<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Essef Corporation
----------------------------------------------
(Name of Registrant as Specified in its Charter)
Essef Corporation
----------------------------------------------
(Name of Person(s) Filing Proxy Statement if Other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(1)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined)
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[ ] Fee paid previously with preliminary materials
[ ] check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE> 2
PROXY STATEMENT
December 18, 1996
GENERAL INFORMATION
This proxy statement is furnished to shareholders of Essef Corporation (the
"Company") on its behalf, by its Board of Directors, in connection with the
solicitation of proxies for use at its Annual Meeting of Shareholders (the
"Annual Meeting") to be held on Thursday, January 23, 1997, at the offices of
the Company, 220 Park Drive, Chardon, Ohio 44024 at 10:00 a.m. EST, or any
adjournments thereof, to elect four directors, to consider and act upon a
proposal of the Board of Directors to approve the Essef Corporation Performance
Share Plan, and to conduct such other business as may properly be brought before
the Annual Meeting. This proxy statement was first mailed on December 20, 1996,
to shareholders of record on November 22, 1996.
On November 22, 1996, 4,802,700 common shares were outstanding. Each shareholder
of record as of that date is entitled to notice of the meeting and to cast one
vote per share held on all matters to come before the Annual Meeting. The
holders of a majority of the votes entitled to be cast present in person or by
proxy shall constitute a quorum for the purposes of the Annual Meeting.
A form of proxy accompanies this statement which shareholders are urged to fill
in and return. The persons appointed by validly executed proxies will vote the
shares covered thereby according to the instructions endorsed thereon, on each
issue or matter as to which an instruction is given. Shares covered by signed
proxies otherwise unmarked or on which contradictory or unclear instructions are
given will be voted in favor of the nominees listed, in favor of the adoption of
the Essef Corporation Performance Share Plan, and in accordance with the best
judgment of the persons appointed thereon as to any other matters properly
brought before the Annual Meeting.
The appointment of a proxy may be revoked at any time by providing notice to the
Company prior to the Annual Meeting or by appearing at the Annual Meeting to
vote in person.
1
<PAGE> 3
NOMINATION AND ELECTION OF DIRECTORS
The Board of Directors of the Company consists of seven members divided into two
classes. Class A has three members and Class B has four members. Directors in
each class are elected for three year terms expiring on the date of the third
annual meeting following their election. Four Class B directors are to be
elected at the Annual Meeting with their terms expiring with the Company's
annual meeting of shareholders to be held in January, 2000.
The Board of Directors has nominated Messrs. Harnett, King and Ross to succeed
themselves as incumbents. Mr. James Biggar has been nominated to succeed Mr.
Horner who will retire following completion of his term as a Director at the
annual meeting. They have all agreed to serve if elected.
The regulations of the Company also provide for the nomination of directors by
shareholders pursuant to a notice satisfying specified requirements, timely
given to the Secretary of the Company. No such notice has been received as of
the date hereof. The Company's Committee on Directors will also consider
recommendations by shareholders for nomination of directors. Directors are
elected by a plurality of the votes represented at the meeting, either in person
or by proxy, and entitled to vote.
A brief biography of each of the four nominees, including their principal
occupations, ages at the date of this statement, a brief account of their
business experience, and the identity of certain companies of which they are or
were directors or with which they are or were associated appear in the following
section. Their beneficial ownership of common shares of the Company is contained
in the section headed "Beneficial Ownership Of Shares."
NOMINEES AND DIRECTORS
NOMINEES
JAMES M. BIGGAR
Age 67
Mr. Biggar is currently Chairman and Chief Executive Officer of Glencairn
Corporation, a real estate development firm. Prior to assuming that position in
July, 1991, he served as Chairman of Nestle USA, Inc., a food products,
restaurant and hotel concern. From January, 1984 to January 1991, Mr. Biggar
served as Chairman and Chief Executive Officer of Nestle Enterprises, Inc. Mr.
Biggar is a director of The Sherwin-Williams Company, a manufacturer of
coatings, and National City Bank and National City Corporation, providers of
financial and banking services.
The term of office as a director for which he is nominated will expire with the
annual meeting of shareholders in 2000.
GORDON D. HARNETT
AGE 54
Mr. Harnett is Chairman, President, and Chief Executive Officer of Brush-Wellman
Corporation, an international supplier of high performance engineered materials.
Prior to assuming that post in January, 1991 he served as Senior Vice President
(1987-1991) of The B.F. Goodrich Co., a diversified manufacturer of aerospace
and specialty chemical products and as President (1982-1985) and Chief Executive
Officer (1985-1987) of Tremco, Inc. a wholly owned subsidiary of The B.F.
Goodrich Co.
Mr. Harnett has served the Company as a director since July, 1987 and is a
member of the Compensation Committee, of which he is Chairman, the Committee on
Directors, and the Executive Committee. The term of office as a director for
which he is nominated will expire with the annual meeting of shareholders in
2000.
2
<PAGE> 4
RALPH T. KING
AGE 67
Mr. King is Chairman of the Board of Creative Label Company, a label printing
company, a post he has held since 1969.
Mr. King has served the Company as a director since 1959 and as its Chairman
since November of 1990. He is a member of the Audit, Compensation, and Executive
Committees. The term of office as a director for which he is nominated will
expire with the annual meeting of shareholders in 2000.
ELLIOT B. ROSS
AGE 50
Prior to joining the Company as its Executive Vice President and Chief Operating
Officer in 1994, Mr. Ross was the co-chairman of Inverness Partners, a venture
capital investment firm founded in 1988 to acquire and improve operations of
mid-sized manufacturing and distribution businesses. He was also co-chairman of
Inverness Casting Group, a die casting supplier to the automotive, furniture and
appliance industries. Prior to founding Inverness, Mr. Ross spent 14 years as a
member and partner in the Cleveland office of McKinsey & Company. He was the
leader of McKinsey's worldwide Marketing Practice from 1984 to 1987.
Mr. Ross has served as a director since January, 1995. The term of office for
which he is nominated will expire with the annual meeting of shareholders in
2000.
INCUMBENT DIRECTORS
GEORGE M. HUMPHREY, II
AGE 54
Mr. Humphrey is President and a principal of Extrudex, L.P., a privately held
thermo-plastic custom extruder. Prior to joining Extrudex, Mr. Humphrey was
Chairman and a principal owner of Philips Container Co., a privately held
plastic injection molder of pails used as containers for industrial and consumer
products.
Mr. Humphrey has served the Company as a director since January, 1989 and is a
member of the Audit and Compensation Committees, and the Committee on Directors,
of which he is Chairman. His current term of office as a director will expire
with the annual meeting of shareholders in 1999.
MARY ANN JORGENSON
AGE 55
Ms. Jorgenson is a partner and head of the corporate practice in the law firm of
Squire, Sanders & Dempsey L.L.P., and has been associated with that firm since
1975. She is a director of the general partner of Cedar Fair, L.P., the owner of
four amusement parks in Ohio, Minnesota, Missouri and Pennsylvania. She is also
a director of S 2 Golf Inc., a manufacturer and distributor of golf clubs and
bags, and a director of Continental Business Enterprises, Inc., an Ohio-based
metal stamping company.
Ms. Jorgenson has served as Secretary of the Company since 1989, as a director
since January, 1993, and is a member of the Committee on Directors. Her current
term of office as a director will expire with the annual meeting of shareholders
in 1999.
3
<PAGE> 5
THOMAS B. WALDIN
AGE 54
Mr. Waldin was appointed Chief Executive Officer of the Company in October, 1990
and was elected President of the Company in January, 1991. Since 1977 he has
been active as an investor in and a director of a number of small businesses. He
retired in 1987 as Chief Operating Officer of USG Interiors, Inc. and Chief
Executive Officer of Donn, Inc. The former is a unit of USG Corporation, a
worldwide manufacturer and distributor of building products, created in
connection with the acquisition of Donn, Inc. in 1986.
Mr. Waldin has served as a director since January, 1991 and is a member of the
Executive Committee, of which he is Chairman. His current term of office as a
director will expire with the annual meeting of shareholders in 1999.
RETIRING DIRECTOR
CHARLES W. W. HORNER
AGE 70
From 1973 until his retirement in 1987, Mr. Horner held the office of Assistant
Controller of Reliance Electric Company, a manufacturer of industrial motors and
telecommunications products.
Mr. Horner has served the Company as a director since 1977 and is a member of
the Audit Committee, of which he is Chairman. His current term of office as a
director will expire with the annual meeting of shareholders in 1997.
4
<PAGE> 6
DIRECTORS' COMMITTEES, MEETINGS AND FEES
At its meeting following the Annual Meeting of shareholders, the Board of
Directors has customarily appointed from among its membership an Audit
Committee, a Compensation Committee, an Executive Committee, and a Committee on
Directors which serve until the next annual meeting.
The Audit Committee consists of three directors, none of whom is an officer or
employee of the Company or its subsidiaries. The committee consists of Mr.
Horner, Chairman, Mr. Humphrey, and Mr. King. The Audit Committee receives the
report of the Company's independent auditors, and provides the link between the
Chief Financial Officer and the controllers of the Company's subsidiaries, the
auditors and the Board of Directors. The Audit Committee met three times in
fiscal 1996.
The Compensation Committee consists of three directors, none of whom is an
officer or employee of the Company or its subsidiaries. The committee consists
of Mr. Harnett, Chairman, Mr. Humphrey, and Mr. King. The Compensation Committee
has authority to recommend, approve and, pursuant to specific mandate from the
Board of Directors, implement its recommendations on all matters relating to
direct and indirect compensation of officers and employees of the Company and
its subsidiaries. The Compensation Committee met three times in fiscal 1996.
The Executive Committee consists of three directors, one of whom, its Chairman,
is an officer of the Company. The committee consists of Mr. Waldin, Chairman,
Mr. Harnett, and Mr. King. The Executive Committee is empowered to exercise all
authority of the Board of Directors between meetings of that body, subject to
report, with the exception of the declaration of dividends, appointment or
election of officers and determination of their compensation, and the filling of
vacancies on the Board or any Committee. The Executive Committee did not meet in
fiscal 1996.
The Committee on Directors consists of three directors, Mr. Humphrey, Chairman,
Mr. Harnett, and Ms. Jorgenson, Secretary of the Company. The Committee on
Directors has authority to recommend director nominees to the Board and to
recommend director policies including terms of office, retirement and
compensation. The Committee on Directors held several informal meetings by
telephone in 1996.
The Board of Directors of the Company and its four committees held a total of
eleven meetings during fiscal 1996 of which five were meetings of the Board of
Directors. All of the directors attended at least 75% of the meetings of the
Board of Directors and committees of which they were members.
Directors who are not employees of the Company or its subsidiaries have been
paid a fee of $750 for each meeting of the Board or Committee attended, plus out
of pocket expenses. Chairmen are paid $1,000 for attendance at meetings of their
Committees. In addition, such non-employee directors are paid an annual retainer
fee of $15,000 without regard to attendance. Mr. King was paid $12,000 in the
last fiscal year for his services as Chairman of the Board, in addition to fees
paid him as director.
Pursuant to the Essef Corporation Deferred Compensation Plan for Directors, each
director has the option to defer receipt, and therefore the recognition of
income for federal income tax purposes, of all or a portion of his or her annual
retainer and meeting fees payable by the Company to the director for his or her
services as a director.
5
<PAGE> 7
EXECUTIVE COMPENSATION
The following table sets forth information relating to the annual and long term
compensation for the fiscal years ended September 30, 1996, 1995 and 1994,
respectively, for the named executive officers of the Company.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
------------------------------------------- ----------------------------------
OTHER RESTRICTED ALL OTHER(1)
NAME AND FISCAL COMPEN- STOCK OPTIONS COMPEN-
PRINCIPAL POSITION YEAR SALARY($) BONUS($) SATION($) AWARDS($) (#) SATION($)
<S> <C> <C> <C> <C> <C> <C> <C>
Thomas B. Waldin 1996 220,480 44,540 -0- -0- -0- 6,615
President and Chief 1995 218,500 -0- -0- -0- -0- 4,500
Executive Officer 1994 201,500 73,385 -0- -0- 8,396 6,339
Elliot B. Ross 1996 260,000 52,560 -0- -0- -0- 11,670
Executive Vice 1995 257,690 -0- -0- -0- -0- 10,947
President and Chief 1994 168,260 84,000 -0- -0- 250,000 -0-
Operating Officer
Gerald C. Hornick 1996 139,000 54,700 -0- -0- 1,284 8,680
Vice President and 1995 132,300 9,340 -0- -0- -0- 9,684
Assistant Treasurer 1994 119,300 69,200 -0- -0- 4,198 8,622
Douglas J. Brittelle 1996 200,000 27,197 -0- -0- 1,284 13,620
President 1995 146,150 42,400 -0- -0- 40,000 -0-
Pac-Fab, Inc.
Stuart D. Neidus 1996 16,315 -0- -0- -0- 125,000 -0-
Executive Vice
President and Chief
Financial Officer
<FN>
(1) Includes for each named executive officer: (a) matching contributions for
fiscal year 1996 under the Company's 401(k) Profit Sharing Plan (b)amounts
paid by the Company on the Executive's behalf into the Company's defined
contribution Retirement Plan and Trust.
</TABLE>
6
<PAGE> 8
OPTION GRANTS
Shown below is information on grants of stock options during the fiscal year
ended September 30, 1996 to the named executive officers pursuant to the
Company's 1987 Employees' Stock Option Plan and an employment agreement between
the Company and its Chief Financial Officer
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
PERCENTAGE
OF TOTAL POTENTIAL REALIZABLE
NUMBER OPTIONS EXERCISE VALUE AT ASSUMED
OPTION GRANTED TO OR BASE ANNUAL RATES OF STOCK PRICE
SHARES EMPLOYEES IN PRICE EXPIRATION APPRECIATION FOR OPTION TERM (1)
NAME GRANTED FISCAL YEAR (PER SHARE) DATE --------------------------------
- ---- ------- ----------- ----------- ---------- 5% 10%
-- ---
<S> <C> <C> <C> <C> <C> <C>
Thomas B. Waldin -0- -- -- -- $ -- $ --
President and Chief
Executive Officer
Elliot B. Ross -0- -- -- -- $ -- $ --
Executive Vice President
and Chief Operating Officer
Gerald C. Hornick 1,284 .8% $17.50 11/17/06 $ 14,130 $ 35,811
Vice President and
Assistant Treasurer
Douglas J. Brittelle 1,284 .8% $17.50 11/17/06 $ 14,130 $ 35,811
President - Pac-Fab, Inc.
Stuart D. Neidus 125,000 80.1% $17.50 09/03/06 $1,375,700 $3,486,310
Executive Vice President
and Chief Financial Officer
<FN>
____________
FOOTNOTE:
(1) Based on the closing price of the common stock on the NASDAQ National Market System on September 30, 1996 of $17.50.
</TABLE>
7
<PAGE> 9
<TABLE>
The following table provides information relating to aggregate stock option
exercises during the last fiscal year and fiscal year-end stock option values
for the named executive officers:
OPTION EXERCISES AND YEAR-END VALUE TABLE
Aggregated Option Exercises in Last Fiscal Year and Year-End Option Value
<CAPTION>
NUMBER OF NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
ACQUIRED ON VALUE OPTIONS AT FY END THE-MONEY OPTIONS AT FY END(1)
NAME EXERCISE(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- -------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C> <C>
Thomas B. Waldin -0- $ -0- 978,097 2,099 $15,069,198 $ 4,198
Elliot B. Ross -0- $ -0- 40,000 210,000 $ 47,000 $ 246,750
Gerald C. Hornick -0- $ -0- 10,317 2,333 $ 97,612 $ 1,049
Douglas J. Brittelle -0- $ -0- 3,000 38,284 $ 3,525 $ 43,475
Stuart D. Neidus -0- $ -0- -0- 125,000 $ -0- $ -0-
<FN>
____________
Footnote:
(1) Based on the closing price of the common stock on the NASDAQ National Market System on September 30, 1996 of $17.50.
</TABLE>
8
<PAGE> 10
EMPLOYMENT AGREEMENTS
The Company is party to employment agreements with four of the named executive
officers. Set forth below is a brief description of each agreement.
Thomas B. Waldin and the Company are parties to an employment agreement which
initially covered a two year period expiring on October 26, 1992 and was
subsequently extended for additional one year periods until its amendment in
1994. The amended agreement expired on September 30, 1996 and was subsequently
extended according to its terms for a one year period. For a description of the
compensation terms of the employment agreement see "Report of Compensation
Committee on Executive Compensation."
Under the employment agreement, the Company granted Thomas B. Waldin
nonstatutory stock options to purchase up to 971,800 Common Shares of the
Company. The exercise price of the options, determined pursuant to a formula, is
$2.00 per share. At the date of the grant of the options, the closing bid for
the shares as quoted by NASDAQ was $2.25. All of the options are vested and
exercisable.
In connection with shares acquired by Mr. Waldin pursuant to the options, Mr.
Waldin may request under certain circumstances that such shares be registered
under the Securities Act of 1933 for the purpose of public distribution. If the
Company elects not to proceed with such a registration, Mr. Waldin may require
the Company to purchase either his shares at a price equal to 95% of the market
value or his options at a purchase price equal to 90% of the price of the shares
underlying the options less the exercise price.
Elliot B. Ross and the Company are parties to an employment agreement which
initially covered a two year period expiring on January 31, 1996. The agreement
was subsequently extended for an additional one year period according to its
terms. As compensation for his service as Executive Vice President and Chief
Operating Officer, Mr. Ross receives an annual base salary of $260,000, and
performance based bonuses targeted at 60% of Mr Ross's annual base salary in
each year. In addition, Mr. Ross was granted initial options, vesting as of
commencement of the agreement, to purchase 100,000 shares of the Company's
common stock at $16.325 per share. Performance options to purchase an additional
150,000 shares were also granted with vesting and exercise terms based on target
earnings per share.
Douglas J. Brittelle and the Company are parties to an employment agreement
which covers a two year period expiring on January 3, 1997 unless terminated or
extended according to its terms. As compensation for his service as President of
Pac-Fab, Inc., a wholly owned subsidiary of the Company, Mr. Brittelle receives
an annual base salary of $200,000 and performance based bonuses targeted at 55%
of Mr. Brittelle's annual base salary. In addition, Mr. Brittelle was granted
initial options, vesting as of the commencement date of the agreement, to
purchase 15,000 shares of the Company's common stock at $16.325 per share.
Performance options to purchase an additional 25,000 shares were also granted
with vesting and exercise terms based on target earnings per share.
Stuart D. Neidus and the Company are parties to an employment agreement which
covers a two year period expiring on September 30, 1998 unless terminated or
extended according to its terms. As compensation for his service as Executive
Vice President and Chief Financial Officer, Mr. Neidus receives an annual base
salary of $200,000, a first year guaranteed bonus of $50,000 and performance
based bonuses targeted at 50% of Mr. Neidus's annual base salary. In addition,
Mr. Neidus was granted initial options, vesting as of the commencement date of
the agreement, to purchase 50,000 shares of the Company's common stock at $17.50
per share. Performance options to purchase an additional 75,000 shares were also
granted with vesting and exercise terms based on target share prices.
9
<PAGE> 11
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee establishes compensation for the executive officers
of the Company and its subsidiaries. In discharging its function, the Committee
seeks to harmonize three objectives. First, compensation levels are designed to
be sufficiently competitive to attract and retain highly qualified management
personnel. Second, recognition is given to the achievement of annual financial,
operational and strategic objectives. Finally, it is the Company's objective to
continue to align pay and performance for the Company's executives with the
longer-term goal of enhancing shareholder value. To implement these objectives,
the compensation program for executive officers consists of base salary, annual
cash incentives and stock option awards.
Base salaries are determined in the first instance by the evaluation of the
executive officer's responsibility and by comparison to similarly situated
executives at other firms (not necessarily all of the companies included in the
peer group established for the purpose of comparing shareholder returns) to
ensure that the Company's salaries are competitive.
Annual cash incentives are used to recognize the achievement of annual
objectives in line with the Company's long-term goals. The annual objectives are
based on specific and quantifiable financial and operational performance
criteria which are set at the beginning of each fiscal year by the Committee.
Bonuses are primarily based on the performance of specific business units in
which the executive works, except those of the Chief Executive Officer, the
Chief Operating Officer and the Chief Financial Officer, whose bonuses are based
on a formula relating to the earnings per share of the Company.
Stock option awards are used primarily as a means for building shareholder value
over the long term. Option awards are generally contingent on the Company's
achievement of certain levels of annual pre-tax profits. In fiscal 1996, 2,568
options to purchase the Company's common stock were granted to the two named
executive officers participating in the 1996 stock option program. Additionally,
125,000 options to purchase the Company's common stock were granted to the new
Chief Financial Officer as an inducement to accept employment with the Company
and as an incentive to meet certain performance targets.
In fiscal 1995, the Committee also undertook a review of the Company's executive
salary structure and incentive programs. The objective of the review was to
ensure that the compensation structure was in alignment with the Company's goal
of enhancing shareholder value. A multidiscipline task force, guided by senior
operating executives, with the assistance of an independent management
consulting firm engaged by the Committee, conducted the review under the
Committee's overall direction. Based on the findings of the review, the
Committee adopted a salary structure that was applied in 1996 and may be applied
in coming years, which would peg executive salaries at the median (50th
percentile) for peer companies. The Committee also authorized an annual cash
incentives plan rewarding key employees for achieving specific objectives in
line with the Company's long-term goals. Based on targeted annual improvements
to earnings, the resulting bonuses would bring the total cash compensation of
executives to the 75th percentile of peer firms. The Committee has also
considered long-term incentive programs and recommended for board and
shareholder approval the Performance Share Plan described below.
CHIEF EXECUTIVE OFFICER'S COMPENSATION
For fiscal 1996, Mr. Waldin's compensation package was based on a review,
carried out in 1994, of his compensation package in connection with an amendment
and extension of his employment agreement. The Committee determined then that
his total cash compensation should be at the 75th percentile for compensation
10
<PAGE> 12
received by chief executive officers of similarly situated companies, adjusted
annually to reflect the percentage of time Mr. Waldin expected to devote to the
Company's business during the ensuing year.
Mr. Waldin's total cash compensation consisted of his base annual salary and
performance based bonuses targeted at 60% of Mr. Waldin's annual salary based on
the Company's annual earnings per share. For fiscal 1996, the base compensation
was not adjusted from the 1995 level of $220,480 and a bonus of $44,540 was
earned.
THE COMPENSATION COMMITTEE
Gordon D. Harnett, Chairman
Ralph T. King
George M. Humphrey II
11
<PAGE> 13
PROPOSAL TO APPROVE THE ESSEF PERFORMANCE SHARE PLAN
At its November 18, 1996 meeting, The Board of Directors adopted, subject to
shareholder approval, the Company's Performance Share Plan (the "Plan"). The
Board believes that the Plan provides a balanced approach to rewarding managers
for creating economic value over the long term, with their reward also tightly
linked to total return to shareholders as reflected in stock price appreciation.
The following is a summary of the material features of the Plan. The full
text of the Plan is attached as Appendix A, and the following summary is
qualified in its entirety by reference to it.
Purpose. The purpose of the Plan is to attract, retain and motivate key
employees of the Company by offering incentive compensation tied to the
performance of the Company and its stock price and, therefore, more closely
aligned with the interests of shareholders.
Administration. The Plan will be administered by the Compensation Committee,
composed of not fewer than two directors appointed by the Board. Each member of
the Compensation Committee shall, at all times during their service as such, be
a "disinterested person" within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934, and an "outside director" within the meaning of Treasury
Regulation Section 1.162-27(e)(3) promulgated under the Internal Revenue Code of
1986 as amended. The Compensation Committee shall have full power and authority
to construe and interpret the Plan, establish and apply rules and procedures for
administering the Plan, and grant awards under the Plan.
Term. The plan shall become effective as of October 1, 1996 subject to its
approval by Company shareholders.
Eligibility. Those persons eligible to participate in the Plan shall include
officers and other key employees of the Company and its subsidiaries, other than
those individuals who may be designated by the Compensation Committee as
ineligible. Members of the Compensation Committee shall not be eligible to
participate in the Plan.
Awards. Based on the attainment of certain performance goals over the
performance period a participant will be awarded Performance Share Units. The
amount of any award payment will be the excess of the common share price of the
Company at the end of the performance period over the common share price at the
beginning of the performance period times the number of Performance Share Units
awarded. The terms, conditions and provisions of an award shall be set forth in
a written Award Agreement approved by the Committee and delivered or made
available to the Plan participant as soon as is practicable following the date
of the award.
Payments under the Plan. No payments with respect to Performance Share Units
granted under the Plan shall be made prior to the end of the performance period.
Award payments may be made wholly in common shares of the Company, wholly in
cash, or a combination of common shares and cash, all at the discretion of the
Compensation Committee. The maximum number of shares to be awarded under the
Plan shall not exceed an aggregate of two hundred thousand (200,000).
RECOMMENDATION AND VOTE
The affirmative vote of the holders of a majority of the common shares of the
Company present and voting at the Annual Meeting is required for approval of the
Essef Performance Share Plan.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
ESSEF PERFORMANCE SHARE PLAN.
12
<PAGE> 14
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
cumulative shareholder return with the cumulative total return of the Nasdaq
Stock Market (US Companies) composite and a peer group of companies selected on
a line-of-business basis:
COMPARISON OF FIVE YEAR-CUMULATIVE TOTAL RETURNS
Prepared by the Center for Research in Security Prices
Produced on 12/17/96 including data to 09/30/96
[Graph inserted here]
<TABLE>
<CAPTION>
Index Description 09/30/91 09/29/92 09/28/93 09/30/94 09/30/95 09/30/96
----------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Essef Corporation 100.0 120.0 117.5 147.5 178.8 175.0
CRSP Index for Nasdaq Stock Market (US Companies) 100.0 112.1 146.8 148.0 204.4 242.6
Self-Determined Peer Group 100.0 95.7 88.9 95.0 112.8 124.7
Companies in the Self-Determined Peer Group
COMMERCIAL INTERTECH CORP CALGON CARBON CORP
DAVIS WATER & WASTE INDS INC GOULD PUMPS INC
IONICS INC OSMONICS INC
SYBRON CHEMICALS INC LESLIES POOLMART
<FN>
________________________
Notes:
A. The lines represent monthly index levels derived from compounded daily returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the previous trading day
C. If the monthly interval, based on the fiscal year-end, is not a trading day, the preceding trading day is used.
D. The index level for all series was set to 100.0 on 09/30/91.
E. Amtrol, Inc. which was previously included in the self determined peer group is not included in the current
year as it is no longer a publicly traded Company and as a result comparative information is no longer available.
F. Anthony Industries, Inc. which was previously included in the self determined peer group is not included in
the current year as it has divested operations in the Company's industry and as a result comparative information
is no longer applicable.
</TABLE>
13
<PAGE> 15
BENEFICIAL OWNERSHIP OF SHARES
The following tables display, as of November 22, 1996, the name and address of
each person who is known to the Company to own beneficially more than 5% of the
Company's voting securities (a single class of Common Shares) as well as the
number of Common Shares beneficially owned by each director and director nominee
and the directors, director nominees and officers of the Company as a group.
FIVE PERCENT BENEFICIAL OWNERSHIP
<TABLE>
<CAPTION>
Common Shares Beneficially Owned
--------------------------------
Name Number Percent
---- ------ -------
<S> <C> <C>
Keybank National Association, Trustee (1)(2)(3)(8) 1,003,760 20.90%
127 Public Square
Cleveland, Ohio 44114
The Jane B. King Irrevocable (4) 465,000 9.68%
Trust dated July 19, 1979,
Ralph T. King and Alexander
S. Taylor, Trustees
30050 Chagrin Boulevard, Suite 150
Pepper Pike, Ohio 44124
Thomas B. Waldin (5) 1,008,097 17.44%
c/o ESSEF Corporation
220 Park Drive
Chardon, Ohio 44024
Fenimore Asset Management 489,050 10.18%
118 North Grand Street
Cobleskill, New York 12043
C. Peter Darby 245,824 5.12%
4938 San Jacinto Circle
Fallbrook, California
James A. Horner Trust (6)(7)(8) 288,168 6.00%
James A. Horner, Jr., Douglas M. Horner
and Mary Ann Jorgensen, Trustees
4900 Key Tower
Cleveland, Ohio 44114
<FN>
(1) Keybank National Association exercises (a) sole voting and shared
dispositive power over 915,640 shares; and (b) shared voting and
dispositive power over 54,390 shares held by a trust of which Keybank
National Association is one of three trustees and noted in 2(a) and
8(b) below.
14
<PAGE> 16
(2) James H. Dempsey, Jr. shares dispositive power of 915,640 shares as
one of three trust advisors noted in 1(a) above, (3) and (8)(d)
below, and is also beneficial owner of: (a) 54,390 shares held by a
trust of which he is one of three trustees with shared voting and
dispositive power and noted in 1(b) above and 8(b) below; and (b)
33,400 shares held by a trust of which he is a co-trustee with shared
voting and dispositive power and noted in note 8(c) below.
Mr. Dempsey disclaims the benefits of ownership of any of the
aforementioned shares. Mr. Dempsey is a partner in the law firm of
Squire, Sanders & Dempsey L.L.P., which the Company retains as its
outside general counsel.
(3) James P. Oliver shares dispositive power of 915,640 shares as one of
three trust advisors noted in 1(a) and (2) above and note 8(d) below.
Mr Oliver disclaims the benefits of ownership of any of the
aforementioned shares. Mr. Oliver is a partner in the law firm of
Squire, Sanders & Dempsey L.L.P., which the Company retains as its
outside general counsel.
(4) Ralph T. King shares voting and dispositive power as a co-trustee and
is also beneficial owner of: (a) 59,900 shares owned by him directly;
(b) 11,180 shares held by a foundation of which he is a trustee with
shared dispositive power.
(5) Thomas B. Waldin is the beneficial owner of 1,008,097 shares owned by
or benefitting him, his wife or child directly (978,097 shares
consist of options to purchase which are exercisable within 60 days
of September 30, 1996).
(6) James A. Horner, Jr. shares voting and dispositive power as
co-trustee and is also beneficial owner of: (a) 313,046 shares owned
by or benefitting him or his children directly or indirectly; and
(b) 75,000 shares held by trusts for the benefit of his children,
nieces and nephews, of which he is one of three trustees sharing
voting and dispositive power, and noted at (7)(b) and (8)(e) below.
(7) Douglas M. Horner shares voting and dispositive power as co-trustee
and is also beneficial owner of: (a) 158,240 shares owned by or
benefitting him or his children directly or indirectly (1,500 shares
consist of options to purchase which are exercisable within 60
days of this statement); and (b) 75,000 shares held by trusts for the
benefit of his children, nieces and nephews, of which he is one of
three trustees sharing voting and dispositive power, and noted at
(6)(b) above and (8)(e) below.
(8) Mary Ann Jorgenson shares voting and dispositive power as co-trustee
and is also beneficial owner of: (a) 34,600 shares held by six trusts
of which she is the sole trustee with sole voting and dispositive
power; (b) 54,390 shares held by a trust of which she is one of three
trustees with shared voting and dispositive power and noted in notes
1(b) and 2(a) above; (c) 33,400 shares held by a trust of which she
is a co-trustee with shared voting and dispositive power
and noted in note 2(b) above; (d) 915,640 shares held by two trusts
over which she has shared dispositive power as one of three trust
advisors, and noted in notes 1(a),(2) and (3) above; and (e) 75,000
shares held by trusts of which she is one of three trustees with
shared voting and dispositive power and noted in (6)(b) and (7)(b)
above. Ms. Jorgenson disclaims the benefits of ownership of any of
the aforementioned shares. Ms. Jorgenson serves as Secretary of the
Company and is a partner in the law firm of Squire, Sanders & Dempsey
L.L.P., which the Company retains as its outside general counsel.
</TABLE>
15
<PAGE> 17
BENEFICIAL OWNERSHIP OF SHARES
BY DIRECTORS AND NAMED EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
Common Shares Beneficially Owned
--------------------------------
Name Number Percent
---- ------ -------
<S> <C> <C>
Gordon D. Harnett (1) 9,150 *
Charles W. W. Horner (1) 12,931 *
George M. Humphrey, II (1) 13,967 *
Mary Ann Jorgenson (2) 1,401,195 29.18%
Ralph T. King (3) 536,080 11.16%
Elliot B. Ross (4) 45,000 *
Thomas B. Waldin (4)(5) 1,008,097 17.44%
Douglas J. Brittelle (4) 3,000 *
Gerald C. Hornick(4)(6) 20,650 *
Stuart D. Neidus 3,000 *
All directors and named executive 3,053,070 52.81%
officers as a group (10 persons)
<FN>
* Less than one percent.
(1) Includes shares held by trustee of the Essef Corporation Deferred
Compensation Plan for Directors as of September 30, 1996.
(2) See Note (8) under Beneficial Ownership of Shares.
(3) See Note (4) under Beneficial Ownership of Shares.
(4) Includes shares underlying options which are exercisable within 60
days of September 30, 1996 as follows:
Thomas B. Waldin 978,097
Elliot B. Ross 40,000
Gerald C. Hornick 10,317
Douglas J. Brittelle 3,000
All directors, director nominees and officers as a group (10 persons)
1,031,414.
(5) See Note (5) under Beneficial Ownership of Shares.
(6) Includes shares held by successor trustee of PAYSOP Plan, as of
September 30, 1996, over which individual beneficiary has sole
voting power.
</TABLE>
16
<PAGE> 18
INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche LLP has acted as independent auditors of the Company for the
fiscal year ended September 30, 1996. Representatives of Deloitte & Touche LLP
will be present at the meeting and will be given an opportunity to make a
statement if they desire to do so as well as to respond to appropriate
questions.
SHAREHOLDER PROPOSALS
Proposals of shareholders for the fiscal 1997 Annual Meeting of Shareholders to
be held in January, 1998 must be received by the Secretary of the Company no
later than August 19, 1997 to be included in the proxy statement and form of
proxy for that meeting.
SOLICITATION EXPENSES
The Company will bear the costs of proxy solicitation including the preparation
and mailing of this statement and accompanying material. Proxies will be
solicited principally by mail, by employees and agents of the Company and its
subsidiaries. No employee of the Company who assists in the solicitation will be
paid for doing so beyond his regular compensation.
The Company will request brokers, banks and other custodians or fiduciaries
holding shares in their names or in the names of nominees to forward copies of
proxy solicitation materials to the beneficial owners of the shares held by them
and, upon request, will reimburse them for the reasonable expenses incurred in
forwarding the material to their principals and processing responses.
VOTE TABULATION POLICIES AND PROCEDURES
Shares voted by proxy on the form provided by management with this statement
will be tabulated according to the tenor thereof. Shares voted by omnibus proxy
or other proxy forms by brokers, nominees or agents will be tabulated according
to instructions and limitations accompanying the form of proxy. All shares for
which valid proxies are returned will be counted as present at the meeting for
determination of a quorum (a majority of shares entitled to vote at the Annual
Meeting), but the votes of shares represented by omnibus or similar proxy will
be tabulated only to the extent the vote is specifically instructed.
OTHER BUSINESS
The Company is not aware of any business which may be presented for action at
the meeting other than that set forth herein. Should any such business be
presented for a vote of the shareholders, the enclosed form of proxy authorizes
the persons appointed to vote thereon in accordance with their best judgment.
By Order of the Board of Directors
/s/ Mary Ann Jorgenson
Mary Ann Jorgenson
Secretary
December 18, 1996
17
<PAGE> 19
APPENDIX A
ESSEF CORPORATION
PERFORMANCE SHARE PLAN
1. PURPOSE.
The purpose of the ESSEF CORPORATION PERFORMANCE SHARE PLAN is to
attract, retain and motivate key employees of Essef Corporation and its
Subsidiaries by offering incentive compensation tied to the growth of
Essef Corporation and, therefore, more closely aligned with the interests
of shareholders.
2. DEFINITIONS.
As used in this Plan, the following capitalized words shall have the
meanings indicated below:
"ADMINISTRATOR" means the individual or individuals to whom the
Committee delegates authority under the Plan in accordance with Section
4(b).
"AWARD" means an award of Performance Share Units to a Participant in
accordance with Section 6.
"AWARD PAYMENT" means the payment to a Participant in accordance with
Section 7.
"AWARD AGREEMENT" means a written agreement between the Company or one
of its Subsidiaries which is approved in accordance with Section 4, which
is executed by the Participant and by an officer on behalf of the Company
and which sets forth the terms and conditions of the Award to the
Participant.
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended, and the
applicable rulings and regulations thereunder.
"COMMITTEE" means the Compensation Committee of the Board, any
successor committee thereto or any other committee appointed by the Board
to administer the Plan. The Committee shall consist of at least two
individuals, each of whom is both a "disinterested person within the
meaning of Rule 16b-3 under the Exchange Act and an "outside director"
within the meaning of Treasury Regulation Section 1.162-27(e)(3)
promulgated under the Code and who shall serve at the pleasure of the
Board.
"COMPANY" means Essef Corporation, an Ohio corporation.
"DATE OF THE AWARD" means the effective date of an Award as specified
by the Committee and set forth in the applicable Award Agreement.
"DEFERRED COMPENSATION PLAN" means the Essef Corporation Deferred
Compensation Plan, as the same may be amended from time to time.
"ELIGIBLE INDIVIDUALS" means the individuals described in Section 5
who are eligible for Awards under the Plan.
"ENDING VALUE" means the fair market value of Shares as of the end of
the Performance Period, as determined in accordance with a valuation
methodology approved by the Committee. In the Committee's
18
<PAGE> 20
discretion, such fair market value of Shares may be determined by the
average of the market's bid price and ask price for such Shares for the
twenty (20) trading days prior to the last day of the Performance
Period.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the applicable rulings and regulations thereunder.
"INITIAL VALUE" means the fair market value of the Shares as of the
beginning of the Performance Period, as determined in accordance with a
valuation methodology approved by the Committee.
"PARTICIPANT" means an individual to whom an Award has been made.
"PERFORMANCE GOALS" means one or more goals established by the
Committee for a Performance Period based upon performance criteria as set
forth in the Award Agreement.
"PERFORMANCE PERIOD" means the time periods set forth in Section 3 and
as subsequently established by the Committee with respect to which
Performance Goals are established and measured.
"PERFORMANCE SHARE UNITS" means the Performance Share Units awarded to
Participants pursuant to this Plan, each of which shall be deemed the
equivalent of one (1) Share.
"PLAN" means this ESSEF CORPORATION PERFORMANCE SHARE PLAN, as the
same may be amended from time to time in accordance with Section 10
below.
"SECTION 162(m) PARTICIPANT" means, for a given fiscal year of the
Company, a Participant whose compensation for such fiscal year may be
subject to the limit on deductible compensation imposed by Section 162(m)
of the Code.
"SHARES" means the common stock, without par value, of the Company.
"SUBSIDIARY" means (i) a corporation or other entity with respect to
which the Company, directly or indirectly, has the power, whether through
the ownership of voting securities, by contract or otherwise, to elect at
least a majority of the members of such corporation's board of directors
or analogous governing body, or (ii) any other corporation or other
entity in which the Company, directly or indirectly, has an equity or
similar interest and which the Committee designates as a Subsidiary for
purposes of the Plan.
"TARGETED PERFORMANCE SHARE UNITS" means with respect to a Performance
Period, the number of Performance Share Units that may be awarded
dependent upon achievement of Participants' Performance Goals.
"TERM OF THE PLAN" means the period established by the Committee.
3. EFFECTIVE DATE AND PERFORMANCE PERIODS.
The Plan shall become effective as of October 1, 1996, subject to its
approval by the shareholders of the Company. The initial Performance
Period shall commence on October 1, 1996, and end on September 30, 1998.
Subsequent Performance Periods may be established by the Committee from
time to time.
4. ADMINISTRATION.
(a) The Plan shall be administered by the Committee, which shall have
full power and authority, subject to the express provisions
hereof, (i) to select Participants from among the Eligible
Individuals, (ii) to establish Targeted Performance Share Units
and Performance Goals, (iii) to make Awards and Award
19
<PAGE> 21
Payments in accordance with the Plan, (iv) to determine the terms
and conditions of each Award and Award Payment, (v) to determine
the terms and conditions of each Award to be set forth in an Award
Agreement and to specify and approve the provisions of the Award
Agreements delivered to Participants in connection with their
Awards, (vi) to construe and interpret the Plan and any Award
Agreement delivered under the Plan, (vii) to prescribe, amend and
rescind rules and procedures relating to the Plan, (viii) to
determine the form of any Award Payments to Participants under the
Plan including, without limitation, payments in the form of cash
only, Shares only, or any combination of cash and Shares; and (ix)
to make all other determinations and to formulate such procedures
as may be necessary or advisable for the administration of the
Plan.
(b) The Committee, may, but need not, from time to time delegate some
or all of its authority under the Plan to an Administrator
consisting of one or more members of the Committee or of one or
more officers of the Company; provided, however, that the
Committee may not delegate its authority (i) to establish Targeted
Performance Share Units, Performance Goals, or make Awards to
Eligible Individuals (A) who are, during the Performance Period,
subject to the reporting rules under Section 16(a) of the Exchange
Act, (B) who are Section 162(m) Participants or (C) who are
officers of the Company and are delegated authority by the
Committee hereunder, or (ii) under Sections 4(c) and 10(f) of the
Plan. Any delegation hereunder shall be subject to the
restrictions and limits that the Committee specifies at the time
of such delegation or thereafter. Nothing in the Plan shall be
construed as obligating the Committee to delegate authority to an
Administrator, and the Committee may at any time rescind the
authority delegated to an Administrator appointed hereunder or
appoint a new Administrator. At all times, the Administrator
appointed under this Section 4(b) shall serve in such capacity at
the pleasure of the Committee. Any action undertaken by the
Administrator in accordance with the Committee's delegation of
authority shall have the same force and effect as if undertaken
directly by the Committee, and any reference in the Plan to the
Committee shall, to the extent consistent with the terms and
limitations of such delegation, be deemed to include a reference
to the Administrator.
(c) The Committee shall have full power and authority, subject to the
express provisions hereof, to construe and interpret the Plan.
(d) All determinations by the Committee in carrying out and
administering the Plan and in construing and interpreting the Plan
shall be final, binding and conclusive for all purposes and upon
all persons interested herein. In the event of any disagreement
between the Committee and the Administrator, the Committee's
determination on such matter shall be final and binding on all
interested persons, including the Administrator.
(e) No member of the Committee or the Administrator shall be liable
for anything whatsoever in connection with the administration of
the Plan except as a result of such person's own willful
misconduct. Under no circumstances shall any member of the
Committee or the Administrator be liable for any act or omission
of any other member of the Committee or, in the case of members of
the Committee, the Administrator. In the performance of its
functions with respect to the Plan, the Committee and the
Administrator shall be entitled to rely upon information and
advice furnished by the Company's officers, the Company's
accountants, the Company's legal counsel and any other party the
Committee or the Administrator deems necessary or appropriate, and
no member of the Committee or the Administrator shall be liable
for any action taken or not taken in reliance upon any such
advice.
(f) The Committee may permit Participants to elect to defer receipt of
all or a portion of their Award
20
<PAGE> 22
Payments under administrative policies established pursuant to the
Deferred Compensation Plan.
5. ELIGIBILITY AND DETERMINATION OF TARGETED PERFORMANCE SHARE UNITS.
(a) Eligible Individuals shall include all officers and other key
employees of the Company and its Subsidiaries, other than those
individuals who may be designated by the Committee as ineligible.
Members of the Committee shall not be eligible to participate in
the Plan. An individual's status as an Administrator will not
affect his or her eligibility to participate in the Plan.
(b) For each Performance Period, the Committee shall determine and
establish the Targeted Performance Share Units and communicate to
Participants the performance criteria pertaining to such.
6. AWARDS.
(a) Awards under this Plan shall be (i) determined by the Committee
based upon the Targeted Performance Share Units and actual
performance in relation thereto, and (ii) granted to a Participant
in the form of Performance Share Units.
(b) A Participant shall have no right to receive payment pursuant to
Section 7 hereof for any part of his Performance Share Units, and
all of his Performance Share Units that are awarded under this
Plan during a Performance Period shall be forfeited, unless a
Participant remains in the employ of the Company or its
Subsidiaries at all times during such Performance Period. The
foregoing employment requirement shall not apply in the case of a
Participant's termination of employment during a Performance
Period due to death, disability or retirement pursuant to the
ESSEF CORPORATION EMPLOYEES' RETIREMENT PLAN. If a Participant's
employment is terminated prior to the end of a Performance Period,
on account of death, disability, or retirement pursuant to the
ESSEF CORPORATION EMPLOYEES' RETIREMENT PLAN, the amount of any
Award Payment, pursuant to Section 7 hereof, to such Participant
shall be multiplied by a fraction, the numerator of which is the
number of months employed by the Company and its subsidiaries
during such Performance Period and the denominator of which is the
total number of months in such Performance Period.
(c) The terms, conditions and provisions of an Award shall be set
forth in a written Award Agreement with the Participant as
approved by the Committee.
(d) In the event of any change in the outstanding Shares by reason of
any Share dividend or split, recapitalization, merger,
consolidation, spin-off reorganization, combination or exchange of
Shares, or other similar corporate change, then if the Committee
shall determine, in its sole discretion, that such change
equitably requires an adjustment in the Initial Value, such
adjustments shall be made, or directed to be made, by the
Committee and shall be conclusive and binding for all purposes of
the Plan.
7. AWARD PAYMENTS AND DEFERRALS.
(a) No Award Payment with respect to Performance Share Units shall be
made prior to the end of a Performance Period.
(b) Upon the expiration of a Performance Period, the Committee shall
determine the amount, if any, of a Participant's Award Payment.
The amount of any such Award Payment shall be determined by the
excess, if any, in Share price of the Ending Value over the
Initial Value times the number of Performance Share Units awarded.
The payment of any such Award Payment less any taxes, as
21
<PAGE> 23
appropriate, shall be made to Participants not later than thirty
(30) days after the Committee has determined that a Participant's
Performance Goals have been met.
(c) Award Payments may be made wholly in Shares or wholly in cash, or
partly in Shares and partly in cash, all at the discretion of the
Committee. However, the number of Shares paid to Participants as
Award Payments during the Term of the Plan shall not exceed a
total two hundred thousand (200,000) Shares.
(d) To the extent the Committee directs that an Award Payment be made
wholly or partly in Shares, the number of Shares shall be
determined by multiplying the Award Payment times the percentage
of such Award Payment to be paid in Shares divided by the Share
price. For purposes hereof, such Share price shall be determined
based upon the source of such Shares, which source shall be solely
at the discretion of the Company as follows: (i) for Shares
purchased in the market by the Company within thirty (30) days of
the Committee's determination, the actual cost to the Company of
such Shares; (ii) for Shares that are treasury shares of the
Company that have not been purchased by the Company within thirty
(30) days preceding the date of the Committee's determination, the
average of the market's bid price and ask price for such Shares
for the twenty (20) trading days prior to the date of the
Committee's determination; (iii) for Shares that are newly issued
by the Company, the average of the market's bid price and ask
price for the twenty (20) trading days prior to the date of the
Committee's determination; or (iv) for Shares the source of which
is any combination of (i), (ii), and (iii), the weighted average
of the amounts determined in such combination of (i), (ii), and
(iii).
(e) In accordance with the procedures specified by, and subject to the
approval of, the Committee, Participants shall have the
opportunity to defer all or a portion of an Award Payment under
the Deferred Compensation Plan. In the event a Participant has
elected to defer receipt of all or a portion of any such payment
beyond the time for payment specified in Section 7(b), such
deferred amount shall be accounted for and paid in accordance with
such deferral election and the Deferred Compensation Plan.
8. CERTAIN RESTRICTIONS.
(a) Prior to any Award Payment in the form of Shares pursuant to this
Plan, the Participant shall not have any rights as a Company
shareholder with respect to any Shares corresponding to such
Participant's Performance Share Units.
(b) Unless the Committee determines otherwise, no Award granted under
the Plan or any Award Payment shall be transferable other than by
last will and testament or by the laws of descent and
distribution; provided, however, that the Committee may, subject
to such terms and conditions as the Committee shall specify,
permit Participants to file beneficiary designations with the
Committee for transfers upon a Participant's death.
9. INVESTMENT REPRESENTATION.
Each Award and Award Payment shall be conditioned on the Participant
making any representations required in the applicable Award Agreement.
Each Award and Award Payment shall also be conditioned upon the making of
any filings and the receipt of any consents or authorizations required to
comply with, or required to be obtained under, applicable law.
22
<PAGE> 24
10. MISCELLANEOUS.
(a) As a condition to the making of any Award, any Award Payment or
the lapse of any restrictions pertaining thereto, the Company may
require the Participant to pay such sum to the Company as may be
necessary, in the Company's opinion, to discharge the Company's
obligations with respect to any taxes, assessments or other
governmental charges imposed on amounts received by a Participant
pursuant to the Plan. In accordance with the rules and procedures
established by the Committee and, in the discretion of the
Committee, such payment may be in the form of cash or other
property. In accordance with rules and procedures established by
the Committee, in satisfaction of such taxes, assessments or other
governmental charges the Company may, in the discretion of the
Committee, make available for delivery a lesser number of Shares
and/or cash in payment of an Award Payment or permit a Participant
to tender previously owned Shares to satisfy such withholding
obligation. At the discretion of the Committee, the Company may
deduct or withhold the amount of taxes, assessments or other
governmental charges from any Award Payment or distribution to a
Participant whether or not pursuant to the Plan.
(b) The Plan shall not give rise to any right on the part of any
Participant to continue in the employ of the Company or its
Subsidiaries.
(c) All expenses and costs in connection with the administration of
the Plan or issuance of Awards hereunder including, without
limitation, the Company's cost of acquisition of any Shares
distributed to Participants pursuant to an Award Payment, shall be
borne by the Company.
(d) the headings of sections herein are included solely for
convenience of reference and shall not affect the meaning of any
of the provisions of the Plan.
(e) The Plan and all rights hereunder shall be construed in accordance
with and governed by the laws of the State of Ohio.
(f) The Board or Committee may modify, amend, suspend or terminate the
Plan in whole or in part at any time; provided, however, that such
modification, amendment, suspension or termination shall not,
without a Participant's consent, affect adversely the rights of
such Participant with respect to any Award or Award Payment
previously made; and provided, further, that such modification,
amendment, suspension or termination shall not, without the
approval of the Company's shareholders:
(i) except as expressly provided in this Plan, increase the
total number of Shares paid to Participants as Award Payments
beyond two hundred thousand (200,000) Shares; or
(ii) otherwise materially increase the benefits accruing to
Participants under the Plan.
(g) The Company shall be under no obligation to segregate or reserve
any funds or other assets for purposes relating to the Plan and
the Participants shall not have any rights whatsoever in or with
respect to any funds or assets of the Company.
* * *
23
<PAGE> 25
ESSEF CORPORATION
PROXY SOLILCITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS - JANUARY 23, 1997
The undersigned hereby appoints Ralph T. King, Stuart D. Neidus and Mary Ann
Jorgenson, and each of them, attorneys and proxies to attend and represent the
undersigned at the Annual Meeting of Shareholders of ESSEF Corporation to be
held at the office of the corporation, 220 Park Drive, Chardon, Ohio on January
23, 1997 at 10:00 o'clock A.M. Eastern Standard Time and at all adjournments
thereof, with full power of substitution and full authority to vote all Common
Shares of ESSEF Corporation which the undersigned, if personally present, would
be entitled to vote:
1. FOR the election of each of the persons named below as a director of
the corporation to serve for a term expiring at the Annual Meeting of
Shareholders in the year shown opposite his name and until his
successor is elected, unless authority is withheld by X marked
opposite the nominee's name below:
James M. Biggar 2000 [ ] Authority withheld
Gordon D. Harnett 2000 [ ] Authority withheld
Ralph T. King 2000 [ ] Authority withheld
Elliot B. Ross 2000 [ ] Authority withheld
2. On the approval and adoption of the Essef Corporation Performance Share
Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. At their discretion, on the transaction of any othr business or matters
that may properly be brought before the meeting or any adjournments
thereof.
THIS PROXY WILL BE VOTED ACCORDING TO INSTRUCTIONS AS MARKED. UNLESS A
CONTRARY INSTRUCTION IS MARKED IT WILL BE VOTED FOR ALL NOMINEES AND PROPOSALS.
This proxy revokes and supersedes any earlier proxy covering the same shares.
________________________________
PLEASE SIGN EXACTLY AS YOUR NAME OR NAMES APPEAR HEREON INDICATING, WHEN
APPROPRIATE, COMPANY AND OFFICIAL POSITION OR REPRESENTATIVE CAPACITY.
IF SHARES ARE HELD IN JOINT NAMES BOTH PARTIES MUST SIGN.
DATE:______________, 199____
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY
IN THE ENVELOPE ENCLOSED.
