timothy P. Horne
and Frederic B. Horne, one to be designated as the primary designee and the
other as the secondary designee. If either Timothy P. Horne or Frederic B.
Horne ceases for any reason to serve as a trustee, first the primary designee
and then the secondary designee (if any) would become a co-trustee with the
remaining Horne brother. Under such circumstances the remaining Horne brother
would generally have the Determination Power except that (i) the concurrence
of the remaining Horne brother and the co-trustee would be required in
connection with any vote involving the election or removal of directors of the
Company, (ii) the designated successor would vote those shares owned by the
departed Horne brother and (iii) the designated successor would have sole
authority with respect to withdrawals of shares beneficially owned by the
departed Horne brother. If both Timothy P. Horne and Frederic B. Horne cease
to serve as trustees, first the primary designee and then the secondary
designee would remain as the sole trustee for the term of the Voting Trust. If
designated successors become trustees but do not survive whichever of Timothy
P. Horne or Frederic B. Horne is still serving as trustee, that trustee would
remain as the sole trustee absent an amendment to the Voting Trust. If each of
Timothy P. Horne and Frederic B. Horne and the two designated successors cease
<PAGE>
to serve as trustees for any reason, the holders of a majority of the voting
trust certificates then outstanding have the right to designate successor
trustees as necessary under the terms of the Voting Trust. Pursuant to the
power of designation described above, Timothy P. Horne, Frederic B. Horne and
George B. Horne have designated Noah T. Herndon, a Director of the Company, as
the primary designee and John LeClaire, Esq., a partner in the law firm of
Goodwin, Procter & Hoar, as the secondary designee, should either Timothy P.
Horne or Frederic B. Horne cease to serve as a trustee under the Voting Trust.
Timothy P. Horne, Frederic B. Horne and George B. Horne can collectively agree
to revoke the designation of any successor before he begins to serve or to
appoint a new designated successor. If one or more of such Horne family
members are unable to take such action, this power rests in the survivor or
survivors of them.
The Voting Trust expires on October 31, 2001, subject to extension on or
after October 31, 1999 by stockholders (including the trustee of any trust
stockholder, whether or nor such trust is then in existence) who deposited
shares of Class B Common Stock in the Voting Trust and are then living or, in
the case of shares in the Voting Trust the original depositor of which (or the
trustee of the original depositor of which) is not then living, the holders of
voting trust certificates representing such shares. The Voting Trust may be
amended by vote of the holders of a majority of the voting trust certificates
then outstanding and, while one or more of Timothy P. Horne, Frederic B. Horne
and their successor designated as described in the preceding paragraph is
serving as trustee, the trustees. In certain cases (i.e., changes to the
extension, termination and amendment provisions), the original depositors must
also approve amendments. Shares may not be removed from the trust during its
term without the consent of the trustees.
<PAGE>
Timothy P. Horne beneficially owns 27.1% of the total beneficial interest
in the Voting Trust (the "Beneficial Interest") individually, 13.1% of the
Beneficial Interest as trustee of a revocable trust, 13.1% of the Beneficial
Interest as trustee of a trust revocable with the consent of the trustee and
19.7% of the Beneficial Interest as co-trustee of a revocable trust
(representing an aggregate of 73.0% of the Beneficial Interest). Frederic B.
Horne beneficially owns 13.3% of the Beneficial Interest individually and
12.7% of the Beneficial Interest as trustee of a revocable trust (representing
an aggregate of 26.0% of the Beneficial Interest). George B. Horne holds 19.7%
of the Beneficial Interest as co-trustee of a revocable trust. Tara V. Horne,
individually, and Judith Rae Horne, as trustee for Timothy P. Horne's minor
daughter, each hold less than 0.5% of the Beneficial Interest. Voting trust
certificates are subject to any restrictions on transfer applicable to the
stock which they represent.
(7) Includes (i) 2,120,010 shares, of which 64,844 are shares of Class A
Common Stock, beneficially owned by Frederic B. Horne (for purposes of this
footnote, "Mr. Horne"), (ii) 2,751,220 shares beneficially owned by Timothy P.
Horne, (iii) 1,335,840 shares beneficially owned by a revocable trust for the
benefit of Daniel W. Horne for which Timothy P. Horne serves as sole trustee,
(iv) 1,335,840 shares beneficially owned by a trust for the benefit of Deborah
Horne, for which Timothy P. Horne serves as sole trustee, which trust is
revocable with the consent of the trustee, (v) 1,285,840 shares beneficially
owned by a revocable trust for the benefit of Peter W. Horne for which Mr.
Horne serves as sole trustee, (vi) 2,000,000 shares beneficially owned by a
revocable trust for the benefit of George B. Horne, for which George B. Horne
and Timothy P. Horne serve as co-trustees, (vii) 50,000 shares owned by Tara
V. Horne, Timothy P. Horne's daughter, (viii) 50,000 shares held by Judith Rae
Horne, as trustee for Timothy P. Horne's minor daughter and (ix) 47,722 shares
issuable upon the exercise of stock options exercisable presently or within 60
days of August 16, 1995. A total of 1,355,166 of the 2,120,010 shares of Class
B Common Stock noted in clause (i) and all of the shares noted in clauses (ii)
through (viii) above (10,163,906 shares in the aggregate) are held in the
voting trust described in footnote 6 above. All shares beneficially owned or
which may be deemed beneficially owned by Mr. Horne are Class B Common Stock
except 64,844 of the 2,120,010 shares noted in clause (i) and all of the
shares noted in clause (ix) of this footnote.
(8) Includes 2,200,000 shares held in a revocable trust for which
Timothy P. Horne and George B. Horne serve as co-trustees. A total of
2,000,000 of such shares are subject to the voting trust described in footnote
6 above.
(9) All shares are Class B Common Stock.
<PAGE>
(10) Shares are held in a revocable trust for which Timothy P. Horne serves as
sole trustee, and are subject to the voting trust described in footnote 6.
(11) Shares are held in a trust for which Timothy P. Horne serves as sole
trustee, which trust is revocable with the consent of the trustee, and are
subject to the voting trust described in footnote 6.
(12) All shares are Class B Common Stock except for 50,000 shares of Class A
Common Stock. The Class b Common Stock shares are held in a revocable trust
for which Frederic B. Horne serves as sole trustee, and are subject to the
voting trust described in footnote 6.
(13) All shares are shares of Class A Common Stock or options to purchase
Class A Common Stock exercisable presently or within 60 days of August 16,
1995.
(14) The information is based on a Schedule l3G dated February 6, 1995 filed
with the Securities and Exchange Commission by Nicholas Company, Inc.,
Nicholas Fund, Inc. and Albert O. Nicholas reporting their aggregate holdings
of shares of Class A Common Stock as of December 31, 1994. Nicholas Company,
Inc. has stated in the Schedule 13G that it is an investment adviser
registered under the Investment Advisers Act of 1940 and possesses sole
dispositive power over 2,555,100 shares indicated as owned by it. Nicholas
Fund, Inc. has stated in the Schedule 13G that it is an investment company
registered under the Investment Company Act of 1940 and possesses sole voting
power for 1,857,000 of the 2,555,100 shares owned by Nicholas Company, Inc.
Albert O. Nicholas has stated in the Schedule 13G that he is an individual and
disclaims direct beneficial ownership of all securities reported as
beneficially owned by Nicholas Company, Inc. and Nicholas Fund, Inc. Mr.
Nicholas is the President, a Director and the majority stockholder of Nicholas
Company, Inc.
(15) The information is based on a Schedule 13G dated February 13, 1995 filed
with the Securities and Exchange Commission by First Pacific Advisors, Inc.
reporting its holdings of shares of Class A Common Stock as of December 31,
1994. First Pacific Advisors, Inc. has stated in the Schedule 13G that it is
an investment adviser registered under the Investment Advisers Act of 1940 and
that it possesses shared voting power over 880,000 shares and shared
dispositive power over 1,040,800 shares.
(16) Includes (i) 2,000 shares of Class A Common Stock issuable upon the
exercise of stock options under the 1991 Non-Employee Directors' Nonqualified
Stock Option Plan, (ii) 2,000 shares of Class A Common Stock held by Ms. Lane
as trustee or custodian for her minor children and (iii) 4,000 shares of Class
A Common Stock.
(17) Includes 8,000 shares of Class A Common Stock issuable upon the exercise
of stock options under the 1991 Non-Employee Directors' Nonqualified Stock
Option Plan.
(18) Represents 18,000 shares of Class A Common Stock issuable upon the
exercise of stock options within 60 days of August 16, 1995.
<PAGE>
(19) Includes (i) 27,600 shares of Class A Common Stock issuable upon the
exercise of stock options presently or within 60 days of August 16, 1995 and
(ii) 4,350 shares of Class B Common Stock of the Company.
(20) Includes (i) 15,000 shares of Class A Common Stock issuable upon the
exercise of stock options presently or within 60 days of August 16, 1995 and
(ii) 1,000 shares of Class A Common Stock held by Mr. Bloss' spouse.
(21) Includes (i) 11,225,996 shares of Class B Common Stock, (ii) 150,587
shares of Class A Common Stock, and (iii) 222,922 shares of Class A Common
Stock issuable upon the exercise of stock options presently or within 60 days
of August 16, 1995.
(22) Shares of Class B Common Stock of the Company held by members of
management other than Horne family members are subject to a right of first
refusal in favor of the Company.
<PAGE>
COMPENSATION ARRANGEMENTS
Summary Compensation Table
The following table contains information with respect to the compensation for
the past three fiscal years of the Company's Chief Executive Officer and the
four other most highly compensated executive officers (the "named executive
officers") serving in such capacity at fiscal year ended June 30, 1995.
<TABLE><CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation
Other
Annual
Name and Fiscal Salary Bonus Compensation
Principal Position Year ($) ($)(1) ($)(3)
<S> <C> <C> <C> <C>
Timothy P. Horne
Chairman of the Board, 1995 619,166 83,948 -
President and Chief 1994 596,838 84,503 -
Executive Officer 1993 570,000 0 -
David A. Bloss, Sr.(2) 1995 236,668 132,000 -
Executive Vice 1994 201,674 104,170 -
President 1993 - - -
Kenneth J. McAvoy
Chief Financial
Officer, Executive
V.P. of European
Operations, 1995 168,338 93,500 -
Treasurer and 1994 158,340 91,760 -
Secretary 1993 148,834 37,650 -
Robert T. McLaurin
Corporate Vice 1995 157,508 88,000 -
President of Asian 1994 143,590 75,908 -
Operations 1993 135,416 31,395 -
Frederic B. Horne 1995 119,168 60,000 -
Corporate Vice 1994 113,340 60,034 -
President 1993 104,166 24,150 -
<PAGE>
SUMMARY COMPENSATION TABLE
Long-Term Compensation
Awards Payouts
LTIP All Other
Name and Options Payouts Compensation
Principal Position (#)(4)(8) ($)(5) ($)
<S> <C> <C> <C>
Timothy P. Horne
Chairman of the Board, 40,000(7) - -
President and Chief 40,000(7) - -
Executive Officer 40,000(7) - -
David A. Bloss, Sr.(2) 35,000(7) - -
Executive Vice 20,000(7) - -
President - - -
Kenneth J. McAvoy
Chief Financial
Officer, Executive
V.P. of European
Operations, 30,000(7) - -
Treasurer and 30,000(7) - -
Secretary 30,000(7) - -
Robert T. McLaurin
Corporate Vice 10,000(6) - -
President of Asian - - -
Operations - - -
Frederic B. Horne 10,500(6) - -
Corporate Vice 16,000(6) - -
President 16,000(6) - -
</TABLE>
____________
<PAGE>
(1) Amounts awarded under the Executive Incentive Bonus Plan for the
respective fiscal years.
(2) Mr. Bloss joined the Company in July 1993.
(3) No amounts for executive perquisites and other personal benefits,
securities or property are shown because the aggregate dollar amount per
executive is the lesser of either $50,000 or 10% of annual salary and
bonus.
(4) Awarded under the 1986 Incentive Stock Option Plan (the "Incentive Plan")
or the 1989 Nonqualified Stock Option Plan (the "Nonqualified Plan").
(5) The Company does not offer a long-term incentive compensation plan to the
named executive officers.
(6) Amount awarded under the Incentive Plan.
(7) Amount awarded under the Nonqualified Plan.
(8) All option amounts for fiscal 1994 and 1993 were doubled as a result of a
two-for-one stock split of the Company's Common Stock effected by means of
a stock dividend payable on March 15, 1994.
<PAGE>
Stock Option Grants
The following table shows information concerning options to purchase the
Company's Class A Common Stock granted in fiscal 1995 to the named executive
officers.
<TABLE>
<CAPTION>
Individual Grants
% of Total
Options
Granted to Exercise
Options Employees or Base
Granted in Fiscal Price
Name (#)(1)(2) Year ($/Sh)
<S> <C> <C> <C>
Timothy P. Horne 40,000(4) 14.21 23.75(6)
David A. Bloss, Sr. 35,000(4) 12.43 23.75(6)
Kenneth J. McAvoy 30,000(4) 10.66 23.75(6)
Robert T. McLaurin 10,000(5) 3.55 23.75(7)
Frederic B. Horne 10,500(5) 3.73 26.125(7)
<PAGE>
Stock Option Grants
Individual Grants
Market Price
on Date of
Grant Expiration
Name ($/Sh) Date
<S> <C> <C>
Timothy P. Horne 23.75 9/1/04
David A. Bloss, Sr. 23.75 9/1/04
Kenneth J. McAvoy 23.75 9/1/04
Robert T. McLaurin 23.75 9/1/04
Frederic B. Horne 23.75 9/1/99
Stock Option Grants
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation
for Option Term(3)
Name 5%($) 10%($)
<S> <C> <C>
Timothy P. Horne 597,440 1,514,040
David A. Bloss, Sr. 522,760 1,324,785
Kenneth J. McAvoy 448,080 1,135,530
Robert T. McLaurin 149,360 378,510
Frederic B. Horne 43,952 127,301
</TABLE>
____________
(1) All options were granted on September 1, 1994.
(2) Options vest over five years at the rate of 20% per year on successive
anniversaries of the respective dates on which the options were granted and
generally terminate upon the earlier of the termination of employment, subject
to certain exceptions, or ten years from the date of grant. Under the terms of
the 1986 Incentive Stock Option Plan, the options granted to optionees who
hold more than 10% of the combined voting power of all classes of stock of the
Company have a maximum duration of five years from the date of grant.
<PAGE>
(3) Based upon the market price on the date of grant and an annual
appreciation at the rate stated on such market price through the expiration
date of such options. The dollar amounts in these columns are the result of
calculations at the 5% and 10% rates set by the SEC and therefore are not
intended to forecast possible future appreciation, if any, of the Company's
stock price. The Company did not use an alternative formula for a grant date
valuation, as the Company is not aware of any formula which will determine
with reasonable accuracy a present value based on future unknown or volatile
factors.
(4) Awarded under the Company's 1989 Nonqualifed Stock Option Plan (the
"Nonqualified Plan").
(5) Awarded under the Company's 1986 Incentive Stock Option Plan (the
"Incentive Plan").
(6) Under the terms of the Nonqualified Plan, the exercise price of options
cannot be less than 50% of fair market value.
(7) Under the terms of the Incentive Plan, the exercise price of options
cannot be less than 110% of fair market value for optionees who hold more than
10% of the combined voting power of all classes of stock of the Company and
100% of fair market value for all other optionees.
<PAGE>
Aggregated Option Exercises and Option Values
The following table shows information concerning the exercise of stock options
during fiscal year 1995 by each of the named executive officers and the fiscal
year-end value of unexercised options.
<TABLE>
<CAPTION>
Shares Acquired Value
Name on Exercise(#) Realized($)(1)
<S> <C> <C>
Timothy P. Horne 22,894 339,801
David A. Bloss, Sr. - -
Kenneth J. McAvoy 48,000 430,867
Robert T. McLaurin - -
Frederic B. Horne - -
Number of Unexercised
Options at Fiscal Year End(#)(2)
Name Exercisable Unexercisable
<S> <C> <C>
Timothy P. Horne 26,000 128,894
David A. Bloss, Sr. 4,000 51,000
Kenneth J. McAvoy - 90,000
Robert T. McLaurin 25,600 12,400
Frederic B. Horne 33,622 49,722
Value of Unexercised
In-the-Money Options
at Fiscal Year End($)(3)
Name Exercisable Unexercisable
<S> <C> <C>
Timothy P. Horne 213,355 857,726
David A. Bloss, Sr. 37,350 195,337
Kenneth J. McAvoy - 567,465
Robert T. McLaurin 224,800 39,075
Frederic B. Horne 208,285 194,867
</TABLE>
____________
<PAGE>
(l) Represents the difference between the market price on the date of
exercise and the exercise price of the options.
(2) Options vest over five years at the rate of 20% per year on successive
anniversaries of the respective dates on which the options were granted and
shall generally terminate upon the earlier of the termination of employment,
subject to certain exceptions, or ten years from the date of grant. Options
granted to Mr. Frederic B. Horne under the Incentive Stock Option Plan have a
five year term.
(3) Represents the difference between the market price on the last day of the
fiscal year and the exercise price of the options.
1991 Non-Employee Directors'
Nonqualified Stock Option Plan. Stock options granted under the 1991
Non-Employee Directors' Nonqualified Stock Option Plan
(the "Directors' Plan") are granted automatically and without any further
action on the part of the Board of Directors as of November 1 in each year
commencing in 1991 (with respect to each year, the "Grant Date"). The
Directors' Plan provides that options to purchase 2,000 shares of Class A
Common Stock (or such lesser amount as shall enable each non-employee Director
then in office to receive an equal grant in the event that there are not
sufficient shares of Class A Common Stock for each such non-employee Director
to receive a grant of 2,000 shares) shall be granted to each non-employee
Director duly elected and serving as such on each Grant Date.
<PAGE>
The purchase price of shares which may be purchased under the Directors' Plan
is $22.75, which is equal to the closing sale price of the Class A Common
Stock on the over-the-counter market on October 18, 1991 (as adjusted for the
March 1994 two-for-one split of the Company's Common Stock).
Options granted under the Directors' Plan are exercisable when granted, but no
option is exercisable after the earlier of (a) the date ten years after the
Grant Date or (b) the date on which the Director to whom such options were
granted ceases for any reason to serve as a Director of the Company; provided,
however, that in the event of termination as a result of disability or death,
the Director or his/her personal representative may exercise any outstanding
options not theretofore exercised during the 90-day period following such
disability or death.
The Directors' Plan is administered by the Board of Directors or an authorized
committee thereof in accordance with Rule 16b-3 under the Exchange Act. The
Board of Directors or an authorized committee thereof determines the form of
options granted under the Directors' Plan and makes other determinations and
interpretations concerning the Directors' Plan and options granted thereunder.
During fiscal 1995, Messrs. Herndon, Moran and Murphy, and Ms. Lane, being all
the non-employee Directors of the Company on the Grant Date, were each granted
options to purchase 2,000 shares of Class A Common Stock under the Directors'
Plan.
Pension Plan
The Company maintains a qualified non-contributory defined benefit pension
plan (the "Pension Plan") for eligible salaried employees of the Company and
its subsidiaries, including the named executive officers specified in the
"Summary Compensation Table" above and it maintains a nonqualified non-
contributory defined benefit supplemental plan (the "Supplemental Plan")
generally for certain highly compensated employees. The eligibility
requirements of the Pension Plan are attainment of age 21 and one year of
service of 1,000 or more hours. The assets of the Pension Plan are maintained
in a trust fund at State Street Bank and Trust Company. The Pension Plan is
administered by the Pension Plan Committee, which is appointed by the Board of
Directors of the Company. Annual contributions to the Pension Plan are
computed by an actuarial firm based on normal pension costs and a portion of
past service costs. The Pension Plan provides for monthly benefits to, or on
behalf of, each covered employee at age 65 and has provisions for early
retirement after ten years of service and attainment of age 55 and surviving
spouse benefits after five years of service. Covered employees who terminate
employment prior to retirement with at least five years of service are vested
in their accrued retirement benefit. The Pension Plan is subject to the
Employee Retirement Income Security Act of 1974, as amended.
<PAGE>
The annual normal retirement benefit for employees under the Pension Plan is
1.67% of Final Average Compensation (as defined in the Pension Plan)
multiplied by years of service (maximum 25 years), reduced by the Maximum
Offset Allowance (as defined in the Pension Plan). For the 1995 Pension Plan
year, Annual Compensation in excess of $150,000 per year is disregarded under
the Pension Plan for all purposes. However, benefits accrued prior to the 1994
plan year may be based on compensation in excess of $150,000. Compensation
recognized under the Pension Plan includes base salary and annual bonus.
The Supplemental Plan provides additional monthly benefits to individuals who
were projected to receive reduced benefits as a result of changes made to the
Pension Plan to comply with the Tax Reform Act of 1986 or who will be affected
by IRS limits on Pension Plan Compensation.
The annual normal retirement benefit payable from the Supplemental Plan is
equal to the difference between (1) the pre-Tax Reform Act formula of 45% of
Final Average Compensation less 50% of the participant's Social Security
Benefit, the result prorated for years of service less than 25, and (2) the
Pension Plan formula above with Annual Compensation in excess of $175,000
disregarded. For eligible employees who were not plan participants of the
Pension Plan as of January 1, 1989, the benefit under the Supplemental Plan is
based on the Pension Plan formula set forth above, with Annual Compensation in
excess of $247,540 disregarded. For the 1995 Plan Year, Annual Compensation in
excess of $309,425 is disregarded for all purposes under the Supplemental
Plan. Compensation recognized under the Supplemental Plan is W-2 pay,
excluding income realized upon the exercise of stock options.
<PAGE>
The following table illustrates total annual normal retirement benefits
(payable from both the Pension Plan and from the Supplemental Plan and
assuming attainment of age 65 during 1995) for various levels of Final Average
Compensation and years of benefit service, prior to application of the Social
Security offset, which is an integral part of the benefits payable under the
Supplemental Plan.
<TABLE>
<CAPTION>
Estimated Total Annual Retirement Benefit
(Pension Plan plus Supplemental Plan)
Final Average Based on Years of Service(1)
Compensation for
Five Highest
Consecutive Years 25 Years
in Last 10 Years: 10 Years 15 Years 20 Years or more
<S> <C> <C> <C> <C>
$100,000 $18,000 $27,000 $ 36,000 $ 45,000
150,000 27,000 40,500 54,000 67,500
200,000 31,825 47,738 63,650 79,563
250,000 40,825 61,238 81,650 102,063
300,000 49,825 74,738 99,650 124,563
350,000 51,522 77,282 103,043 128,804
</TABLE>
____________
(l) The annual Pension Plan benefit is computed on the basis of a straight
life annuity.
<PAGE>
Messrs. Timothy P. Horne, Bloss, McAvoy, McLaurin and Frederic B. Horne have
36, 2, 14, 7 and 22 years, respectively, of benefit service under the Pension
Plan. Eligible employees are currently limited to a maximum annual benefit
under the Pension Plan of $120,000 (subject to cost of living adjustments)
under Internal Revenue Code requirements regardless of their years of service
or Final Average Compensation. Accordingly, under current salary levels and
law, Mr. Timothy P. Horne's annual benefit would be limited to such amount.
Employment, Termination, Supplemental and Deferred Compensation Agreements
On May l, 1993, the Company entered into an Employment Agreement with Timothy
P. Horne providing for annual base salary of at least $570,000 plus other
benefits and bonuses generally available to senior executives of the Company.
The Employment Agreement provides for the employment of Mr. Horne as Chairman
of the Board and Chief Executive Officer of the Company for a period of not
less than four years and is terminable by Mr. Horne on thirty days notice. The
Employment Agreement supersedes all prior employment agreements between the
Company and Mr. Horne. Under the Employment Agreement, if Mr. Horne shall,
without his consent, cease to be, or cease to have the responsibilities and
duties of, Chairman of the Board of Directors of the Company and Chief
Executive Officer other than for a willful illegal act relating to the
performance of his duties, or if he shall be assigned duties inconsistent with
those previously performed by him, he shall be entitled to terminate his
employment upon notice and, if so terminated, he shall be entitled to receive
a severance payment equal to the greater of (i) the compensation which would
have been payable under the Employment Agreement at the base salary in effect
on the termination date for the balance of the original term thereof or (ii)
two years' compensation at that rate.
Under a Supplemental Compensation Agreement, effective as of May l, 1993,
Timothy P. Horne is entitled to receive annual payments during his lifetime
following his retirement or other termination of employment with the Company
equal to the greater of (a) one half of the average of his base salary for the
three years immediately preceding such retirement or termination or (b)
$350,000. During this period Mr. Horne will be available as a consultant to
the Company for 300 to 500 hours per year.
Timothy P. Horne is also entitled under a Deferred Compensation Agreement to
retirement benefits aggregating $233,333 payable over a period of 28
consecutive months commencing upon the earliest of his retirement, attainment
of the age of 65 or other termination of employment. The Deferred Compensation
Agreement represents compensation which Mr. Horne deferred prior to the
Company's past three fiscal years. The Company has fully expensed its
obligations under this Deferred Compensation Agreement.
<PAGE>
Stock Option and Compensation Committee Report
The Stock Option and Compensation Committee is currently composed of Messrs.
Murphy and Herndon and Ms. Lane. Mr. Murphy is the Chairman of the Committee.
The three members of the Stock Option and Compensation Committee are non-
employee directors and are ineligible to participate in any of the
compensation plans which are administered by the Committee.
In accordance with the rules adopted by the Securities and Exchange
Commission, the Stock Option and Compensation Committee will report on the
compensation and benefits provided in fiscal 1995 to Timothy P. Horne, David
A. Bloss, Sr., Kenneth J. McAvoy, Robert T. McLaurin, and Frederic B. Horne.
Compensation Philosophy
The Company's executive compensation program is designed to promote corporate
performance and thereby enhance stockholder returns. The Committee believes
that executives should have a greater portion of their compensation tied
directly to performance, both of the business and of individual objectives
established by management. To this end, overall compensation strategies and
specific compensation plans have been developed to tie a significant portion
of executive compensation to the success in meeting specified performance
goals. The overall objectives of this strategy are to attract and retain the
best possible executive talent, to motivate executives to achieve goals
inherent in the Company's business strategy, to link executive and stockholder
interests and to provide compensation packages that recognize individual
contributions as well promote achievement of business goals.
The key elements of the Company's executive compensation program consists of
three components, each of which is intended to serve the overall compensation
philosophy: base salary, an annual bonus and stock options granted under
either the 1986 Incentive Stock Option Plan or the 1989 Nonqualified Stock
Option Plan. These programs, as well as the basis for Mr. Timothy P. Horne's
compensation in fiscal 1995, are discussed below.
Base Salary
Base salaries for executive officers are initially determined by evaluating
the responsibilities of the position held and the experience of the
individual, coupled with a review of the base salaries for comparable
positions at other companies.
Executives' base salaries are reviewed on an annual basis following the close
of the fiscal year and completion of the audit of the Company's financial
results by the independent auditors. Adjustments are determined by evaluating
the performance of the Company and each executive officer. The performance of
executive officers with functional or administrative responsibilities is
considered by reviewing the quality and efficiency of administrative and
<PAGE>
functional processes. In the case of executive officers with responsibility
for one or more business units within the Company, the business results of
those units are also considered. The Committee also considers, where
appropriate, certain non-financial performance measures, such as increase in
market share, market expansion, corporate development and acquisitions,
achievement of manufacturing efficiencies, improvements in product quality
and/or relations with customers, suppliers or employees. Adjustments in base
salary are also made when and as appropriate to reflect changes in job
responsibilities.
The Committee believes that the Company's most direct competitors for
executive talent are not necessarily all of the companies that would be
included in the peer group established to compare shareholder returns. Thus,
the compensation packages which may be considered during the Company's
compensation review process are not the same group as the peer group index in
the Comparison of Five Year Cumulative Total Return graph included in this
proxy statement.
The base salary received by Mr. Timothy P. Horne in fiscal 1995 was $619,166,
an increase of 3.6% from $596,838 in the prior fiscal year. Under the terms of
an Employment Agreement with the Company, Mr. Horne's base salary was
established in 1993 at $570,000, subject to a guaranteed annual adjustment
equal to the increase in the Consumer Price Index for all Urban Consumers,
with such other additional increase, if any, as the Committee deems
appropriate in its discretion. The CPI increased by approximately 2.5% from
June 1993 to June 1994, the twelve month period immediately prior to the
Committee's adjustment in Mr. Horne's base salary for fiscal 1995.
The key performance measure the Committee used in determining Mr. Horne's
compensation for fiscal 1995 was its assessment of his ability and dedication
to enhance the long-term value of the Company through continuation of the
leadership and vision he has provided during his tenure as Chairman, President
and CEO. Under his leadership, the sales of the Company have experienced a
compounded annual growth rate of approximately 17%.
<PAGE>
Annual Bonus
The Company's executive officers are eligible for an annual cash bonus.
Individual and corporate performance objectives are established at or near the
beginning of each fiscal year by the Chairman/President/Chief Executive
Officer in consultation with the Executive Vice President and the Chief
Financial Officer. These objectives are then reviewed by the Committee. Once
established, eligible executives are assigned threshold, target and maximum
bonus levels. Each participant in the plan is assigned a percentage, based
upon the participant's position in the Company, of base salary as a target
upon which the bonus is calculated. The Committee believes that a significant
portion of executive compensation should be tied to an annual bonus potential
based on performance of specified objectives. During fiscal 1995, the
Company's net income increased by 11.5%.
Under the Employment Agreement, Mr. Timothy P. Horne is eligible for an annual
bonus in an amount to be determined by the Committee based upon such factors
as the Committee deems appropriate. Mr. Horne received a bonus of $83,948 for
fiscal 1995. The Committee believes that Mr. Horne's continued leadership and
focus on the long-term growth of the Company contributed to the 11.5% increase
in net income for fiscal 1995.
<PAGE>
Stock Options
Under the Company's 1986 Incentive Stock Option Plan and 1989 Nonqualified
Stock Option Plan, both of which were approved by the stockholders, stock
options may be granted to the Company's executive officers. The Committee sets
guidelines for the size of stock option awards based on similar factors as
used to determine base salaries and annual bonuses, including corporate
performance and individual performance against objectives. Stock options are
the principal vehicle for the payment of long-term compensation. This
component of compensation is intended to motivate executives to improve stock
market performance.
Stock options are designed to align the interests of the executives with those
of the stockholders as the full benefit of the compensation package will not
be realized unless stock appreciation occurs over a number of years. Stock
options under the Incentive Plan are typically granted annually and vest 20%
per year over five years beginning with the first anniversary of the grant
date. Under the Incentive Plan, the exercise price equals the market price of
the Class A Common Stock on the date of the grant with an exception for
executives who own more than 10% of the combined voting power of the Company;
for those employees the exercise price is equal to 110% of the market price on
the date of the grant. Stock options under the Nonqualified Plan have an
exercise price which may be no less than 50% of the market price on the date
of the grant. The duration of options under either plan is generally 10 years,
with the exception of grants under the Incentive Plan to owners of more than
10% of the combined voting power of the Company, in which case such grants
terminate after 5 years.
Options are normally granted in the fall following the close of the fiscal
year in order to provide the Committee with an opportunity to review the
fiscal year performance, both of individual and business goals.
On September 1, 1994, Mr. Timothy P. Horne received options under the
Nonqualified Plan to purchase 40,000 shares with an exercise price of $23.75,
which represents 100% of the fair market value of the Class A Common Stock on
the grant date. This is the same number of options which were granted to Mr.
Horne for the fiscal year ended June 30, 1993 (after giving effect for the
two-for-one stock split of the Company's Common Stock in March 1994). Mr.
Horne holds a significant equity interest in the Company.
Conclusion
Through the programs described above, a significant portion of the Company's
executive compensation is linked to individual and corporate performance and
stock appreciation. The Stock Option and Compensation Committee has adopted a
new annual bonus plan for the 1996 fiscal year that is intended to more
closely align executive compensation to corporate performance. The new plan
will link each executive's annual bonus to sales growth, increases in economic
<PAGE>
value added, and improvements in inventory turnover. In addition, the
Committee adopted, and recommends stockholder approval of, the Watts
Industries, Inc. Management Stock Purchase Plan (the "Plan"). The Committee
believes that the Plan will encourage executives and management employees to
acquire a greater equity stake in the Company and will motivate them to
contribute to the future growth and success of the Company, thereby aligning
the long-term interests of executives and management employees with the
interests of all stockholders.
Stock Option and Compensation Committee
Daniel J. Murphy, III (Chairman)
Noah T. Herndon
Wendy E. Lane
<PAGE>
Performance Graph
Set forth below is a line graph comparing the cumulative total shareholder
return on the Company's Class A Common Stock, based on the market price of the
Class A Common Stock, with the cumulative return of companies on the Standard
& Poor's 500 Stock Index and a peer group of companies engaged in the valve
and pump industries, for a period of five fiscal years commencing June 30,
1990 and ended June 30, 1995. The performance indicator of peer group
companies consists of Keystone International, Inc., Bw Ip, Inc., Zurn
Industries, Inc., Goulds Pumps, Inc. and Duriron, Inc. The graph assumes that
the value of the investment in the Company's Class A Common Stock and each
index was $100 at June 30, 1990 and that all dividends were reinvested.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG WATTS INDUSTRIES, INC., S & P 500 INDEX AND A PEER GROUP
[GRAPHIC]
LINE GRAPHIC AS DESCRIBED BELOW
Cumulative Total Return
6/30/90 6/30/91 6/30/92
Watts Industries, Inc 100 122 122
Peer Group 100 105 110
S & P 500 100 107 122
6/30/93 6/30/94 6/30/95
Watts Industries, Inc 94 118 129
Peer Group 116 91 101
S & P 500 138 140 177
Certain Transactions
George B. Horne, the father of Timothy P. Horne and Frederic B. Horne,
receives monthly payments of $7,959 ($95,505 annually) from the Watts
Industries, Inc. Retirement Plan for Salaried Employees.
<PAGE>
PROPOSAL 2
RATIFICATION OF INDEPENDENT AUDITORS
Although Delaware law does not require that the selection by the Directors of
the Company's independent auditors be approved each year by the stockholders,
the Directors believe it is appropriate to submit the selection of independent
auditors to the stockholders for their approval and to abide by the result of
the stockholders' vote. Upon the recommendation of the Audit Committee of the
Board, the Directors have recommended that the stockholders ratify the
selection of Ernst & Young as the Company's independent auditors for fiscal
1996.
The Company expects that a representative of Ernst & Young will be present at
the annual meeting and will be given the opportunity to make a statement if he
or she wishes to do so. This representative is also expected to be available
to respond to questions from stockholders.
Holders of voting rights sufficient to ratify the selection of Ernst & Young
as independent auditors have indicated an intention to vote in favor of this
proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL.
PROPOSAL 3
APPROVAL OF MANAGEMENT STOCK PURCHASE
PLAN
Proposal
The Board of Directors of the Company adopted the Watts Industries, Inc.
Management Stock Purchase Plan (the "Stock Purchase Plan") on August 8, 1995,
subject to the approval of the Company's stockholders at the 1995 Annual
Meeting.
Subject to adjustment for stock splits, stock dividends and similar events,
the total number of shares of Class A Common Stock that can be issued under
the Stock Purchase Plan is 1,000,000. The closing price of the Class A Common
Stock on September 1, 1995 was $24.50 per share.
<PAGE>
Recommendation
The Company believes that it is desirable for management employees of the
Company and its subsidiaries to acquire an equity interest in the Company, and
the Stock Purchase Plan has been designed to achieve such goal. Under the
Stock Purchase Plan, management employees may elect to defer part or all their
bonus and apply it towards the purchase of restricted stock units. Subject to
meeting certain vesting requirements, the management employees will receive
payment under the Stock Purchase Plan in the form of shares of Class A Common
Stock. The Board of Directors believes the Stock Purchase Plan is in the best
interests of the Company because it will provide a tax-effective mechanism to
encourage the management employees to acquire a greater equity stake in the
Company and will motivate the management employees to contribute to the future
growth and success of the Company, thus aligning the long-term interests of
the management employees with the interests of all stockholders. THE BOARD OF
DIRECTORS RECOMMENDS THAT THE STOCK PURCHASE PLAN BE APPROVED, AND THEREFORE
RECOMMENDS A VOTE FOR THIS PROPSAL.
<PAGE>
Summary of the Stock Purchase Plan
The material terms of the Stock Purchase Plan are summarized below. The
summary is qualified in its entirety by reference to the full text of the
Stock Purchase Plan which is attached hereto as Appendix A to this proxy
statement.
Plan Administrator; Eligibility. The Stock Purchase Plan will be administered
by the Stock Option and Compensation Committee of the Board of Directors (the
"Committee"). Only management employees selected by the Committee will be
eligible to participate in the Stock Purchase Plan. It is anticipated that
approximately 25 management employees, including employee directors and
executive officers, will participate initially in the Stock Purchase Plan.
Restricted Stock Units. Each eligible management employee may elect, pursuant
to an advance election, to defer up to 100% of his/her annual bonus, beginning
with the bonus payable for the 1996 fiscal year. The designated amounts will
be converted to restricted stock units at a price equal to 75% of the fair
market value of Class A Common Stock on the date the bonus would otherwise
have been paid. These units will be credited to an account for the benefit of
the management employee. Under some limited circumstances, a management
employee may purchase restricted stock units with after-tax dollars.
Each grant of restricted stock units will be 100% vested after three years
from the date of grant and will be payable in the form of shares of the
Company's Class A Common Stock at the earlier of a preselected date or the
management employee's termination of employment. During the deferral period
selected by the management employee, the restricted stock units will be
restricted from sale, transfer or pledge and the management employee will not
be entitled to any voting rights.
In the event the Company declares any cash dividends, dividend equivalent
amounts will be credited to each management employee's account and will be
paid out in cash upon vesting or when the management employee receives payment
of his/her non-vested units.
If the management employee voluntarily terminates his/her employment prior to
vesting in his/her restricted stock units, the management employee will become
entitled to receive in cash the lesser of the original purchase price of the
non-vested units, as adjusted by interest, or the fair market value of an
equal number of shares of the Company's Class A Common Stock. If the
management employee is terminated by the Company or if the management
employee's employment terminates as a result of death or permanent disability,
the Stock Purchase Plan provides for vesting of the restricted stock units at
the rate of 33-1/3% for each year of employment after date of grant. The non-
vested units will be paid in cash on the same basis as in the case of a
voluntary termination.
<PAGE>
Change in Control. All restricted stock units will become vested automatically
upon the effective date of any merger, consolidation, sale, dissolution or
liquidation of the Company.
Adjustments for Stock Dividends, Stocks Splits, etc. The Committee will adjust
the reserved shares and the restricted stock units to reflect stock dividends,
stock splits, or similar events.
Amendments and Termination. The Board of Directors may terminate or amend the
Stock Purchase Plan, but no amendment may adversely affect the rights of any
management employee to the vested restricted stock units credited to his/her
account without his/her consent. All material amendments to the Stock Purchase
Plan must be submitted for stockholder approval to the extent necessary for
the Stock Purchase Plan to satisfy the requirements of the exemption from the
short-swing profits rules under Section 16 of the Securities Exchange Act of
1934.
Approval of the Stock Purchase Plan requires the affirmative vote of the
holders of a majority of the outstanding votes of the Company's Class A Common
Stock and Class B Common Stock, voting as a single class. Holders of voting
rights sufficient to approve the Stock Purchase Plan have indicated an
intention to vote in favor of this proposal.
OTHER MATTERS
The Board of Directors is not aware of any other matters which may come before
the meeting. If any other matters shall properly come before the meeting, it
is the intention of the persons named in the enclosed proxy to vote the proxy
in accordance with their judgment on any such matters.
STOCKHOLDER PROPOSALS
In order for any stockholder proposal to be included in the proxy statement
for the Company's 1996 Annual Meeting of Stockholders, such proposal must be
received at the principal executive offices of the Company, 815 Chestnut
Street, North Andover, MA 01845, not later than May 17, 1996 and must satisfy
certain rules of the Securities and Exchange Commission.
Nominations and proposals of stockholders may also be submitted to the Company
for consideration at the 1996 Annual Meeting if certain conditions set forth
in the Company's bylaws are satisfied, but will not be included in the proxy
materials unless the conditions set forth in the preceding paragraph are
<PAGE>
satisfied. Such nominations (or other stockholder proposals) must be delivered
to or mailed and received by the Company not less than 75 days nor more than
120 days prior to the anniversary date of the 1995 Annual Meeting. If the date
of the 1996 Annual Meeting is subsequently moved to a date more than seven
days (in the case of Director nominations) or ten days (in the case of other
stockholders proposals) prior to the anniversary date of the 1995 Annual
Meeting, the Company will publicly disclose such change, and nominations or
other proposals to be considered at the 1996 Annual Meeting must be received
by the Company not later than the 20th day after such disclosure (or, if
disclosed more than 75 days prior to such anniversary date, the later of 20
days following such disclosure or 75 days before the date of the 1996 Annual
Meeting, as rescheduled). To submit a nomination or other proposal, a
stockholder should send the nominee's name or proposal and appropriate
supporting information required by the Company's bylaws to the Secretary of
the Company at the address set forth above.
<PAGE>
APPENDIX A
WATTS INDUSTRIES, INC.
MANAGEMENT STOCK PURCHASE PLAN
I. INTRODUCTION
The purpose of the Watts Industries, Inc. Management Stock Purchase Plan (the
"Plan") is to provide equity incentive compensation to selected management
employees of Watts Industries, Inc. (the "Company") and its subsidiaries.
Participants in the Plan may elect to receive restricted stock units ("RSUs")
in lieu of all or a portion of their annual incentive bonus and, in some
circumstances, make after-tax contributions in exchange for RSUs. Each RSU
represents the right to receive one share of the Company's Class A Common
Stock (the "Stock") upon the terms and conditions stated herein. RSUs are
granted at a discount of 25% from the fair market value of the Stock on the
date of grant. So long as the participant remains employed by the Company for
at least three years after the date of grant, his or her RSUs will be settled
in shares of Stock after a period of deferral selected by the participant, or
upon termination of employment, if earlier.
II. ADMINISTRATION
The Plan shall be administered by the Stock Option and Compensation Committee
of the Board of Directors of the Company (the "Committee"). Each member of the
Committee shall be a "disinterested person" within the meaning of Rule 16b-
3(c)(2)(i) promulgated under the Securities Exchange Act of 1934, as amended
(the "Act"). The Committee shall have complete discretion and authority with
respect to the Plan and its application, except as expressly limited herein.
Determinations by the Committee shall be final and binding on all parties with
respect to all matters relating to the Plan.
III. ELIGIBILITY
Management employees of the Company and its subsidiaries as designated by the
Committee shall be eligible to participate in the Plan.
<PAGE>
IV. PARTICIPATION
A. Restricted Stock Units. Participation in the Plan shall be based on the
award of RSUs. Each RSU awarded to a participant shall be credited to a
bookkeeping account established and maintained for that participant.
B. Valuation of RSUs; Fair Market Value of Stock. The value of each RSU,
for purposes of the Plan, shall be determined as follows: The "Cost" of each
RSU shall be equal to 75% of the fair market value of the Stock on the date
the RSU is awarded. The "Value" of each RSU shall be equal to its Cost plus
simple interest per annum on such amount at the one-year U.S. Treasury Bill
rate (as published in The Wall Street Journal) in effect on the award date and
each anniversary thereof. For all purposes of the Plan, the "fair market value
of the Stock" on any given date shall mean the last reported sale price at
which Stock is traded on such date or, if no Stock is traded on such date, the
most recent date on which Stock was traded, as reflected on the New York Stock
Exchange.
C. Election to Participate. Each year, each participant may elect to
receive an award of RSUs under the Plan during the subsequent calendar year by
completing a Bonus Deferral and RSU Subscription Agreement ("Subscription
Agreement"). The Subscription Agreement shall provide that the participant
elects to receive RSUs in lieu of a specified portion of any annual incentive
bonus. Such portion may be expressed as either (1) a specified percentage of
the participant's actual bonus amount; (2) the lesser of a specified
percentage or a specified dollar amount of the participant's actual bonus
amount; or (3) a specified dollar amount, up to 100% of the participant's
targeted maximum bonus. Any dollar amount specified must be at least $1,000;
and any percentage specified must be at least 10% and not more than 100%.
Amounts specified pursuant to methods (1) and (2) are entirely contingent on
the amount of bonus actually awarded. Where the participant specifies a fixed
dollar amount pursuant to method (3), however, the Subscription Agreement
shall provide that, if the specified dollar amount exceeds the actual bonus
amount awarded, the participant undertakes to pay the excess, in cash or by
check, to the Company within five days after the date the participant receives
notice of the bonus amount. Each Subscription Agreement, in addition, shall
specify a deferral period for the RSUs to which it pertains. The deferral
period shall be expressed as a number of whole years, not less than three,
beginning on the award date. Subscription Agreements must be received by the
Company no later than December 31 of the fiscal year for which such bonus
amount will be determined. A participant who is not subject to the short-swing
profits rule of Section 16 of the Act may revise his or her Subscription
Agreement with respect to the amount of elected RSUs no later than June 1 of
the fiscal year for which such bonus amount will be determined.
D. Award of RSUs. Once each year, on the date that annual incentive bonuses
are paid or would otherwise be paid, the Company shall award RSUs to each
participant as follows: Each participant's account shall be credited with a
whole number of RSUs determined by dividing the amount (expressed in dollars)
that is determined under his or her Subscription Agreement by the Cost of each
RSU awarded on such date. No fractional RSU will be credited and the amount
equivalent in value to the fractional RSU will be paid out to the participant
currently in cash.
<PAGE>
V. VESTING AND SETTLEMENT OF RSUs
A. Vesting. A participant shall be fully vested in each RSU three years
after the date such RSU was awarded.
B. Settlement After Vesting. With respect to each vested RSU, the Company
shall issue to the participant one share of Stock at the end of the deferral
period specified in the participant's Subscription Agreement pertaining to
such RSU, or upon the participant's termination of employment or the
termination of the Plan, if sooner.
C. Settlement Prior to Vesting.
1. Voluntary Termination. If a participant voluntarily terminates his/her
employment with the Company for reasons other than death or permanent
disability, the participant's nonvested RSUs shall be canceled and he or she
shall receive a cash payment equal to the lesser of (a) the Value of such RSUs
or (b) an amount equal to the number of such RSUs multiplied by the fair
market value of the Stock on the date of the participant's termination of
employment.
<PAGE>
2. Involuntary Termination. If a participant's employment is terminated by
the Company, or if the participant's employment terminates as a result of
death or permanent disability, the participant's nonvested RSUs shall be
canceled and he or she shall receive payment as follows: The number of
nonvested RSUs awarded on each award date shall be multiplied by a fraction
that is equal to the number of full years that the participant was employed by
the Company after each such award date divided by three and the participant
shall receive the resulting number of such RSUs in shares of Stock. With
respect to the participant's remaining nonvested RSUs, the participant shall
receive cash in an amount equal to the lesser of (a) the Value of such RSUs or
(b) an amount equal to the number of such RSUs multiplied by the fair market
value of the Stock on the date of the participant's termination of employment.
3. Committee's Discretion. The Committee shall have complete discretion to
determine the circumstances of a participant's termination of employment,
including whether the same results from voluntary termination, permanent
disability or termination by the Company, and the Committee's determination
shall be final and binding on all parties and not subject to review or
challenge by any participant or other person.
VI. DIVIDEND EQUIVALENT AMOUNTS
Whenever dividends (other than dividends payable only in shares of Stock) are
paid with respect to Stock, each participant shall be paid an amount in cash
equal to the number of his or her vested RSUs multiplied by the dividend value
per share. In addition, each participant's account shall be credited with an
amount equal to the number of such participant's nonvested RSUs multiplied by
the dividend value per share. Amounts credited with respect to each nonvested
RSU shall be paid, without interest, on the date the participant becomes
vested in such RSU, or when the participant receives payment of his or her
nonvested RSUs pursuant to Subsection V.(C).
VII. DESIGNATION OF BENEFICIARY
A participant may designate one or more beneficiaries to receive payments or
shares of Stock in the event of his/her death. A designation of beneficiary
shall apply to a specified percentage of a participant's entire interest in
the Plan. Such designation, or any change therein, must be in writing and
shall be effective upon receipt by the Company. If there is no effective
designation of beneficiary, or if no beneficiary survives the participant, the
participant's estate shall be deemed to be the beneficiary.
VIII. SHARES ISSUABLE; MAXIMUM NUMBER OF RSUs; ADJUSTMENTS
A. Shares Issuable. The aggregate maximum number of shares of Stock
reserved and available for issuance under the Plan shall be 1,000,000. For
purposes of this limitation, the shares of Stock underlying any RSUs that are
canceled shall be added back to the shares of Stock available for issuance
under the Plan. Shares subject to the Plan are authorized but unissued shares
or shares that were once issued and subsequently re-acquired by the Company.
<PAGE>
B. Adjustments. In the event of a stock dividend, stock split or similar
change in capitalization affecting the Stock, the Committee shall make
appropriate adjustments in (i) the number and kind of shares of Stock or
securities with respect to which RSUs shall thereafter be granted; (ii) the
number and kind of shares remaining subject to outstanding RSUs; (iii) the
number of RSUs credited to each participant's account; and (iv) the method of
determining the value of RSUs. In the event of any proposed merger,
consolidation, sale, dissolution or liquidation of the Company, all non-vested
RSUs shall become fully vested upon the effective date of such merger,
consolidation, sale, dissoution or liquidation and the Committee in its sole
discretion may, as to any outstanding RSUs, make such substitution or
adjustment in the aggregate number of shares reserved for issuance under the
Plan and the number of shares subject to such RSUs as it may determine on an
equitable basis and as may be permitted by the terms of such transaction, or
terminate such RSUs upon such terms and conditions as it shall provide. In the
case of the termination of any vested RSU, the Committee shall provide payment
or other consideration which the Committee deems equitable in the
circumstances.
IX. AMENDMENT OR TERMINATION OF PLAN
The Company reserves the right to amend or terminate the Plan at any time, by
action of its Board of Directors, provided that no such action shall adversely
affect a participant's rights under the Plan with respect to RSUs awarded and
vested before the date of such action, and provided further, that Plan
amendments shall be subject to approval by the Company's shareholders to the
extent required by the Act to ensure that awards are exempt under Rule 16b-3
promulgated under the Act.
X. MISCELLANEOUS PROVISIONS
A. No Distribution; Compliance with Legal Requirements. The Committee may
require each person acquiring shares of Stock under the Plan to represent to
and agree with the Company in writing that such person is acquiring the shares
without a view to distribution thereof. No shares of Stock shall be issued
until all applicable securities law and other legal and stock exchange
requirements have been satisfied. The Committee may require the placing of
such stop-orders and restrictive legends on certificates for Stock as it deems
appropriate.
B. Withholding. Participation in the Plan is subject to any required tax
withholding on wages or other income of the participant in connection with the
Plan. Each participant agrees, by entering the Plan, that the Company shall
have the right to deduct any such taxes, in its sole discretion, from any
amount payable to the participant under the Plan or from any payment of any
kind otherwise due to the participant. Participants who wish to avoid the
withholding of shares of Stock otherwise issuable to them under the Plan
should arrange with the Company to pay the amount of taxes required to be
withheld in advance of the settlement date.
<PAGE>
C. Notices; Delivery of Stock Certificates. Any notice required or
permitted to be given by the Company or the Committee pursuant to the Plan
shall be deemed given when personally delivered or deposited in the United
States mail, registered or certified, postage prepaid, addressed to the
participant at the last address shown for the participant on the records of
the Company. Delivery of stock certificates to persons entitled to receive
them under the Plan shall be deemed effected for all purposes when the Company
or a share transfer agent of the Company shall have deposited such
certificates in the United States mail, addressed to such person at his/her
last known address on file with the Company.
D. Nontransferability of Rights. During a participant's lifetime, any
payment or issuance of shares under the Plan shall be made only to him/her. No
RSU or other interest under the Plan shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or
charge, and any attempt by a participant or any beneficiary under the Plan to
do so shall be void. No interest under the Plan shall in any manner be liable
for or subject to the debts, contracts, liabilities, engagements or torts of a
participant or beneficiary entitled thereto.
E. Company's Obligations To Be Unfunded and Unsecured. The Plan shall at
all times be entirely unfunded, and no provision shall at any time be made
with respect to segregating assets of the Company (including Stock) for
payment of any amounts or issuance of any shares of Stock hereunder. No
participant or other person shall have any interest in any particular assets
of the Company (including Stock) by reason of the right to receive payment
under the Plan, and any participant or other person shall have only the rights
of a general unsecured creditor of the Company with respect to any rights
under the Plan.
F. Governing Law. The terms of the Plan shall be governed, construed,
administered and regulated in accordance with the laws of the Commonwealth of
Massachusetts. In the event any provision of this Plan shall be determined to
be illegal or invalid for any reason, the other provisions shall continue in
full force and effect as if such illegal or invalid provision had never been
included herein.
G. Effective Date of Plan. The Plan shall become effective as of the date
of its approval by the holders of a majority of the shares of the Company's
Class A Common Stock and Class B Common Stock, voting as a single class,
present or represented and entitled to vote at a meeting of the shareholders.
<PAGE>
WATTS INDUSTRIES, INC.
815 Chestnut Street, North Andover, MA 01845
Proxy for Class A Common Stock
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Timothy P. Horne and Kenneth J. McAvoy, and
each of them acting solely, proxies, with power of substitution and with all
powers the undersigned would possess if personally present, to represent and
vote, as designated below, all of the shares of Class A Common Stock of Watts
Industries, Inc. which the undersigned is entitled to vote at the Annual
Meeting of Stockholders of Watts Industries, Inc. to be held in the Phillips
Room of The Andover Inn at Phillips Academy, Chapel Avenue, Andover,
Massachusetts, on Tuesday, October 17, 1995 at 10:00 a.m. (Boston time), and at
any adjournment(s) or postponement(s) thereof, upon the matters set forth on
the reverse side hereof and described in the Notice of Annual Meeting of
Stockholders and accompanying Proxy Statement and upon such matters as may
properly be brought before such meeting and any adjournment(s) or
postponement(s) thereof.
The undersigned hereby revokes any proxy previously given in connection with
such meeting and acknowledges receipt of the Notice of Annual Meeting and Proxy
Statement for the aforesaid meeting and the 1995 Annual Report to Stockholders.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE SIDE
<PAGE>
X Please mark votes as in this example.
This proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder. If no instruction is indicated with respect to
Items 1, 2 and 3 below, the undersigned's votes will be cast in favor of such
matters. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
1. To elect eight Directors to hold office until the next Annual Meeting of
Stockholders and until their successors are duly elected and qualified.
Nominees: Timothy P. Horne, David A. Bloss, Sr., Frederic B. Horne, Kenneth J.
McAvoy, Noah T. Herndon, Wendy E. Lane, Gordon W. Moran and Daniel J.
Murphy, III
FOR _________ WITHHELD ______________
For all nominees except as noted above _______________________________
2. To ratify the selection of Ernst &Young LLP as the independent auditors of
the Company for the current fiscal year.
For Against Abstain
[ ] [ ] [ ]
3. To approve the Watts Industries, Inc. Management Stock Purchase Plan, as
described in the Proxy Statement.
For Against Abstain
[ ] [ ] [ ]
Mark here for address change and note at left
Sign exactly as name appears on this Proxy. If the shares are registered in the
names of two or more persons, each should sign. Executors, administrators,
trustees, partners, custodians, guardians, attorneys and corporate officers
should add their full titles as such.
___________________________________________________
Signature Date
___________________________________________________
Signature Date
<PAGE>
WATTS INDUSTRIES, INC.
815 Chestnut Street, North Andover, MA 01845
Proxy for Class B Common Stock
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Timothy P. Horne and Kenneth J. McAvoy, and
each of them acting solely, proxies, with power of substitution and with all
powers the undersigned would possess if personally present, to represent and
vote, as designated below, all of the shares of Class B Common Stock of Watts
Industries, Inc. which the undersigned is entitled to vote at the Annual
Meeting of Stockholders of Watts Industries, Inc. to be held in the Phillips
Room of The Andover Inn at Phillips Academy, Chapel Avenue, Andover,
Massachusetts, on Tuesday, October 17, 1995 at 10:00 a.m. (Boston time), and at
any adjournment(s) or postponement(s) thereof, upon the matters set forth on
the reverse side hereof and described in the Notice of Annual Meeting of
Stockholders and accompanying Proxy Statement and upon such matters as may
properly be brought before such meeting and any adjournment(s) or
postponement(s) thereof.
The undersigned hereby revokes any proxy previously given in connection with
such meeting and acknowledges receipt of the Notice of Annual Meeting and Proxy
Statement for the aforesaid meeting and the 1995 Annual Report to Stockholders.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE SIDE
<PAGE>
X Please mark votes as in this example.
This proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder. If no instruction is indicated with respect to
Items 1, 2 and 3 below, the undersigned's votes will be cast in favor of such
matters. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
1. To elect eight Directors to hold office until the next Annual Meeting of
Stockholders and until their successors are duly elected and qualified.
Nominees:
Timothy P. Horne, David A. Bloss, Sr., Frederic B. Horne,
Kenneth J. McAvoy, Noah T. Herndon, Wendy E. Lane, Gordon W. Moran
and Daniel J. Murphy, III
FOR WITHHELD
[ ] [ ]
[ ] ___________________________________________________
For all nominees except as noted above
2. To ratify the selection of Ernst & Young LLP as the independent auditors of
the Company for the current fiscal year.
For Against Abstain
[ ] [ ] [ ]
3. To approve the Watts Industries, Inc. Management Stock Purchase Plan, as
described in the Proxy Statement.
For Against Abstain
[ ] [ ] [ ]
Sign exactly as name appears on this Proxy. If the shares are registered in the
names of two or more persons, each should sign. Executors, administrators,
trustees, partners, custodians, guardians, attorneys and corporate officers
should add their full titles as such.
___________________________________________________
Signature Date
___________________________________________________
Signature Date
