<PAGE>
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] 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
BW/IP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] 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:
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(2) Aggregate number of securities to which transaction applies:
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(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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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
BW/IP, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 6, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of BW/IP,
Inc. will be held at The Long Beach Hilton Hotel, Two World Trade Center, Long
Beach, California, on Tuesday, May 6, 1997, at 11:00 a.m. (Pacific Daylight
Savings Time), for the following purposes:
1. To elect eight directors to serve for the ensuing year;
2. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
The close of business on March 25, 1997, has been fixed by the Board of
Directors as the record date for determining the stockholders entitled to
notice of, and to vote at, the Annual Meeting.
You are cordially invited to attend the Annual Meeting. Whether or not you
plan to attend the Annual Meeting, you may ensure your representation by
completing, signing, dating and promptly returning the enclosed proxy card. A
return envelope, which requires no postage if mailed in the United States, has
been provided for your use. If you attend the Annual Meeting and inform the
Secretary of BW/IP, Inc. in writing that you wish to vote your shares in
person, your proxy will not be used.
By Order of the Board of Directors,
JOHN D. HANNESSON
Secretary
Long Beach, California
April 2, 1997
<PAGE>
BW/IP, INC.
200 OCEANGATE BOULEVARD, SUITE 900
LONG BEACH, CALIFORNIA 90802
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TUESDAY, MAY 6, 1997
This Proxy Statement is furnished in connection with the solicitation on
behalf of the Board of Directors of BW/IP, Inc. (the "Company") of proxies for
use at the Annual Meeting of Stockholders (the "Annual Meeting") to be held at
The Long Beach Hilton Hotel, Two World Trade Center, Long Beach, California,
on Tuesday, May 6, 1997, at 11:00 a.m. and at any adjournment thereof, for the
purposes set forth in the accompanying Notice of Annual Meeting of
Stockholders. This Proxy Statement and the accompanying proxy card are first
being mailed on or about April 2, 1997, to all stockholders of the Company.
Only holders of record of the Company's Common Stock, par value $.01 per
share (the "Common Stock"), at the close of business on March 25, 1997, will
be entitled to vote at the Annual Meeting. As of that date, there were
24,275,000 shares of Common Stock outstanding. Each share of Common Stock
entitles the holder to one vote. In accordance with Section 216(1) of the
General Corporation Law of the State of Delaware (the "DGCL") and Section 1.04
of the Company's Bylaws, a majority of the outstanding shares of Common Stock,
present in person or represented by proxy, will constitute a quorum for the
transaction of business at the Annual Meeting. Under applicable Delaware law,
abstentions and broker non-votes will be treated as shares that are present
and entitled to vote for the purpose of determining the presence of a quorum.
There is no cumulative voting. There are no other voting securities of the
Company outstanding. The 175,000 shares of Common Stock held in the Company's
treasury will not be voted.
If the accompanying proxy card is properly signed and returned to the
Company prior to the Annual Meeting and not revoked, it will be voted in
accordance with the instructions contained therein. If no instructions are
given, the persons designated as proxies in the accompanying proxy card will
vote FOR the election as Directors of those persons named below.
The Board of Directors is not currently aware of any matters other than
those referred to herein that will come before the Annual Meeting. If any
other matter should be presented at the Annual Meeting for action, the persons
named in the accompanying proxy card will vote the proxy in their own
discretion.
You may revoke your proxy at any time before it is actually voted at the
Annual Meeting by delivering written notice of revocation to the Secretary of
the Company, by submitting a subsequently dated proxy or by attending the
Annual Meeting and requesting in writing that the proxy be withdrawn.
Attendance at the Annual Meeting will not, in itself, constitute revocation of
the proxy.
The expense of preparing, printing and mailing proxy materials to the
Company's stockholders will be borne by the Company. In addition to the use of
the mails, proxies may be solicited personally or by telephone by officers or
employees of the Company, none of whom will receive additional compensation
therefor. The Company will also reimburse brokerage houses and other nominees
for their reasonable expenses in forwarding proxy materials to beneficial
owners of shares of Common Stock.
If a stockholder is a participant in the BW/IP International, Inc. Capital
Accumulation Plan (the "CAP") and shares of Common Stock have been allocated
to such person's account in the CAP, the proxy also serves as voting
instructions to the trustee of the CAP. The trustee will vote both allocated
shares of Common Stock for which it has not received direction and unallocated
shares held by it in the same proportion as directed shares are voted.
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
OWNERSHIP OF COMMON STOCK BY DIRECTORS AND EXECUTIVE OFFICERS
The following table furnishes certain information as of March 17, 1997, as
to the shares of Common Stock beneficially owned by each director and nominee
for director of the Company, by the Chief Executive Officer and other
individuals named in the Summary Compensation Table (collectively, the "Named
Executive Officers") and by all directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
NUMBER OF
SHARES SHARES UNDER
BENEFICIALLY EXERCISABLE PERCENT
NAME OWNED (1) OPTIONS (2) OF CLASS (3)
- ---- ------------ ------------ ------------
<S> <C> <C> <C>
Peter C. Valli...................... 249,062 83,500 1.4%
Bernard G. Rethore.................. 82,543(4)(5) -- --
Roy A. Herberger, Jr................ -- -- --
Michael F. Johnston................. 681(6) -- --
George D. Leal...................... 2,500(7) 10,000 --
H. Jack Meany....................... 70,000 10,000 --
James S. Pignatelli................. 490(6) 10,000 --
James O. Rollans.................... 1,181(6) 3,300 --
William C. Rusnack.................. 2,500 10,000 --
Jeffrey L. Zelms.................... 181(6) -- --
Eugene P. Cross..................... 153,757(4) 33,600 --
Darrach G. Taylor................... 141,572(4) 16,800 --
Richard R. Testwuide................ 193,518(4) 30,766 --
Howard D. Wynn...................... 41,965(4)(8) 10,450 --
Ronald W. Hoppel.................... 188,834(4) 35,233 --
All executive officers and directors
as a group (19).................... 1,195,467(9) 267,615 6.0
</TABLE>
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(1) The shares described as "owned" are shares owned by each listed person and
by members of his or her household and are held either individually or
pursuant to a trust agreement.
(2) Includes shares which could be acquired within 60 days of March 17, 1997,
through the exercise of options.
(3) Unless otherwise indicated, beneficial ownership of any named individual
does not exceed 1% of the outstanding shares.
(4) Includes certain shares under the CAP over which an executive officer has
no dispositive power.
(5) Includes 8,206 restricted shares granted pursuant to Mr. Rethore's
employment agreement and 2,019 restricted shares awarded pursuant to the
1996 Long-Term Incentive Plan.
(6) Includes shares a director will be entitled to receive at a future date as
a result of deferral of all or part of the director's annual retainer or
other fees. The table reflects 181 shares for Mr. Johnston; 90 shares for
Mr. Pignatelli; 181 shares for Mr. Rollans; and 181 shares for Mr. Zelms.
(7) Common Stock owned by either The George and Mary Ann Leal Foundation, a
charitable non-profit corporation, as to which Mr. Leal may be deemed the
beneficial owner or the George and Mary Ann Leal Living Trust, of which
Mr. Leal is a trustee and may be deemed the beneficial owner. Mr. Leal is
President and Chairman of the Board of the Foundation and, subject to the
approval and supervision of the Foundation's Board of Directors, is
responsible for directing the voting and disposition of these shares.
(8) Includes 353 restricted shares awarded pursuant to the 1996 Long-Term
Incentive Plan.
(9) Includes an aggregate of 3,436 restricted shares awarded pursuant to the
1996 Long-Term Incentive Plan.
2
<PAGE>
OWNERSHIP OF COMMON STOCK BY SIGNIFICANT STOCKHOLDERS
The following table furnishes certain information as of December 31, 1996,
as to each person known to the Company to be the beneficial owner of more than
five percent of the outstanding shares of Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME AND BUSINESS ADDRESS OWNERSHIP OF CLASS
------------------------- ---------- --------
<S> <C> <C>
David L. Babson and Company Incorporated.............. 1,238,500(1) 5.10%
One Memorial Drive
Cambridge, Massachusetts 02142
FMR Corp.............................................. 2,216,900(2) 9.13%
82 Devonshire Street
Boston, Massachusetts 02109
Norwest Corporation................................... 1,260,500(3) 5.19%
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479
Thompson, Siegel & Walmsley, Inc...................... 1,262,620(4) 5.20%
5000 Monument Avenue
Richmond, Virginia 23230
</TABLE>
- --------
(1) David L. Babson and Company Incorporated filed a 13G, dated February 7,
1997, with the Securities and Exchange Commission ("SEC"), stating that it
beneficially owns 1,238,500 shares with sole dispositive power as to all
such shares, sole voting power as to 387,600 such shares and shared voting
power as to 850,900 such shares.
(2) FMR Corp. filed a 13G, dated February 14, 1997, with the SEC, which states
that, collectively with certain affiliated entities, it beneficially owns
2,216,900 shares with sole dispositive power as to all such shares and
sole voting power as to 57,200 such shares.
(3) Norwest Corporation ("Norwest") and Norwest Bank Colorado, National
Association ("NBC") filed a 13G, dated January 29, 1997, with the SEC,
which states that Norwest beneficially owns 1,260,500 shares (including
1,247,500 shares deemed to be beneficially owned by NBC) with sole
dispositive power as to 1,259,300 such shares and sole voting power as to
1,098,000 such shares and that NBC beneficially owns 1,247,500 shares with
sole dispositive power as to 1,246,300 such shares and sole voting power
as to 1,085,000 such shares.
(4) Thompson, Siegel & Walmsley, Inc. filed a Schedule 13G, dated February 12,
1997, with the SEC stating that it beneficially owns 1,262,620 shares with
sole dispositive power as to all such shares, sole voting power as to
786,060 such shares and shared voting power as to 394,110 such shares.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors and officers and persons who own more than
ten percent of the Common Stock (collectively, the "Reporting Persons") to
file certain reports ("Section 16 Reports") with the SEC with respect to their
beneficial ownership of shares of Common Stock. The Reporting Persons are also
required to furnish the Company with copies of all Section 16 Reports they
file.
Based solely on a review of copies of Section 16 Reports furnished to the
Company by the Reporting Persons and written representations by directors and
officers of the Company, the Company believes that all Section 16(a) filing
requirements applicable to the Reporting Persons during and with respect to
1996 were complied with on a timely basis except that in February 1997, George
Leal, Director, filed a Form 5 to correct an inadvertent error by the Office
of the Corporate Secretary that caused his purchase of 1,000 shares in October
1996 not to be reported.
3
<PAGE>
PROPOSAL--ELECTION OF DIRECTORS
GENERAL INFORMATION
As set by the Board of Directors pursuant to the Bylaws of the Company, the
Board currently consists of ten members. In accordance with the Company's
retirement policy for directors, Peter C. Valli and H. Jack Meany will retire
from the Board at the Annual Meeting. As a result, the Board has determined to
decrease the size of the Board, effective at the Annual Meeting to eight
members. Directors will hold office from the time of their election until the
next annual meeting of stockholders of the Company and until their successors
are duly elected and qualify, or until their earlier resignation or removal.
All nominees also serve as members of the Board of Directors of the Company's
subsidiary, BW/IP International, Inc. ("BW/IP"). Each nominee is currently
serving as a director. Messrs. Rethore, Leal, Pignatelli, Rollans and Rusnack
were elected to the Board of Directors at the last meeting of stockholders in
May 1996. Mr. Johnston was appointed to the Board of Directors on July 23,
1996, Mr. Zelms on December 19, 1996 and Mr. Herberger on February 19, 1997.
The Board of Directors has no reason to believe that any of the nominees
will not serve if elected, but if any of them should become unavailable to
serve as a director, and if the Board designates a substitute nominee, the
persons named in the accompanying proxy card will vote for the substitute
nominee designated by the Board.
INFORMATION CONCERNING NOMINEES
BERNARD G. RETHORE, age 55 Director of the Company and BW/IP since 1995
Mr. Rethore became Chairman of the Board of Directors of the Company and
BW/IP in 1997 and has been President and Chief Executive Officer and a member
of the Board of Directors of the Company and BW/IP since 1995. Mr. Rethore was
Senior Vice President of Phelps Dodge Corporation and President of Phelps
Dodge Industries, its diversified international manufacturing business, from
1989 to 1995. Previously Mr. Rethore had been President and CEO of Microdot
Industries, the diversified manufacturing business of Microdot Inc.
Mr. Rethore is also a director of Maytag Corporation and Belden, Inc.
Committee Membership: Executive
ROY A. HERBERGER, JR., age 54 Director of the Company and BW/IP since 1997
Mr. Herberger has been President of the American Graduate School of
International Management (known widely as "Thunderbird") since 1989. He is
also a director of COMPAS, Inc., Inroads Arizona and Inroads National, Bank of
America Arizona, MicroAge, Pinnacle West Corporation and Express America
Holdings, Inc.
MICHAEL F. JOHNSTON, age 49 Director of the Company and BW/IP since 1996
Mr. Johnston has been Vice President and General Manager of ASG Interior
Systems Business of Johnson Controls, Inc., a company serving the automotive
and building services industries, since 1997. He was Vice President and
General Manager of the Johnson Controls Battery Group of Johnson Controls,
Inc. from 1993 to 1997, Vice President and General Manager of the SLI Battery
Division from 1991 to 1993 and Vice President and General Manager of the
Specialty Battery Division from 1989 to 1991.
Committee Membership: Audit and Finance
GEORGE D. LEAL, age 63 Director of the Company and BW/IP since 1993
Mr. Leal has been Chairman of the Board of Dames & Moore, a worldwide
consulting engineering firm, since 1981. He served as Chief Executive Officer
of Dames & Moore from 1981 to 1994 and as President from 1981 to 1993.
Committee Membership: Executive and Compensation, Benefits and Organization.
4
<PAGE>
JAMES S. PIGNATELLI, age 53 Director of the Company and BW/IP since 1993
Mr. Pignatelli is Senior Vice President and Chief Operating Officer of
Tucson Electric Power Company. Prior to this he was a consultant to SCEcorp, a
public utility company. Mr. Pignatelli was President and Chief Executive
Officer of Mission Energy Company, an independent power company and subsidiary
of SCEcorp, from 1988 to 1993. Mr. Pignatelli is currently a director of Tejas
Power Corporation.
Committee Membership: Audit and Finance (Chairman).
JAMES O. ROLLANS, age 54 Director of the Company and BW/IP since 1995
Mr. Rollans has been Senior Vice President and Chief Administrative Officer
of Fluor Corporation, a global engineering, construction and technical
services company since 1994. He was Senior Vice President and Chief Financial
Officer of Fluor Corporation from 1992 to 1994 and its Vice President,
Corporate Communications from 1982 to 1992.
Committee Membership: Audit and Finance.
WILLIAM C. RUSNACK, age 52 Director of the Company and BW/IP since 1993
Mr. Rusnack has been Senior Vice President of ARCO (an integrated petroleum
company) since July 1990, and President of ARCO Products Company since June
1993. He was President of ARCO Transportation Company from 1990 to 1993, Vice
President of Atlantic Richfield from 1987 to 1990 and Senior Vice President of
ARCO Oil & Gas Company from 1985 to 1987.
Committee Membership: Compensation, Benefits Organization (Chairman) and
Executive.
JEFFREY L. ZELMS, age 52 Director of the Company and BW/IP since 1996
Mr. Zelms has been the Chief Executive Officer of The Doe Run Company, an
integrated lead producing, recycling and fabricating company, since 1992 and
its President since 1986. From 1985 to 1986 Mr. Zelms was Vice President of
St. Joe Minerals and prior to that time held various positions with affiliates
of St. Joe Minerals, including President of Placer Service Corp., President of
St. Joe Lead Company, and President of Pea Ridge Iron Ore. Co. Mr. Zelms is
currently a director of the Phoenix Textiles Corporation.
Committee Membership: Audit and Finance
In accordance with Section 216(3) of the DGCL and Section 2.03 of the
Company's Bylaws, the affirmative vote of a plurality of the shares of Common
Stock present in person or represented by proxy at the Annual Meeting is
required for the election of Directors. Under applicable Delaware law,
withheld votes on any nominee or nominees, abstentions from voting on the
election of Directors and broker non-votes will have no effect on the outcome
of the vote on this proposal.
SHARES REPRESENTED BY THE ACCOMPANYING PROXY CARD WILL BE VOTED FOR THE
ELECTION OF THE ABOVE NOMINEES UNLESS AUTHORITY TO VOTE FOR ONE OR MORE
NOMINEES IS WITHHELD. STOCKHOLDERS MAY WITHHOLD AUTHORITY TO VOTE FOR THE
ENTIRE SLATE AS NOMINATED OR, BY WRITING THE NAME OF ONE OR MORE NOMINEES IN
THE SPACE PROVIDED IN THE PROXY CARD, WITHHOLD THE AUTHORITY TO VOTE FOR SUCH
NOMINEE OR NOMINEES.
COMMITTEES AND MEETINGS OF THE BOARD
The composition of the Board of Directors of each of the Company and BW/IP
is identical. The Board of Directors of the Company held five regularly
scheduled or special meetings during the fiscal year ended December 31, 1996
(the "Fiscal Year"), and the Board of Directors of BW/IP held five such
meetings. Each
5
<PAGE>
Board of Directors has three standing committees: an Executive Committee, an
Audit and Finance Committee and a Compensation, Benefits and Organization
Committee. While the composition and responsibilities of the standing
committees of the two Boards are identical, the level of activity of the
corresponding committees of each Board varies depending on the matters being
considered.
Executive Committee. The Executive Committee of each Board has authority,
with certain exceptions, during the intervals between the meetings of the
Board of Directors, to take all actions that may be taken by its respective
full Board of Directors in the management of the property, affairs and
business of the Company or BW/IP, as the case may be. The Executive Committee
of the Company's Board met one time during the Fiscal Year, and the
corresponding committee of BW/IP's Board met one time during the Fiscal Year.
Audit and Finance Committee. The Audit and Finance Committee of each Board
reviews and approves the scope and results of any outside audit of the Company
or BW/IP, as the case may be, and the fees therefor, and reviews, considers
and acts upon all matters concerning auditing, accounting and financial
matters and the selection of outside auditors for the Company or BW/IP, as the
case may be. The Audit and Finance Committee of the Company's Board met five
times during the Fiscal Year, while the corresponding committee of BW/IP's
Board did not meet during the Fiscal Year.
Compensation, Benefits and Organization Committee. The Compensation,
Benefits and Organization Committee of each Board reviews, considers and acts
upon matters of salary and other compensation and benefits of all officers and
other employees of the Company or BW/IP, as the case may be, as well as acts
upon all matters concerning, and exercises such authority as is delegated to
it under the provisions of, any benefit, retirement or pension plan. The
Compensation, Benefits and Organization Committee of the Company's Board met
three times during the Fiscal Year, and the corresponding committee of BW/IP's
Board met two times during the Fiscal Year.
Each current member of the Board of Directors of the Company nominated for
election attended at least 75% of the aggregate of the total number of
meetings of the Board of Directors of the Company and of the committees of
such Board on which he served during the Fiscal Year.
COMPENSATION OF DIRECTORS
Each director of the Company and BW/IP, other than any director employed by
the Company or BW/IP, is entitled to receive an annual retainer of $12,000
plus a fee of $1,000 for each Board meeting attended in person or by
conference telephone and $1,000 for each committee meeting attended that is
not held concurrently with a Board meeting, plus all reasonable travel and
other expenses of attending such meetings. The Chairman has the discretion to
determine in each circumstance whether meetings of Committees held by
conference telephone shall be paid as regular meetings or no meeting fee paid.
Pursuant to the Non-Employee Directors Stock and Deferred Compensation Plan, a
non-employee director may elect to receive all or part of his cash
compensation in shares of Common Stock or to defer receipt through an
interest-bearing cash account or a stock account and receive cash or shares of
Common Stock at a future date.
As part of its overall program to promote charitable giving, the Company has
established the Non-Employee Directors' Charitable Gift Plan pursuant to which
the Company purchased life insurance policies on non-employee directors.
Eligibility is based on length of service as a non-employee director, with a
minimum of two years of vesting service required after the March 1993 adoption
of this plan by the Board of Directors, and full benefits vesting after five
years of service. Upon the death of an individual non-employee director, the
Company will donate up to $1 million to one or more qualifying charitable
organizations recommended by the individual director and subsequently be
reimbursed by life insurance proceeds. Individual directors derive no
financial benefit from this program since all charitable deductions accrue
solely to the Company. The program results in only nominal cost to the Company
over time. Participants in this program are Messrs. Herberger, Johnston, Leal,
Meany, Pignatelli, Rollans, Rusnack and Zelms.
6
<PAGE>
Pursuant to the Company's Non-Employee Directors' Stock Option Plan (the
"Directors' Plan"), each non-employee director who is reelected or who is
continuing as a member of the Board of Directors is granted, as of the date of
each year's annual meeting of the Company's stockholders, a non-qualified
option ("Option") to purchase 2,000 shares of Common Stock, (or proportionate
amount based on meetings held if serving as a director for less than one-year)
while each new non-employee director upon initial election as a member of the
Board is granted an Option to purchase 5,000 shares of Common Stock.
The following table summarizes for all non-employee directors of the Company
Options granted in fiscal year 1996 under the Directors' Plan.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------
OPTIONS EXERCISE EXPIRATION
NAME GRANTED (1) PRICE/SHARE (2) DATE
- ---- ----------- --------------- ----------
<S> <C> <C> <C>
Roy A. Herberger, Jr..................... -- -- --
Michael F. Johnston...................... 5,000 $18.125 7/23/06
George D. Leal........................... 2,000 20.750 5/14/06
H. Jack Meany............................ 2,000 20.750 5/14/06
James S. Pignatelli...................... 2,000 20.750 5/14/06
James O. Rollans......................... 1,600 20.750 5/14/06
William C. Rusnack....................... 2,000 20.750 5/14/06
Peter C. Valli........................... -- -- --
Jeffrey L. Zelms......................... 5,000 16.250 12/19/06
</TABLE>
- --------
(1) Except for the Options granted to Mr. Johnston upon his initial election
as a director on July 23, 1996 and to Mr. Zelms upon his initial election
as a director on December 19, 1996, all Options were granted on May 14,
1996, the date of the last annual meeting of the Company's stockholders.
Fifty percent of the total number of shares of Common Stock covered in an
Option will be exercisable beginning with the first anniversary date of
the grant and the remaining fifty percent shall be exercisable on the
second anniversary date of the grant provided that the director has served
for a period from one annual meeting to a subsequent annual meeting.
Payment of the exercise price may be made in cash, Common Stock or a
combination of both.
(2) The exercise price for shares under the Options is the mean of the high
and low prices for the Common Stock as reported on the NASDAQ National
Market System or the New York Stock Exchange on the date of grant.
Following his retirement as President and Chief Executive Officer of the
Company and BW/IP on October 19, 1995, and as an employee of the Company on
December 31, 1995, Mr. Valli has been retained by the Company as a consultant.
He will receive annual consulting fees in the amount of $200,000 until May 15,
1997. Except for the annual retainer and meeting fees otherwise payable to
non-employee directors, Mr. Valli is not eligible to participate in any
compensatory plan or program for non-employee directors.
Mr. Valli waived the prescribed retirement payments under the Supplemental
Executive Retirement Plan, and the Board of Directors approved the purchase of
split dollar life insurance using a second-to-die life insurance policy on the
lives of Mr. Valli and his spouse. This arrangement will deliver greater
economic value to Mr. Valli and provide a long-term earnings benefit to the
Company. The Company will make five annual insurance premium payments of
approximately $405,000 each. At the earlier of the deaths of Mr. Valli and his
spouse or twenty years from the date of the policy, the Company will receive
an amount equal to the premiums paid, and Mr. Valli's beneficiary will receive
the remaining benefit amount paid pursuant to the policy.
7
<PAGE>
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION, BENEFITS AND ORGANIZATION COMMITTEE
Under the supervision of the Committee, the Company has developed and
implemented compensation policies and programs designed to add stockholder
value through increasing the sales, profitability and return on capital of the
Company by aligning the financial interests of the Company's executives and
managers with those of the stockholders. The strategy of the compensation
program is to relate compensation to measurable business objectives and
performance, and provide incentives to executives who contribute to the
success of the Company.
The compensation package for the CEO and all other executive officers is
comprised of three components: base salary, bonus (paid under the Management
Incentive Plan (the "MIP")) and long term equity based incentives, through
stock options and/or other stock-based awards under the 1996 Long-Term
Incentive Plan (the "LTIP").
Base salaries of the CEO and all other executive officers are set by the
Committee. Each year the Committee reviews general corporate compensation and
executive compensation survey data. In addition to the survey data, the
Committee considers the merit of each individual's performance and the
individual's compensation in the context of both the Company and its industry.
The surveys, and what they reveal about base salaries paid for comparably
responsible positions at other companies, are considered the most important
single factor in setting salaries, although an element of subjective judgment
is also utilized. The Company's policy is generally to set base salaries at or
near the medians for positions it believes are comparable to those of the CEO
and the other executive officers. The base salary for Mr. Bernard Rethore who
became the CEO effective October 19, 1995, was determined by the Committee and
reflects an amount considered appropriate for an individual with the
qualifications and experience required for the position of CEO.
The Committee believes that the contingent or incentive compensation of the
Company's CEO and other executive officers should be linked to measurable
aspects of both the Company's performance and their individual performance.
Therefore, the MIP provides that a portion of the annual bonus opportunity for
each officer is dependent upon the Company's meeting certain previously
defined financial goals. These goals are determined annually after review of
the Company's forecast for the upcoming year. The MIP targets for 1996 were
intended to pay at their targeted level only if a very substantial improvement
was made to the Company's financial performance from the prior year and the
range of performance over which a pay out would be made was narrowed so that
there was a greater risk of no bonus being earned. The Company's performance
did improve significantly, approximating the level required to trigger the
target pay out. The Company targeted a 1996 performance level that would
result in total executive compensation being in the mid 3rd quartile.
In 1996 financial goals for the CEO as well as all other officers were a
specified level of net income and return on capital for the Company. In
addition, certain officers other than the CEO have a portion of their bonus
opportunity dependent upon additional financial goals based on other
performance measures which by virtue of their job responsibilities they are in
a position to influence, such as division or corporate cash flow, division
operating income or bookings. The CEO and all other officers also have a
portion of their bonus opportunity based on their individual performance in
meeting certain non-financial goals. These goals are determined by each
officer and his supervisor, or in the case of the CEO by the Committee, and
relate to specific items within the authority of that officer which are
determined to have benefit to the Company. Non-financial goals for the CEO
during 1996 included the successful completion of his transition into the
office of president and chief executive officer, setting out a preliminary
vision and plan for the Company's future, and ensuring that the principal
tools and processes are in place to achieve it, and for other officers items
such as the development of programs to implement value based management
techniques.
Failure to reach the targeted goals results in lower annual bonus awards and
may, in appropriate circumstances, result in no award. In 1996 the range of
potential bonus payments at target performance levels ranged from 58% of
salary for the CEO and descended in steps to 28% for certain other executive
officers. The
8
<PAGE>
range of actual pay outs for cash bonuses in 1996 was from 30% to 65% based
upon the Company's performance against its financial targets and the
evaluation of each individual's degree of completion of his or her non-
financial goals.
The LTIP is a plan under which awards are available in the form of stock
options and other types of stock-based compensation. The general principle
governing the granting of awards was to determine a desired level of Company
performance and a total compensation level for executive officers at targeted
levels of corporate performance, and then relate the two through the reward
system so that through a combination of base salary, bonus and the LTIP the
desired level of compensation was delivered at target performance. The
percentage of total compensation derived through base salary is lowest for the
CEO, who has the largest portion of his total compensation available through
the MIP and LTIP, and therefore contingent upon the Company's and his own
individual performance, and then cascades down in levels for other officers
based on the scope of their responsibilities.
The size of stock option awards varies, depending upon the recipient's
position, and responsibilities with the Company which is determined under the
Hay point evaluation system, with the more senior executives receiving a
larger award. The Committee determined a target dollar amount to be awarded to
each executive in stock options and converted that amount into a number of
stock options based upon a proprietary model for valuation of stock options.
Mr. Rethore received a grant of stock options when he was employed in October
of 1995, and under the terms of his employment agreement, was ineligible for
additional stock options in 1996.
The total compensation paid to the CEO increased in 1996 due to his being
employed for a full year and being a participant in the MIP. The total
compensation of other executive officers increased in 1996 compared to 1995 as
a result of higher base salaries and increased MIP payments resulted from the
Company's improved performance against targets compared to the prior year,
subject to the effect of individual performance.
The Company's compensation system as currently operated would not in the
ordinary course result in payments in excess of the $1 million cap on the
deductibility of compensation expenses provided in Section 162(m) of the
Internal Revenue Code, and the LTIP was drafted to comply with the performance
standards requirements of the Code. Therefore, the Company anticipates
compensating its management in a manner that will preserve the deductibility
of compensation expenses.
William C. Rusnack, Chairman
H. Jack Meany
George D. Leal
Compensation, Benefits and
Organization Committee
9
<PAGE>
PERFORMANCE GRAPH FOR COMMON STOCK
The following graph compares the Company's cumulative total return on the
Common Stock with the Standard & Poor's 500 Stock Index and the Standard &
Poor's Manufacturing (Diversified) Index. The graph assumes that $100 was
invested on December 31, 1991, in each of the Common Stock, the Standard &
Poor's 500 Stock Index and the Standard & Poor's Manufacturing (Diversified)
Index and that all dividends were reinvested. The historical stock price
performance of the Common Stock shown on the following graph is not necessarily
indicative of future price performance.
TOTAL STOCKHOLDER RETURNS
<TABLE>
<CAPTION>
S&P
Measurement Period MANUFACTURING
(Fiscal Year Covered) BW/IP, INC. S&P 500 (DIVER.)
- ------------------- ---------- --------- ------------
<S> <C> <C> <C>
12/31/91 $100 $100 $100
12/31/92 $137 $108 $108
12/31/93 $116 $118 $132
12/31/94 $ 80 $120 $136
12/31/95 $ 79 $165 $192
12/31/96 $ 81 $203 $264
</TABLE>
10
<PAGE>
SUMMARY COMPENSATION TABLE
The following table summarizes the total compensation of the Named Executive
Officers for fiscal year 1996, as well as the total compensation paid to each
such individual for the Company's two previous fiscal years in all capacities
in which they served.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------- ----------------------------
AWARDS
----------------------------
OTHER ANNUAL RESTRICTED SHARES SUBJECT ALL OTHER
NAME YEAR SALARY BONUS(1) COMPENSATION(2) STOCK($)(3) TO OPTIONS(#) COMPENSATION(4)
- ---- ---- -------- -------- --------------- ----------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Bernard G. Rethore(5)... 1996 $400,000 $258,376 $ 0 $192,304(6) 0 $2,375
President, Chief
Executive 1995 80,512 0 0 250,000 0
Officer and Director
Eugene P. Cross......... 1996 240,000 106,668 3,287 27,000 2,875
Executive Vice 1995 232,000 60,000 3,148 20,000 2,240
President-Finance, 1994 223,000 80,000 2,640 11,500 2,148
Chief Financial Officer
Darrach G. Taylor....... 1996 178,000 61,885 2,241 12,000 2,768
Vice President 1995 173,000 50,000 2,216 9,000 2,137
Human Resources 1994 168,000 60,000 1,131 5,400 2,365
Richard R. Testwuide.... 1996 212,000 78,026 2,671 23,000 2,714
Vice President 1995 204,000 70,000 3,528 17,000 2,015
President Seal Division 1994 195,000 80,000 2,288 10,000 2,383
Howard D. Wynn(7)....... 1996 167,000 90,460 0 5,648 22,000 3,000
Vice President 1995 138,000 41,000 2,545 5,500 2,050
President Pump Division 1994 131,300 42,000 2,671 2,350 2,148
Ronald W. Hoppel(8)..... 1996 242,000 0 2,695 28,000 3,000
Former Vice President 1995 232,000 70,000 3,239 19,000 2,250
and President Pump 1994 222,000 85,000 98 11,000 2,599
Division
</TABLE>
- --------
(1) These amounts are the awards to the named individuals under BW/IP
Management Incentive Plans. Amounts shown for performance in 1996, 1995
and 1994 were paid by March 15 of the calendar year following the year for
which bonuses were awarded. For 1994 and 1995 all amounts were paid in
cash. For 1996 pursuant to the 1996 Long-Term Incentive Plan ("LTIP"),
officers could elect to receive bonus payments in cash or shares of Common
Stock, as approved by the Compensation, Benefits and Organization
Committee.
(2) Reflects amount reimbursed for the payment of taxes ("gross-up").
(3) The amounts in this column reflect the value of restricted Common Stock
awarded pursuant to the LTIP except as described in Note (6). For 1996
bonus payments made in shares of Common Stock, the Committee granted
shares of restricted Common Stock equal to the lesser of 12.5% of the
amount of the officer's total bonus or 25.0% of the amount of the bonus
paid in shares of Common Stock. All restricted Common Stock awarded to the
Named Executive Officers in 1996 vests at the end of three years. Regular
dividends are paid on the restricted Common Stock. Shares of restricted
stock were awarded as follows: Mr. Rethore, 2,019 shares and Mr. Wynn, 353
shares.
(4) Represents amounts contributed or accrued for the fiscal year under the
BW/IP International, Inc. Capital Accumulation Plan.
(5) Mr. Rethore was elected President and Chief Executive Officer in October
1995 and Chairman of the Board of Directors in February 1997.
(6) Pursuant to his employment agreement upon meeting the requirement of base
share ownership of Common Stock with a fair market value of $800,000, Mr.
Rethore received an award of restricted Common Stock of $160,000,
representing 8,206 shares valued at $19.50 per share on May 31, 1996, the
date of grant. These shares vest over five years. The value of these
shares based on the closing price of the Common Stock on the New York
Stock Exchange on December 31, 1996, is $135,399.
11
<PAGE>
(7) Mr. Wynn was elected Vice President and President of the Pump Division in
August 1996. Prior to that time he was Vice President Service of the Pump
Division.
(8) Mr. Hoppel ceased to be an officer in August 1996, but remains an employee
of the Company.
OPTION GRANTS
The following table summarizes for the Named Executive Officers options to
acquire shares of the Common Stock granted in fiscal year 1996 under the LTIP.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------
PERCENTAGE OF POTENTIAL REALIZABLE VALUE
TOTAL OPTIONS AT ASSUMED ANNUAL RATES OF
GRANTED TO STOCK PRICE APPRECIATION
EMPLOYEES IN FOR TEN YEAR OPTION TERM(1)
OPTIONS FISCAL YEAR EXERCISE EXPIRATION ------------------------------
NAME GRANTED(2) 1996 PRICE/SHARE DATE 0% 5% 10%
- ---- ---------- ------------- ----------- ---------- --- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Bernard G. Rethore...... -- -- $ -- -- $-- -- --
Eugene P. Cross......... 27,000 8.0 16.000 2/22/06 0 271,674 688,500
Darrach G. Taylor....... 12,000 3.6 16.000 2/22/06 0 120,744 306,000
Richard R. Testwuide.... 23,000 6.8 16.000 2/22/06 0 231,426 586,500
Howard D. Wynn.......... 12,000 3.6 16.000 2/22/06 0 120,744 306,000
10,000 3.0 18.625 8/23/06 0 117,130 296,830
Ronald W. Hoppel........ 28,000 8.3 16.000 2/22/06 0 281,736 714,000
All Stockholders........ N/A N/A N/A N/A 0 247,629,275(3) 627,557,300(3)
All Optionees........... 335,800 100.0 16.221 (4) 0 3,425,522(5) 8,681,230(5)
Optionee Gain as a % of
All Stockholders' Gain. N/A N/A N/A N/A N/A 1.4% 1.4%
</TABLE>
- --------
(1) Based upon assumed annual rates of stock price appreciation (as used in
the table above) from the date of grant through the expiration date of
such options. Actual gains, if any, are dependent on the future
performance of the Common Stock, as well the continued employment of the
Named Executive Officers through the vesting period. The potential
realizable values indicated have not taken into account amounts required
to be paid as income tax under the Internal Revenue Code of 1986, as
amended (the "Code"), and any applicable state laws.
(2) BW/IP granted stock options to purchase shares of the Common Stock
pursuant to the LTIP. Unless otherwise determined by the Compensation,
Benefits and Organization Committee, a stock option may be exercised
commencing three years after the date of grant in one or more
installments. Options granted in 1996 are exercisable one-third commencing
one year after the date of grant and an additional one-third in each of
the two following years. A stock option may only be exercised upon full
payment of the option price.
(3) "All Stockholders" value is calculated from $16.221 the weighted average
exercise price for all options awarded in fiscal 1996, based on the
outstanding shares of Common Stock on December 31, 1996.
(4) Options expire on various dates during the year 2006. Exercise price shown
is an average of all grants in fiscal 1996.
(5) No gain to the optionees is possible without an increase in stock price
appreciation, which will benefit all stockholders commensurately.
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<PAGE>
OPTION VALUES
The following table sets forth the number and the dollar value of
unexercised options to purchase Common Stock held by the Named Executive
Officers at December 31, 1996. No options were exercised by these individuals
during 1996.
AGGREGATED LAST FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR FISCAL
END(#) YEAR-END($)(1)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Bernard G. Rethore.......... 0 250,000 $0 $ 0
Eugene R. Cross............. 13,100 58,500 0 26,000
Darrach G. Taylor........... 7,400 33,800 0 11,625
Richard R. Testwuide........ 13,100 50,000 0 22,125
Howard D. Wynn.............. 4,100 23,500 0 9,438
Ronald W. Hoppel............ 14,900 58,000 0 25,875
</TABLE>
- --------
(1) Based on the closing price per share of the Common Stock as reported on
the New York Stock Exchange on December 31, 1996 ($16.50).
OTHER PLANS AND ARRANGEMENTS
Retirement Benefits. The following table indicates the estimated maximum
annual retirement benefit that persons in specified compensation and years of
service classifications would be entitled to receive under the BW/IP
International, Inc. Retirement Plan (the "BW/IP RP") and the Supplemental
Executive Retirement Plan (the "SERP") on a straight-life annuity basis as if
retirement had occurred on December 31, 1996 at age 65 after the indicated
years of credited service and as if average annual earnings for the highest
five consecutive years in the ten years preceding retirement equaled the
amounts indicated. Benefits in the table are not subject to any deduction for
social security benefits. The table does not reflect limitations imposed by
the Code.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
AVERAGE YEARS OF SERVICE
ANNUAL -----------------------------------------------------
EARNINGS 15 20 25 30 35 40
- ---------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$150,000 $ 34,139 $ 45,518 $ 56,898 $ 68,277 $ 72,027 $ 75,777
200,000 46,139 61,518 76,898 92,277 97,277 102,277
250,000 58,139 77,518 96,898 116,277 122,527 128,777
300,000 70,139 93,518 116,898 140,277 147,777 155,277
350,000 82,139 109,518 136,898 164,277 173,027 181,777
400,000 94,139 125,518 156,898 188,277 198,277 208,277
450,000 106,139 141,518 176,898 212,277 223,527 234,777
500,000 118,139 157,518 196,898 236,277 248,777 261,277
550,000 130,139 173,518 216,898 260,277 274,027 287,777
600,000 142,139 189,518 236,898 284,277 299,277 314,277
650,000 154,139 205,518 256,898 308,277 324,527 340,777
700,000 166,139 221,518 276,898 332,277 349,777 367,277
750,000 178,139 237,518 296,898 356,277 375,027 393,777
800,000 190,139 253,518 316,898 380,277 400,277 420,277
</TABLE>
13
<PAGE>
Eligible BW/IP U.S. salaried and certain hourly employees participate in the
BW/IP RP, which provides retirement benefits based on an employee's years of
service and earnings with Borg-Warner Corporation, BW/IP's predecessor parent,
BW/IP and its subsidiaries and such employee's average annual earnings
(subject to limitations imposed by the Code) for the highest consecutive five
years of the ten years preceding retirement. Participants are covered in the
BW/IP RP for wages, salary and bonuses, and up to 50% of an employee's award
under the 1981 Borg-Warner Contingent Compensation Plan through 1987.
As of December 31, 1996, the credited years of service for each Named
Executive Officer are: Mr. Rethore, 1 year; Mr. Cross, 27 years; Mr. Taylor,
23 years; Mr. Testwuide, 24 years; Mr. Wynn, 25 years and Mr. Hoppel 32 years.
Mr. Rethore will have an additional retirement benefit that recognizes his
experience prior to employment by the Company. The additional benefit will be
equal to the excess of (i) the retirement benefit payable under the SERP
assuming one additional year of service for each year of actual service over
(ii) the retirement benefit actually payable under the SERP.
Employment Agreements. On October 19, 1995, the Company entered into an
agreement covering a period of five years for the employment of Mr. Rethore as
President and Chief Executive Officer of the Company at an annual base salary
of no less than $400,000, but subject to increase based on annual reviews. Mr.
Rethore participates in the MIP and has the opportunity to receive an annual
bonus up to 100% of his base salary, based upon attainment of performance
objectives. Pursuant to the employment agreement Mr. Rethore will have an
additional retirement benefit as described under "Retirement Benefits" above.
Mr. Rethore's employment agreement also provides for the payment of a
severance benefit if the Company terminates his employment without cause or if
Mr. Rethore terminates his employment for "good reason" (which includes a
reduction in base salary or incentive compensation opportunity, a reduction in
Mr. Rethore's duties or positions, or a material breach of the agreement by
the Company). The severance benefit is a lump sum amount equal to two times
the sum of base salary and bonus that would have been payable at target
performance for the year in which termination occurs.
Under the terms of his employment agreement, Mr. Rethore was required to
purchase no later than December 31, 1996, shares of Common Stock with an
aggregate fair market value of at least $800,000 ("Base Stock"). After
completing the purchase of this Base Stock, Mr. Rethore was granted 8,206
shares of restricted Common Stock ("Premium Shares"). The Premium Shares vest
over five years, except that in the event of Mr. Rethore's termination for
death or disability, all Premium Shares become fully vested. No later than
December 31, 1998, and at all times thereafter, Mr. Rethore must own directly
or beneficially Common Stock with an aggregate fair market value equal to
three times his then current base salary or the amount required under stock
ownership guidelines established by the Board of Directors for the Company's
executive officers, but in no event more than five times his then current base
salary.
In February 1997, Mr. Hoppel signed an agreement to continue his employment
with the Company until March 31, 2000 at a reduced rate of pay equal to
$125,800 per annum, commencing April 1, 1997. He will not be eligible to
participate in any incentive compensation programs and will report to the
Company's President and Chief Executive Officer. He may terminate the
arrangement at any time upon 30 days notice.
Employment Continuation Program. On December 14, 1995, the Company adopted
an employment continuation program (the "Program"). All nine of the executive
officers of the Company are eligible to participate in the Program. The
Program provides for the officer's continued employment for two years
following a change in control of the Company. Compensation for this period
will be based on the officer's then current base salary with an annual bonus
opportunity no less favorable than the bonus available before the change in
control and provide for continued participation in long-term incentive and
benefit plans.
The employment continuation agreement for Mr. Rethore provides that in the
event his employment is terminated during the two year period by the Company
without cause or by Mr. Rethore for good reason (which
14
<PAGE>
includes failure to continue in the position of President and Chief Executive
Officer or assignment of duties inconsistent with such position, a reduction
in compensation, a material breach of the agreement by the Company, failure of
the successor to the Company to assume the agreement or relocation (more than
40 miles) from the location at which services were performed before the
change), Mr. Rethore will receive a severance benefit equal to three times the
sum of his base salary and an amount equal to the greater of either his last
bonus or the average bonus paid as a percentage of base salary for the three
years prior to the change in control plus certain other benefits (welfare and
fringe benefits and a Company- provided automobile for up to three years,
outplacement services and immediate vesting in the Premium Shares). The
employment continuation agreements for each of the other officers provide that
in the event the officer's employment is terminated during the two year period
without cause or by the officer for good reason (which includes an adverse
change in position or assignment of duties inconsistent with such position, a
reduction in compensation, relocation (more than 35 miles) from the location
at which services were performed before the change, a material breach of the
agreement by the Company, or failure of the successor to the Company to assume
the agreement), the officer covered by the Program will receive a severance
benefit equal to two and one fourth times the sum of his or her base salary
and an amount equal to the greater of either the last bonus or the average
bonus paid as a percentage of base salary for the last three calendar years
prior to the change in control plus certain other benefits (welfare and fringe
benefits and a Company-provided automobile for up to one year and outplacement
services). The Program provides that if any amount payable under the Program
is deemed to be an "excess parachute payment" under section 280G(b) of the
Code, which generally would limit deductibility of such payment by the Company
for Federal income tax purposes, then the amount payable under the Program
shall be limited to an amount that would not cause such limitation on the
deduction.
Under the employment continuation agreements a change in control is deemed
to have occurred if (a) another person or group unaffiliated with the Company,
becomes the beneficial owner of at least 30% of the voting power of the
Company; or (b) members of the Board of Directors as of the beginning of any
consecutive twenty-four calendar month period (the "Incumbent Directors")
cease to constitute at least a majority of the Board of Directors, unless the
new directors were elected with the approval of at least two-thirds of the
Incumbent Directors and were not designated by a person who had entered into
an agreement with the Company to effect a merger, consolidation, share
exchange, division, sale or other disposition of all or substantially all of
the Company ("Corporate Event"); or (c) the Company's stockholders approve a
Corporate Event as a result of which such stockholders do not hold a majority
of the voting power in a surviving, resulting or acquiring corporation. If the
officer's employment is terminated by the Company without cause within one
year after a potential change in control but before a change in control and a
change in control actually occurs, the officer will be considered employed as
of the date of a change in control for purposes of his or her rights under the
Program. A potential change in control is deemed to have occurred if a person
commences a tender offer for securities representing at least 20% of the
Company's securities, the Company enters into an agreement that would
consummate a change in control, proxies are solicited by anyone other than the
Company, or any other event which is deemed to be a potential change in
control by the Board of Directors.
INDEPENDENT AUDITORS
Beginning in 1996, the Company eliminated the formality of seeking
ratification of the appointment of Price Waterhouse as the Company's
independent auditors because it determined there was little beneficial purpose
for this unnecessary action.
Price Waterhouse has served as the Company's independent auditors since
March 1993. Representatives of Price Waterhouse will attend the meeting, and
respond to any questions, or make a statement if they so desire.
15
<PAGE>
ANNUAL REPORT
The Company's 1996 Annual Report to Stockholders, containing audited
financial statements for the year ended December 31, 1996, is being mailed to
all stockholders of record with this Proxy Statement.
PROPOSALS BY STOCKHOLDERS
Proposals by stockholders intended to be presented at the 1998 annual
meeting of stockholders must be received by the Secretary of the Company no
later than December 3, 1997 to be included in the Company's proxy, notice of
meeting and proxy statement relating to such meeting.
16
<PAGE>
BW/IP, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 6, 1997
The undersigned hereby appoints John D. Hannesson, John M. Nanos and M. J.
Young, and each or any of them, as proxies of the undersigned, with full power
of substitution, to represent the undersigned and to vote all shares of the
Common Stock of BW/IP, Inc. which the undersigned is entitled to vote at the
Annual Meeting of Stockholders to be held on May 6, 1997 at 11:00 a.m. at The
Long Beach Hilton Hotel, Two World Trade Center, Long Beach, California, and at
any adjournment thereof, upon the matter listed on the reverse and, in their
discretion, upon such other matters as may properly come before the meeting. The
undersigned hereby revokes all proxies heretofore given by the undersigned to
vote at the meeting or any adjournment thereof. The proxies appointed hereby may
act by a majority of said proxies present at the meeting (or if only one is
present, by that one).
(Continued and to be signed on the reverse side.)
