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SCHEDULE 14A
(RULE 14A)14(a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant /X/[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)14A-6(e)(2))
/X/[X] Definitive Proxy Statement
/ /[ ] Definitive Additional Materials
/ /[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
THE DURIRON COMPANY, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
THE DURIRON COMPANY, INC.
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of filing feeFiling Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ /[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:
(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):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ /[ ] Fee paid previously with preliminary materials.
/ /[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. 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:
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DURIRON LOGO
THE DURIRON COMPANY, INC.
3100 RESEARCH BOULEVARD
DAYTON, OHIO 45420
NOTICE OF 19961997 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 25, 199624, 1997
The 19961997 Annual Meeting of Shareholders of The Duriron Company, Inc. (the
"Company") will be held at the main offices of the Company's subsidiary,
Durametallic Corporation, at 2100 Factory Street, Kalamazoo, MichiganMiami Valley Research Park, BDM Conference Center,
1900 Founders Drive, Dayton, Ohio at 1:30 p.m. on Thursday, April 25, 199624, 1997 for
the following purposes:
1. To elect three directors to each serve for a term of three years and one
directoryears.
2. To approve the change of the name of the Company to serve a one year term.
2."Durco International
Inc."
3. To approve the 1997 Stock Option Plan.
4. To approve the appointment of Ernst & Young LLP as independent auditors
for 1996.
3.1997.
5. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Only holders of Common Stock whose names appeared of record on the books of
the Company at the close of business on March 8, 19967, 1997 are entitled to notice of
and to vote at this meeting.
By order of the Board of Directors
Ronald F. Shuff
Secretary
Dayton, Ohio
March 14, 199617, 1997
VOTING YOUR PROXY IS IMPORTANT
PLEASE SIGN AND DATE YOUR PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE
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THE DURIRON COMPANY, INC.
------------------------
PROXY STATEMENT
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Mailing Date
March 14, 199617, 1997
GENERAL INFORMATION
PERSONS MAKING THE SOLICITATION
The accompanying Proxy is solicited by the Board of Directors (the "Board")
of The Duriron Company, Inc. (the "Company") and relates to the Company's 19961997
Annual Meeting of Shareholders (the "Annual Meeting") to be held at the main
offices of the Company's subsidiary, Durametallic Corporation ("Durametallic"),
at 2100 Factory Street, Kalamazoo, Michigan,Miami Valley
Research Park, BDM Conference Center, 1900 Founders Drive, Dayton, Ohio at 1:30
p.m. on Thursday, April 25,
1996.24, 1997.
VOTING SECURITIES
The Company has one class of stock outstanding, namely common stock, $1.25
par value (the "Common Stock"), of which there were 24,461,76123,504,980 shares
outstanding as of March 8, 1996.7, 1997. Only holders of Common Stock whose names
appeared of record on the books of the Company at the close of business on March
8, 19967, 1997 are entitled to notice of and to vote at the Annual Meeting. Each share
entitles the holder thereof to one vote.
The holders of a majority of the shares of Common Stock outstanding as of
the record date, whether present in person or represented by Proxy, constitute a
quorum at the Annual Meeting. Both shares as to which the holder abstains from
voting on a particular matter, and broker "non-votes" (being street-name shares
which the record holder refrains from voting because of the absence of required
instructions from the beneficial owner), will count towards the determination of
whether a quorum is present at the Annual Meeting.
ACTIONS TO BE TAKEN UNDER THE PROXY
Unless otherwise directed by the giver of the Proxy, all properly executed
Proxies will be voted for the election of JohnDiane C. Harris, William M. Jordan,
and James S. Haddick, Kevin E. Sheehan and
R. Elton WhiteWare for three year terms as directors of the Company; for James S.
Ware for a one year term as a director;in favor of
changing the Company's name to "Durco International Inc."; in favor of the 1997
Stock Option Plan; in favor of the appointment of Ernst & Young LLP as
independent auditors for the Company for 1996;1997; and, at the discretion of the
persons acting under the Proxy, in the transaction of such other business as may
properly come before the meeting or any adjournment thereof.
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Should any nominee named herein for the office of director become unable or
unwilling to accept nomination or election, it is intended that the persons
acting under the Proxy will vote for the election in his or her stead for such
other person as the Board may designate. The Board has no reason to believe that
any of the nominees will be unable or unwilling to serve if elected to office.
The giving of a Proxy does not preclude the right to vote in person, should
the person giving the Proxy so desire. A person giving a Proxy has the power to
revoke the same, at any time before it has been exercised, by giving the Company
written notice bearing a later date than the Proxy, by submission of a later
dated Proxy, or by voting in person at the Annual Meeting (although attendance
at the Annual Meeting will not in and of itself constitute revocation of a
Proxy). All properly executed Proxies will be voted. The proxy voting will be
tabulated by the Company's transfer agent, KeyCorp Shareholder Services,
Cleveland, Ohio,National City Bank, which will also
serve as inspector of election at the Annual Meeting.
ELECTION OF DIRECTORS
The Board currently consists of eleven directors who are divided into three
classes, with one full class being elected at each Annual Meeting of
Shareholders. At the Annual Meeting, the term of the directors serving in the
Class of 19961997 expires, and three directors will be elected to hold office until
the 19992000 Annual Meeting of Shareholders and until their successors are elected
and qualified. Additionally, one director, ROBERT E. FRAZER, will be so elected to hold office for
a one year term.then retire
from the Board after twenty years of distinguished service, including service as
both Audit/Finance Committee Chairman and, most recently, as Executive Committee
Chairman. Under New York law, directors are elected by a plurality of the votes
cast at a meeting of shareholders by the holders of shares entitled to vote in
the election.
Set forth below is information with respect to each nominee for election as
a director and each director whose term of office continues after the Annual
Meeting.
CLASS OF 1997
NOMINEES TO BE ELECTED:
JAMES S. WARE, 60, was elected to the Board on December 14, 1995. He has
served as Chairman and CEO of Durametallic since 1983, and he has announced his
retirement as CEO effective April 12, 1996. He became a director of Durametallic
in 1976. He is a director of First of America Bank Corporation, Cello-Foil
Corporation, a consumer products packaging manufacturer, the Michigan State
University Foundation and the Western Michigan Foundation.
DIRECTORS WHOSE TERM IN OFFICE CONTINUES UNTIL 1997:
ROBERT E. FRAZER, 67, has been a director of the Company since 1976. He was
Chairman of the Board of The Dayton Power and Light Company from 1982 to 1987
and served as its Chief Executive Officer from 1978 through 1984. Mr. Frazer was
also Chairman of the Board of DPL Inc., the parent company of the Dayton Power
and Light Company, from its formation in 1986 until 1988.
DIANE C. HARRIS, 53,54, was elected to the Board in 1993. She is the President
of Hypotenuse Enterprises, Inc., a merger and acquisition services and corporate
development outsourcing company. She was Vice President, Corporate Development,
of Bausch & Lomb, an optics and health care products company, from 1981 until
February,March, 1996. She is a director and Vice PresidentPresident-elect of the Association for
Corporate Growth.
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WILLIAM M. JORDAN, 52,53, has been a director since 1991 and was electedbecame Chairman
of the Board in February, 1996 to become effective at the Annual
Meeting.April, 1996. He has been President and Chief Executive Officer
since 1993. He was elected Executive Vice President in 1990 and promoted to
President in 1991. He served as Chief Operating Officer from 1990 to 1993. He
became a Group Vice President in 1984 and joined the Company in 1972. He is a
director of National
City Bank, Dayton, NIBCO, a manufacturer of flow control products, and Thomas
Industries, a manufacturer of lighting fixtures, air compressors and vacuum
pumps.
JAMES S. WARE, 61, was elected to the Board in 1995. He is Chairman of a
Company subsidiary, Durametallic Corporation. He served as Chairman and CEO of
Durametallic from 1983 to April, 1996. He became a director of Durametallic in
1976. He is a director of First of America Bank Corporation, Cello-Foil
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Corporation, a consumer products packaging manufacturer, the Michigan State
University Foundation and the Western Michigan Foundation.
CLASS OF 1999
DIRECTORS WHOSE TERM IN OFFICE CONTINUES UNTIL 1999:
JOHN S. HADDICK, 67, was Chairman of the Board from 1990 until April, 1996.
He resigned as Chief Executive Officer in 1993 after approximately eight years
of service in this capacity. He was President from 1983 to 1991 and became a
director of the Company in 1983. He joined the Company in 1953. He is also a
director of Bank One, Dayton, NA and Price Brothers Company, a supplier of
concrete products.
KEVIN E. SHEEHAN, 51, was elected to the Board in 1990. He is a general
partner of the CID Equity Partners, a venture capital firm that concentrates on
entrepreneurial midwestern companies. He was a Vice President with Cummins
Engine Company, a manufacturer of diesel engines and related components, from
1980 until 1993.
R. ELTON WHITE, 54, was elected to the Board in 1993. He retired in 1994 as
President and a director of NCR Corporation, a computer systems manufacturer,
after over 25 years of service to this company in various management capacities.
He is a director of Keithley Instruments, an electronics test and measurement
concern, Kohl's Corporation, a department store company, and Verifone
Corporation, a computer and communications systems company.
CLASS OF 1998
DIRECTORS WHOSE TERM IN OFFICE CONTINUES UNTIL 1998:
HUGH K. COBLE, 61,62, Vice Chairman of Fluor Corporation, a major engineering
and construction firm, was elected to the Board in 1994. He joined Fluor
Corporation in 1966, where he has held a series of increasingly responsible
management positions and has been a director since 1984. He is also a director
of Beckman Instruments, Inc., which sells medical instruments.
ERNEST GREEN, 57,58, was elected to the Board in 1991. He is the founder and
President of EGI, a supplier of automotive components. He is a director of Bank
One, Dayton, NA, DPL Inc., the parent company of The Dayton Power and Light
Company, a public utility, Acordia, Inc., an insurance brokerage firm, and Eaton
Corporation, a supplier of automotive products.
RICHARD L. MOLEN, 55,56, was elected to the Board in February, 1995. He is the
Chairman, President and CEO of Huffy Corporation, a consumer products and retail
services concern, which he joined in 1968. He has been President of Huffy
Corporation since 1986 and a director there since 1984. He is also a director of
The Huntington National Bank and Alltrista Corporation, a diversified consumer
products and commercial services firm.
JAMES F. SCHORR, 63,64, has been a director of the Company since 1986. Mr.
Schorr is President of JFS Consulting, a firm consulting with the chemical and
plastics industries. He is also Vice Chairman and a director of Osterman &
Company, a plastics resins broker and distributor. He was President of USI
Chemicals Division and Corporate Vice President of Quantum Chemical Corporation
from 1987 to 1989.
He was also Vice Chairman of Old World Trading Company, a
distributor of automotive products and industrial chemicals, from 1988 to 1990.
CLASS OF 1999
NOMINEES TO BE ELECTED:
JOHN S. HADDICK, 66, has been Chairman of the Board since 1990 and will so
serve until the Annual Meeting when Mr. Jordan will assume the position. He
resigned as Chief Executive Officer in 1993 after approximately eight years of
service in this capacity. He was President from 1983 to 1991 and became a
director of the Company in 1983. He served as President and Chief Operating
Officer during 1984 and as Executive Vice President and Chief Operating Officer
during 1983. He joined the Company in 1953. He is also a director of Bank One,
Dayton, NA and Price Brothers Company, a supplier of concrete products.
KEVIN E. SHEEHAN, 50, was elected to the Board in 1990. He is a general
partner of the CID Equity Partners, a venture capital firm that concentrates on
entrepreneurial midwestern companies. He was a Vice President with Cummins
Engine Company, a manufacturer of diesel engines and related components, from
1980 until 1993.
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R. ELTON WHITE, 53, was elected to the Board in 1993. He retired in
February 1994 as President and a director of NCR Corporation, a computer systems
manufacturer, after over 25 years of service to this company in various
management capacities. He is a director of Keithley Instruments, an electronics
test and measurement concern, Kohl's Corporation, a department store company,
and Verifone Corporation, a computer and communications systems company.
Any shareholder who intends to nominate a director must, pursuant to
Article III, Section 2 of the By-Laws of the Company as approved by the
Shareholders at the 1986 Annual Meeting of Shareholders, give
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written notice of such intention to the Secretary of the Company. The notice
must be received at the principal executive offices of the Company not less than
50 days prior to the meeting (or if fewer than 60 days notice or prior public
disclosure of the meeting date is given or made to shareholders, not later than
the tenth day following the day on which the notice of the date of the meeting
was mailed or such public disclosure was made) and must include specified
information about the nominee and the shareholder. The proposed nomination will
be referred to the Executive Committee of the Board for further consideration.
No shareholder has to date notified the Company of any intention to nominate a
director.
BOARD COMMITTEES: MEMBERSHIP AND FUNCTIONS
EightSeven meetings of the Board were held in 1995.1996. The number of meetings held
by each of the three standing committees of the Board in 19951996 was as follows:
Audit/Finance Committee -- three;four; Compensation Committee -- six;five; Executive
Committee -- three.two.
The Audit/Finance Committee, of which Mr. White is chairman and Mrs. Harris
and Messrs. Coble, GreenHaddick and MolenWare are members, recommends annually the
appointment of independent auditors for the Company. The Committee also advises
the Board on strategic financial matters, including making recommendations to
the Board on acquisitions, divestitures, major financings, pension fund
performance, capital structure and dividend policy. The Committee meets with the
independent auditors, internal auditors and management personnel to review the
scope and results of the annual audit of the financial statements of the Company
and the recommendations of the independent auditors pertaining to accounting
practices, policies and procedures and overall internal controls. The Committee
also approves major capital expenditures made in the ordinary course of
business.
The Compensation Committee, of which Mr. Sheehan is chairman and Messrs.
Frazer, Green, Molen and Schorr are members, has the responsibility of
establishing executive compensation designed so thatthrough which officers and key management
personnel are compensated in a manner which is internally equitable, externally
competitive and an incentive for effective performance in the best interest of
shareholders. The Committee has the authority of the Board of Directors to fix
the compensation of the officers, including the Chief Executive Officer, who are
elected by the Board. The Committee also administers the Company's stock option,
restricted stock and incentive compensation plans. It is responsible for
reviewing the management succession plan and for recommending changes in
director compensation to the Board. The report of the Committee on the Company's
executive compensation practices is located on page 1312 of this Proxy Statement.
The Executive Committee, of which Mr. Frazer is chairman and Messrs.
Haddick, Jordan, Sheehan and White are members, is empowered to exercise the
full authority of the Board of Directors except as to matters not delegable to a
committee under the New York Business Corporation Law. The Committee makes
recommendations to the Board for the positions of Chairman of the Board,
President, Chief Executive Officer 4
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and candidates for director. The Committee
also reviews and makes recommendations on Board self governance matters to the
Board.
Each of the directors attended, in the aggregate, 75% or more of the 19951996
meetings of the Board and of the standing committees on which he or she served.
DIRECTOR COMPENSATION
Each non-employee4
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BOARD INTERNAL GOVERNANCE GUIDELINES
During 1996, the Board adopted internal self governance guidelines. Under
these guidelines, the outside directors annually elect an outside director receives an annual retaineras
the Chairperson of $14,100. A
director also receives $750the Executive Committee. In addition to his/her Executive
Committee responsibilities, this Chairperson is responsible, among other things,
for each meetingconducting executive sessions of the Board of Directors(without the CEO or former inside
director present), approving Board meeting agendas and $600
for each meeting of a committee ofotherwise working
closely with the CEO to cause the Board which he or she attends asto function in the effective and
independent way desired by the directors. These guidelines further require
directors to accept a committee member. Asignificant portion of their director who attends a meeting of a committee on which he or
she does not serve receives one-half of the regular meeting fee. Committee
chairmen receive an additional $500 per committee meeting. In addition, the
chairman of the Executive Committee receives an additional $5,000 per year for
service in this capacity. Furthermore, Mr. Haddick received an additional
$40,000 per year for service as Chairman of the Board since the 1995 Annual
Meeting of Shareholders.
Under the Company's current deferred compensation arrangements for
directors, a director may elect to defer, in the
form of cashcommon stock. The guidelines mandate that a candidate for director must
own a minimum personal investment in Company common stock as a prerequisite for
Board endorsement for election to the Board by shareholders. This self
governance program provides a process to review CEO, individual director and
with interest,full Board performance. Finally, these guidelines require the receiptoffer of
resignation by a director at the end of a term of office when the director's
principle occupation has changed during the term, while imposing term limits on
newly elected directors.
DIRECTOR COMPENSATION
The philosophy of the annual retainer and other meeting attendance fees payable to
him or her asBoard is that a significant component of director
until he or she terminates Board service. A director
may alternatively elect to have this deferred compensation investedshould be paid in the form of Common Stock to be received after terminationStock. In 1996, approximately
64% of Board service.the aggregate compensation provided directors was in the form of Common
Stock.
Under the Company's 1989 Restricted Stock Plan, each non-employee director
receives 300 shares of Restricted Common Stock per year of the term for which he
or she is elected to the Board at an Annual Meeting of Shareholders. Dividend
and voting rights attach upon receipt of the Restricted Common Stock, and the
Restricted Common Stock vests at the rate of 300 shares per year, unless the
Restricted Common Stock is forfeited back to the Company due to earlier
termination of Board service. A director may also elect to defer this
compensation until termination of Board service.
During 1995, each non-employee director, under the Company's Retirement
Compensation Plan for Directors, received an amount of $1,500 which was placed
into a trust and deferred with interest until the director terminates service on
the Board of Directors. Each director elected to receive such deferred payments
either in a lump sum or in certain installments after leaving the Board. The
Board terminated further contributions to this plan effective December 31, 1995.
At the same time, the Board increased the annual retainer from $12,600 to
$14,100 (which was the first retainer increase since 1989), in an amount equal
to the terminated contribution to the Retirement Compensation Plan.
Finally, non-employeeNon-employee directors may also elect to receive discounted stock options,
under the Company's 1989 Stock Option Plan, which are in lieu of and have a fair
market value at time of grant equal to the elected portion of the annual
retainer otherwise payable to the director.
Each non-employee director receives an annual retainer of $14,100. A
director also receives $750 for each meeting of the Board of Directors and $600
for each meeting of a committee of the Board which he or she attends as a
committee member. A director who attends a meeting of a committee on which he or
she does not serve receives one-half of the regular meeting fee. Committee
chairmen receive an additional $500 per committee meeting. In addition, the
chairman of the Executive Committee receives an additional $5,000 per year for
service in this capacity.
Under the Company's current deferred compensation arrangements for
directors, a director may elect to defer, in the form of Common Stock or cash,
the receipt of the annual retainer and other meeting attendance fees payable to
him or her as a director, until he or she terminates Board service.
The Company maintains a liability insurance policy with the Chubb Group of
Insurance Companies covering part of the Company's statutory rightsright and
obligationsobligation to indemnify directors and officers and partially covering directors
and officers in some instances in which they might not otherwise be indemnified
by the Company. The current policy is for a onethree year term (expiring July 29,
1996)August 30,
1998) at aan annual cost of approximately $93,100.$139,702.
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SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS
Set forth in the table below is information as of March 1, 19961997 with
respect to the number of shares of Common Stock of the Company beneficially
owned by each director and certain executive officers of the Company and by all
directors and officers as a group. For purposes of this table, an individual is
considered to "beneficially own" any shares of Common Stock (i) over which he or
she exercises sole or shared voting or investment power or (ii) of which he or
she has the right to acquire beneficial ownership at any time within 60 days
after March 1, 1996.1997.
(A) (B)
(A) ------------------------------
----------------------------------------------- --------------------------------------------
NUMBER OF SHARES, INCLUDING
OPTION SHARES WHICH MAY OPTION SHARES SHOWN IN WHICH MAYCOLUMN (A),
BE ACQUIRED COLUMN (A), BENEFICIALLY OWNED
WITHIN 60 DAYS BENEFICIALLY OWNED AS OF MARCH 1, 1995(A)(B)
--------------------- ------------------------------1997(a)(b)
-------------------------- --------------------------------------------
Hugh K. Coble.................................Coble........................ -- 1,4081,837
Curtis E. Daily............................... 34,180 69,254(c)Daily...................... 41,823 78,834(c)(d)(f)
Robert E. Frazer..............................Frazer..................... -- 4,8426,030
Ernest Green..................................Green......................... 2,114 5,7926,690
John S. Haddick............................... 51,480 131,452(c)(d)Haddick...................... 56,160 134,728(c)
Diane C. Harris...............................Harris...................... 394 2,0322,907
Bruce E. Hines................................ 30,590 63,098(c)Hines....................... 37,803 78,738(c)(d)
William M. Jordan............................. 44,340 124,999(c)Jordan.................... 65,619 186,741(c)(d)
Richard L. Molen..............................Molen..................... -- 1,2002,098
James F. Schorr...............................Schorr...................... -- 5,1877,070
George A. Shedlarski.......................... 26,650 68,879(c)Shedlarski................. 34,533 80,736(c)(d)
Kevin E. Sheehan..............................Sheehan..................... -- 2,1123,068
Mark E. Vernon................................ 21,480 40,680(d)Vernon....................... 16,843 40,144(c)(d)
James S. Ware................................. 30,097 1,097,863(e)Ware........................ -- 1,044,376
R. Elton White................................White....................... 788 1,688
1910,125
20 Directors and Officers as a
Group.......... 293,869 1,784,570(c)(d)Group.............................. 299,188 1,808,560
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(a) Unless otherwise indicated, voting power and investment power are exercised
solely by the named individual or are shared by such individual and his or
her immediate family members.
(b) Other than Mr. Ware, who beneficially owns about 4.4%, no director or
officer beneficially owns in excess of 1% of the outstanding shares of
Common Stock of the Company. All directors and officers as a group own 7.2%7.6%
of the outstanding shares of Common Stock of the Company. Percentages are
calculated on the basis of the number of shares outstanding at March 1, 19961997
plus the number of shares subject to outstanding options held by the
individual or group which are exercisable within 60 days thereafter.
(c) Includes the following shares held as of December 31, 19951996 by The Duriron
Company, Inc. Savings and Thrift Plan Trust for the following individuals:
Mr. Haddick -- 2,539;1,335; Mr. Jordan -- 10,498;22,600; Mr. Hines -- 1,806;2,050; Mr.
Shedlarski -- 4,409;4,695; Mr. Daily -- 1,632;1,881; and all directors and executive
officers as a group -- 28,732.46,695. This plan's participants have the right to
vote shares held for their accounts in this plan, but disposition of the
shares is restricted and may be made only in accordance with the terms of
the plan.
(d) Includes 28,500 shares held for the benefit of Mr. Jordan, 7,500 shares each held
by Mr. Jordan,for the benefit of Mr. Hines, Mr. Shedlarski and Mr. Daily, and 15,000 shares
held byfor the benefit of Mr. Vernon and 87,90088,500 shares held byfor the benefit of
all directors and executive officers as a group, which are subject to
restrictions on resale and forfeiture back to the Company, but which have
full voting and
dividend rights and which are eligible for deferralrights. Receipt of such shares has been deferred until
termination of service.
(e) Includes 4,529 shares held as Trustee of the James S. Ware Trust, 155,660
shares held as Trustee of the T. R. Ware "Grantor Retained Annuity Trust"
("GRAT"), 155,660 shares held as Trustee of the J. A. Ware GRAT, 137,795
shares held as Trustee of the Margaret M. Ware Trust, 298,014279,112 shares held as
Custodian of the James S. Ware Agency Account, 155,660155,600 shares held as
Trustee of the J. S. Ware GRAT, 155,660 shares held as Trustee of the S. D.
Ware GRAT, and 4,788 shares allocated to the individual account of James S.
Ware under the Durametallic ESOP.
(f) Retired effective March 1, 1997
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain summary information concerning the
compensation provided by the Company to the Chief Executive Officer and its four
other highest compensated officers in 1995.1996.
SUMMARY COMPENSATION TABLE(1)TABLE (1)
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------------------------------------------------- ------------------------------------
AWARDS ANNUAL COMPENSATIONPAYOUTS
------------------------- PAYOUTS
---------------------------------------- -------
(E) (F) (G)--------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
OTHER RESTRICTED SECURITIES (H) (I)
(C) (D)
ANNUAL STOCK UNDERLYING LTIP ALL OTHER
(A) (B)
SALARY BONUS COMPENSATION AWARD(S) OPTIONS/SARS PAYOUTS COMPENSATION
NAME OF PRINCIPAL POSITION YEAR ($) ($)(2) ($)(3) ($)(4) (#) ($)(5) (#) ($)(6)
($)(7)
- --------------------------------------------------------- ----- -------- -------- ------------ ---------- ------------ --------------- ------------
William M. Jordan............Jordan........... 1996 396,308 484,979(7) 0 21,000 57,000 218,635 11,630
Chairman, President and 1995 298,615 324,873(8)324,873 0 0 12,000 0 11,630
President and Chief Executive Officer 1994 275,000 262,078 42 0 12,000 0 4,221
Executive................
Officer 1993 265,980 101,120 1,467 0 8,000 69,120 2,208
Bruce E. Hines...............Hines.............. 1996 233,265 206,327(7) 0 0 7,000 129,808 11,237
Senior Vice President and 1995 197,617 168,822(8)168,822 0 0 7,000 0 11,237
Senior Vice President andChief Administrative 1994 182,200 132,867 0 0 6,750 0 5,473
Chief Administrative 1993 180,861 64,228 0 0 4,500 57,960 5,426
Officer
George A. Shedlarski.........Shedlarski........ 1996 228,810 170,513 0 0 7,000 97,478 10,042
Group Vice President 1995 194,363 144,191 0 0 7,000 0 10,042
Group Vice President 1994 179,200 115,101 0 0 6,750 0 5,274
1993 177,631 50,783Curtis E. Daily............. 1996 210,071 120,362 0 0 4,500 43,680 2,664
Curtis E. Daily..............7,000 95,100 10,042
Group Vice President 1995 175,047 143,710 0 0 7,000 0 10,042
Group Vice President 1994 155,435 126,184 0 0 6,750 0 5,274
1993 137,677 35,105Mark E. Vernon.............. 1996 211,708 168,531 0 0 4,500 29,280 4,130
Mark E. Vernon...............7,000 95,100 15,399
Group Vice President 1995 178,551 127,948 0 0 7,000 0 18,509
Group Vice President 1994 163,982 86,658 0 0 6,750 0 11,395
1993 154,195 61,746 0 225,000 10,000 36,666 13,112
- ---------------
(1) The salary, annual bonus and long term payouts may be deferred with interest
by the recipient until retirement. The annual bonus and long term payouts
may also be deferred in the form of Common Stock.
(2) No increase in the base salary of these officers was made in 1994, except
for a promotional increase to Mr. Daily.
(3) Reflects annual bonus earned but actually paid in following calendar year.
(4)(3) Does not include value of certain perquisites which are less than 10% of
annual salary but includes certain interest credited to deferred
compensation.
(5)(4) Messrs. Jordan, Hines, Shedlarski and Daily received a special grant of
15,000 shares of restricted stock in 1991 at the then current market value
of $14.80 (adjusted for a three-for-two split in 1994) per share, and Mr.
Vernon received a counterpart grant in 1993 at then current (and so
adjusted) market value of $15.00 per share. At the market price on December
31, 1995, the restricted shares have an aggregate value of $350,625 per
individual. One-half of the restricted stock
grant to Messrs. Jordan, Hines, Daily and Shedlarski vested in February,
1996 and is no longer restricted. Mr. Jordan received an additional grant of
21,000 shares in April, 1996 upon his election to the additional position as
Chairman of the Board and the aggregate value of his restricted shares
totals $759,500 as of December 31, 1996. At this date, the currently
restricted shares have an aggregate value of $203,438 for the other
aforementioned individuals except Mr. Vernon, whose value is $406,875. The
remainingaforementioned restricted shares represent the only such restricted holdings
of such officers. Regular dividends are payable and voting rights apply on all such restricted
shares, which may be deferred.
(6)(5) Based on three year performance plan ending in December of noted year but
actually paid in following year. Payment to all above named officers was
one-half cash and one-half shares of Common Stock of the Company at then
equal fair market value.
(7)value except for Mr. Jordan, Mr. Hines and Mr. Shedlarski.
They elected to defer payment until retirement and to receive all of their
payment in the form of Common Stock. Their total award was increased 2.5% as
a result, with the procedure for determining the number of shares fixed
under this plan.
(6) Reflects Company contributions to officer accounts in defined contribution
benefit plans (which are generally available to salaried employees) in the
following amounts: Jordan -- $5,400; Hines -- $5,400; Shedlarski -- $5,400;
Daily -- $5,400 and Vernon -- $13,860$10,500 (Mr. Vernon participates in a Company
subsidiary's profit sharing plan in which no other officers participate).
Also reflects the computation, under SEC rules, of the actuarial value to
these officers of the non-term portion of an executive "split dollar" life
7
10
insurance program, in the following amounts: Jordan -- $6,230;
Hines -- $5,837; Shedlarski -- $4,642; Daily -- $4,642 and Vernon -- $4,649.
(8)(7) Mr. Jordan elected to take all his 19951996 bonus, and Mr. Hines elected to take
one-half of his 19951996 bonus, in the form of 12,709 shares and 3,383 of Common Stock, respectively, payable
after retirement, which resulted in all of Mr. Jordan's and one-half of Mr.
Hines' bonus being increased 5% in value over its cash equivalent under the
applicable executive incentive plan. The procedure for determining the
number of shares payable in lieu of cash is also fixed under this plan.
7
10
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The following table contains information concerning the grant of Stock
Options under the Company's 1989 Stock Option Plan to its executives shown on
the Summary Compensation Table. No Stock Appreciation Rights were granted in
19951996 either in tandem with such Stock Options or otherwise, and no previously
outstanding Stock Options were amended in 19951996 to change the exercise price.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------------------
VALUE AT ASSUMED ANNUAL
RATES OF STOCK PRICE
(B) (C) APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM
--------------------------------------------------------------- -------------------------
(a) (b) (c) (d) (e) (f) (g)
NUMBER OF % OF TOTAL
TERM
SECURITIES OPTIONS (D) -----------------------
UNDERLYING GRANTED TO EXERCISE OR
(E)
(A) OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION (F) (G)
NAME GRANTED(#)(1) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- --------------------------------------------------------------- ------------- ------------ ----------- ---------- -------- ------------------
William M. Jordan...............Jordan.............. 12,000 9.88% $ 27.56256.2 26.50 10/19/05 $208,007 $527,13022/06 199,988 506,810
45,000 23.3 26.00 4/24/06 735,807 1,864,679
Bruce E. Hines..................Hines................. 7,000 5.76% $ 27.56253.6 26.50 10/19/05 $121,337 $307,49322/06 116,600 295,639
George A. Shedlarski........... 7,000 3.6 26.50 10/22/06 116,600 295,639
Curtis E. Daily.................Daily................ 7,000 5.76% $ 27.56253.6 26.50 10/19/05 $121,337 $307,493
George A. Shedlarski............ 7,000 5.76% $ 27.5625 10/19/05 $121,337 $307,49322/06 116,600 295,639
Mark E. Vernon..................Vernon................. 7,000 5.76% $ 27.56253.6 26.50 10/19/05 $121,337 $307,49322/06 116,600 295,639
- ---------------
(1) All Stock Options granted were for a ten year term. Of these options, the
following were granted as incentive stock options: Mr. Jordan -- 0;6,923, all
others -- 3,108.2,865 per person. The remaining options granted to each executive
were nonqualified. The exercise price of all these Stock Options was equal
to the fair market value on the date of grant, with pro rata vesting
occurring on each grant anniversary until fully vested on the third
anniversary of grant. All these Stock Options have tandem limited rights
which, in general, allow the optionee to receive the value of the Stock
Option in the event of a change of control of the Company.
(2) Mr. Jordan received two stock option grants during 1996. In consideration of
his election by the Board to the additional position as Chairman of the
Board effective April 25, 1996, he received a grant of 45,000 shares at the
then current market price of $26.00 per share which expires April 24, 2006.
He also received a grant in October, 1996 of 12,000 shares at the then
current market price of $26.50 per share expiring October 22, 2006, at the
same time that the Compensation Committee authorized its customary annual
grants to the officers and selected key employees of the Company. The two
grants together constituted 29.5% of the total options granted during the
year. The total potential realizable value at a 5% assumed annual
appreciation rate for the option term was $935,795 and was $2,371,489 at a
comparable 10% rate.
8
11
OPTION/SAR EXERCISES AND HOLDINGS
For the executives named in the Summary Compensation Table, the following
table sets forth information concerning the exercise of Stock Options and/or
SARs during 19951996 and the unexercised Stock Options and SARs held by such
executives as of the end of 1995.1996.
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR
FISCAL YEAR-END OPTION/SAR VALUES
(D)
(E)(a) (b) (c) (d) (e)
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SAR'S OPTIONS/SAR'S
(B) AT FY-END(#) AT FY-END($)
SHARES (C) ------------- ----------------
(A)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#)(1) REALIZED($) UNEXERCISABLE UNEXERCISABLE(2)
- --------------------------------------------------------------- -------------- ----------- ------------- ----------------
William M. Jordan...............Jordan.............. 8,000 112,000 50,620/71,280 606,332/127,270
Bruce E. Hines................. 1,000 9,375 37,803/15,297 441,699/44,451
George A. Shedlarski........... -- -- 44,340/28,560 408,327/120,550
Bruce E. Hines.................. 7,000 94,703 20,477/26,623 186,222/152,40434,533/14,967 392,768/40,450
Curtis E. Daily................. 3,540 57,384 22,485/27,065 228,650/156,127
George A. Shedlarski............ 5,000 79,376 26,650/15,850 222,812/64,031Daily................ -- -- 41,823/14,727 521,812/37,540
Mark E. Vernon..................Vernon................. 900 10,462 11,032/23,568 88,183/126,7847,519 16,843/23,857 168,712/149,024
- ---------------
(1) Mr. Hines and Mr. ShedlarskiJordan paid the exercise price for certain shares through the exchange
of previously owned shares of Common Stock, so that Mr. Hines and Mr. ShedlarskiJordan realized a
net increase in share holdings of 5,082
and 3,082, respectively, as the result of these exercises.3,863.
(2) Based upon the excess, where applicable, of the market value of $23.375$27.125 per
share at December 31, 1995,1996, of the shares covered by Stock Options held by
these officers, over the applicable exercise prices of such Stock Option
shares.
9
12
LONG-TERM INCENTIVE PLAN
The following table provides information concerning awards made for 19951996
under the Company's Long-Term Incentive Plan to the executives shown on the
Summary Compensation Table.
LONG-TERM INCENTIVE PLANS
AWARDS IN LAST FISCAL YEAR
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK PRICE-BASED PLANS
-------------------------------------------
(B) (C)---------------------------------
(a) (b) (c) (d) (e) (f)
NUMBER OF SHARES, PERFORMANCE OR OTHER (D) (E) (F)
(A)
UNITS OR OTHER PERIOD UNTIL MATURATION THRESHOLD TARGET MAXIMUM
NAME RIGHTS (#)(1) OR PAYOUT(2) ($ OR #))(3) ($ OR #)(4)) ($ OR #)(5))
- ------------------------------------------------------- ----------------- ----------------------- ----------- ----------- -------------------- ------- -------
William M. Jordan(6)Jordan (4)....... 1,516 Units18.5 Rights February 19981999 Payout 758 Units 1,516 Units 3,032 UnitsNote 3 197,516 395,032
Bruce E. Hines(6)Hines (4).......... 953 Units11.3 Rights February 19981999 Payout 477 Units 953 Units 1,906 UnitsNote 3 120,023 240,046
George A. Shedlarski(5)..... 8.0 Rights February 1999 Payout Note 3 85,218 170,436
Curtis E. Daily(7)Daily (5)......... 716 Units8.0 Rights February 19981999 Payout 358 Units 716 Units 1,432 Units
George A. Shedlarski(7).... 716 Units February 1998 Payout 358 Units 716 Units 1,432 UnitsNote 3 85,218 170,436
Mark E. Vernon(7)Vernon (5).......... 716 Units8.0 Rights February 19981999 Payout 358 Units 716 Units 1,432 UnitsNote 3 85,218 170,436
- ---------------
(1) Each unit valued at $100.00.Right is a predetermined percentage of total Plan award "pool," if
earned and applicable.
(2) Performance measured against preestablished performance goal (three year net
asset return goalPayout is based upon economic value added ("EVA") concept and requires, as determineda
prerequisite, that the Company earn more than its cost of capital on the
basisaverage net assets used to generate its earnings. Specified annual
percentages (whether positive or negative) of a premium over a published
independent indexannual EVA performance and
annual EVA improvement or decline during each year of capital spending by Company's primary markets) for all
awardees for the three year period of January 1, 1995 through December 31,
1997. Any paymentPlan cycle
are used to the above named officers will be one-half cash and
one-half in shares of Common Stock at then equivalent fair market value.calculate actual awards, if any.
(3) Payout at threshold (80% of "net asset return" performance target) is 50% of
grant.
(4) Payout at target is 100% of grant.
(5) Maximum payout (125% of "net asset return" performance target and stipulated
revenue growth over capital spending raterequires net minimally positive cumulative EVA
calculation for three year period, with each individual's share of such
index) is 200% of grant.
(6)payout being equal to his applicable Right.
(4) Target unit award is 45% of salary midpointreference rate of position held.
(7)(5) Target unit award is 35% of salary midpointreference rate of position held.
10
13
PENSION PLANS
The following table shows the estimated annual pension benefits payable to
a covered participant at normal retirement age of 65 under the Company's
qualified defined benefit pension plan and under a nonqualified supplemental
pension plan that provides certain additional retirement benefits that would
otherwise be denied participants by reason of certain Internal Revenue Code
limitations on qualified plan benefits,benefits. The table is based on each participant's
components of total remuneration that iswhich are covered under the plans and his or
her years of service with the Company. All executive officers listed in the
Summary Compensation Table except Mr. Vernon are covered by these plans.
PENSION PLAN TABLE (1)TABLE(1)
YEARS OF SERVICE(2)
-------------------------------------------------------------
REMUNERATION(3) 15 20 25 30 35
- --------------- --------- --------- --------- --------- ---------
300,000 $ 200,000 39,667 52,890 66,112 79,334 92,557
300,000 60,667 80,890 101,112 121,334 141,55760,518 $ 80,691 $ 100,864 $ 121,036 $ 141,209
400,000 81,667 108,890 136,112 163,334 190,55781,518 108,691 135,864 163,036 190,209
500,000 102,667 136,890 171,112 205,334 239,557102,518 136,691 170,864 205,036 239,209
600,000 123,667 164,890 206,112 247,334 288,557123,518 164,691 205,864 247,036 288,209
700,000 144,667 192,890 241,112 289,334 337,557144,518 192,691 240,864 289,036 337,209
800,000 165,518 220,691 275,864 331,036 386,209
900,000 186,518 248,691 310,864 373,036 435,209
- ---------------
(1) Benefits are calculated as annual straight life annuity amounts beginning at
age 65 and are not reduced by any federal Social Security benefits. Optional
payment forms of actuarial equivalence are also available.
(2) Current credited years of service for pension benefit calculation:
Jordan -- 23;24; Shedlarski -- 23;24; Hines -- 24;25; Daily -- 31.27.
(3) Covered compensation for pension benefit calculation includes only base
salary and annual bonus shown on the Summary Compensation Table. The benefit
calculation is based upon average annual base salary and annual bonus for
the three highest consecutive years during the participant's last ten years
preceding retirement.
11
14
REPORT OF COMPENSATION COMMITTEE
CONCERNING EXECUTIVE COMPENSATION
OVERALL COMPENSATION POLICY AND BENCHMARK EVALUATION PROCESS
The Compensation Committee of the Board consists of five directors, none of
whom is a present or former officer or employee of the Company. The
Board-adopted statement of purposes and responsibilities of the Compensation
Committee states that the Committee is charged with the broad responsibility of
seeing that officers and key management personnel are effectively compensated in
terms of salaries, supplemental compensation and benefits which are internally
equitable and externally competitive. Within that framework, and in order to tie
compensation directly to performance, the Committee has adopted an "incentive-
leveraged" compensation policy which offers the Company's officers the
opportunity to supplement their base salaries with substantial cash and
stock-based incentives, all as more fully described below. The Committee
believes that this incentive leveraged policy was a contributing factor in
motivating executive management to guidelead the Company to record annual sales, net
earnings and incoming business and market price of an outstanding share of Common
Stock in 1995.1996.
The Committee has established, for all officer personnel, including the
Chief Executive Officer, a compensation policy which would place the officers'
total annual cash compensation at the sixty-fifth percentile of companies of
comparable size, if the Company attains its target financial goals under its
incentive plans described hereafter. The Committee established this sixty-fifth
percentile benchmark based upon data received by the Committee from Hay
Associates and Hewitt Associates. The Hay database included a broad cross
section of companies in order to allow the Committee to consider overall
executive compensation trends.
In 1995, the Committee completed an independent comprehensive overall review of
the Company's executive compensation programs, including consideration of
several specially commissioned reports prepared by Hewitt Associates. The
Committee tested and validated the accuracy of the Hay data used to establish
this 65th percentile benchmark by comparing it to the counterpart benchmark
calculated by Hewitt Associates, which used a job title/survey methodology in
comparison to the Hay Point methodology.
INCENTIVE PLANS -- DESIGN AND STRATEGY
Annual and Long-Term Incentive Plans allow opportunities, through effective
performance against goals, for significant additional cash and stock
compensation for the Chief Executive Officer and other officers. Performance
goals, which must be met in order to earn payment of incentive compensation
target awards, are set to reward superior performance, and incentiveperformance. Incentive awards are
payable only if the Company achieves or exceeds predetermined results against
quantitative financial performance measures designed to benefit shareholders,
such as return on shareholders' equity, economic value added ("EVA") and/or
return on net assets ("RONA"). During 1995,1996, for the Company's Chief Executive
Officer, annual and long-term incentives were set, when combined, to be 110% of
his individual salary range midpointreference rate if all goals were met. In comparison,
the total combined annual and long-term incentives were set within a band of 85%
to 100% of salary range midpointreference rate for other officers listed in the Summary
Compensation Table on page .
Both the Annual and Long-Term Plans contain a leveraged payment schedule
for performance both above the minimum performance threshold and above goal.
Under this approach, performance above the threshold but below goal gives rise
to awards which are a lesser percentage of the target payment than the level of
goal attainment actually achieved. Under the Annual Plan, for example,
attainment of 75% of goal
12
15
performance (the minimum threshold for any payment), provides an award of 40% of
the target payment. However, the attainment of above goal performance gives rise
to payments which are a higher percentage of the target payment than the
percentage of goal actually attained. Under another Annual Plan example,
attainment of 125% of goal provides an award which is 150% of the target payment
(or the maximum award payable under the Annual Plan).7.
The specific performance goals under these incentive plans are established
by the Compensation Committee. In the case of the Annual Plan, the goals for a
year are set at or before the beginning of the year and, foryear. For the Long-Term Plan, the
goals for a "performance cycle" (customarily three years) are set at or before
the beginning of the cycle.
Return on net assets (RONA) goals were selected by the Committee as the
predominant measure of performance for both the year 19951996 under the Annual Plan (as
applicable to executive officers). For 1997, the Committee added a diversity
improvement goal to the 1997 Annual Plan, although the 1997 RONA goal remains
the most highly weighted and the target award (expressed as a percentage of
salary reference rate) remains unchanged.
12
15
A RONA goal was also set for the 1993-95 performance cycle under the Long-Term Plan. In the case of the 1995
Annual Plan, the 1995 RONA goals for all officers were fixed and based on
attainment of the Company's financial objectives under its 1995 business plan
approved by the Committee in December, 1994. In the case of the 1993-951994-96 cycle of the Long-Term Plan, a RONAPlan. This
goal was set in February, 1993is calculated through indexation (within a predetermined range) to a fixed
premium over an independently calculated and published rate of growth in capital
spending over this three year period in the primary industries which the
Company's principal products serve. This same RONA based approach was used by
the Committee in establishing the Long-Term Plan cyclescycle covering 1994-96 andthe 1995-97
periods.period. In contrast to this RONA based Long-Term Plan design, the Committee
at its
December, 1995 meeting, adopted an "economic value added" ("EVA")EVA based Long-Term Plan for the 1996-98 period.and 1997-99 periods. Under
this EVA approach, the Long-Term
Plan will be based upon the concept that awards will beare earned by participants only when the Company earns
more than its cost of capital (i.e., weighted equity and debt capitalization)
over the applicable measurement periods. The target
compensation levelTarget Awards (expressed as a
percentage of salary reference rate) for the Chief Executive Officer and the
other officers noted in the Summary Compensation Table was left unchanged fromare the prior plan designsame under this new EVA based plan.both
Long-Term Plan designs.
INCENTIVE PLANS -- 19951996 RESULTS
Consistent with the Company's record net earnings in 1995,1996, Mr. Jordan and
the other officers received above target awards under the 19951996 Annual Plan, since the
Company's financial performance met or exceeded the applicable pre-established
financial goals.Plan. Mr.
Jordan's award was equivalent to 109%122.4% of his 19951996 salary, while the
counterpart range of awards for the other officers noted in the Summary
Compensation Table extended from 71%57.3% to 85%88.5%. In addition to the higher
annual incentive leverage of Mr. Jordan's total cash compensation plan, the
diversity in such percentages derived from the fact that the RONA target for Mr.
Jordan was solely based on total corporate performance, while the officers in
charge of operating business units had a portion of their RONA target based only
upon the RONA performance of the business units for which they were directly
responsible. Pursuant to an Annual Plan
provision adopted by the Committee to incent officers to invest their Annual
Plan awards in Common Stock, Mr. Jordan received a 5% increase in his award by
electing a stockCommon Stock award. TwoOne other officersnoted officer made a similar electionselection
covering all or a portion of their awards.
Nohis award.
Under the 1994-96 Long-Term Plan, Mr. Jordan received an above target award
equal to 55.1% of his 1996 base salary, while the other noted officers received
counterpart awards of 42.6% to 55.6%. These awards were made for the 1993-95 performance cycle of the Long-Term
Plan, sincebased in large part upon
the Company's performance duringattainment of record annual net earnings in both 1995 and 1996.
One-half of this three year period did not meetaward was made in the minimum level for payment.
13
16form of Common Stock to all noted
officers. In addition, Mr. Jordan, Mr. Hines and Mr. Shedlarski elected to
receive the remainder also in the form of Common Stock, with this portion being
increased by 5% to incent such elections.
STOCK-BASED PLANSCOMPENSATION
Stock-based forms of incentive compensation utilized by the Company include
stock options and restricted stock awards. As well as providing incentives,
these programs enhance the commonality of interests between shareholders and
management by encouraging increased share ownership by management.
With regard to stock options, the Committee has adopted a stock option plan
administration policy where options are granted annually to officers and
selected other key employees. The number of options granted in 19951996 to Mr.
Jordan and the other officers was based, in general, upon their job performance,
their respective salary range midpoints,reference rates, the market price of a share of
Common Stock at date of grant and their past receipt of stock option grants. The
Committee also then considered certain
subjective factors in approvingbelieves that these grants includinghelp link the individual job
performanceobjectives of management and
shareholders. The Committee thus intends to continue the annual grants. The
Committee authorized the 1997 Stock Option Plan, subject to shareholder
approval, as discussed on page 18, for that purpose.
In addition, Mr. Jordan received a special stock option grant of 45,000
shares (of the total of 57,000 that he received in 1996) and a special
restricted stock grant of 21,000 shares in recognition of his election to the
additional position of Chairman of the applicableBoard in April, 1996. Both grants
annually vest on a prorated basis over three years.
13
16
The Committee, as part of its review of stock-based compensation, adopted
personal stock ownership guidelines for all the aforementioned officers. These
guidelines require unrestricted personal stock ownership equal to four times
salary for the CEO and two times salary for the other noted officers. The
Committee now intends to give these guidelines substantive impact by increasing
the annual stock option grant, to an executive in compliance, by 20% over what
the officer recipientswill receive when not in compliance. These management guidelines
correspond to the Board's own stock ownership guidelines requiring both minimum
director shareholdings to stand for shareholder election and their abilitya significant
portion of director compensation to helpbe in the Company achieve future goals.form of Common Stock.
The Committee has adopted an Equity Incentive Plan, the purposes of which
include requiring currentthe CEO and other noted officers to make a personal cash
investment in Common Stock (unless waived by the Committee) and providing
participants with substantial incentives to increase share value. Participants
in the Plan include all individuals noted in the Summary Compensation Table.
Features of the Plan include a one-time grant of both 15,000 shares of
Restricted Stock and of a Stock Option covering 15,000 shares to each
participant. The Plan also requires participants, in order to receive full Plan
benefits, not to sell any of their Common Stock acquired from any source during
the ten year term following their grant without Committee consent. Plan
participants may only exercise Stock Options granted under the Plan to the
extent that they have otherwise acquired Common Stock during this term. All of
this Restricted Stock is forfeited if the participant's employment with the
Company terminates (for any reason other than
death, disability or retirement)(except for specified reasons) prior to the fifth anniversary
of his or her grant. One-half of the Restricted Stock award is forfeited if the
participant's employment terminates prior to the tenth anniversary of his or her
grant. Plan participants are also required to accept at least one-half of any
applicable Long-Term Plan awards in the form of Common Stock. Mr. VernonJordan
received a grant
under this Plan in 1993, while the other officers listed in the Summary
Compensation Table received their counterpart grants in 1991. The Committee also
added one new participant to thehis Equity Incentive Plan grant in February, 1996. This
occurred1991 as did the result of the Company's acquisition of Durametallic and the
Board's appointment of a new corporate officer from Durametallic management to
serve as the Company's Group Vice President of this new subsidiary of the
Company.other noted
officers, except for Mr. Vernon who received his grant in 1993.
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Committee has not formally adopted a policy with regard to qualifying
executive compensation plans for tax deductibility under Internal Revenue Code
Section 162(m), which generally limits the corporate tax deduction for
compensation paid to certain executive officers named in the Proxy Statement to
$1 million per year. Current CompanyNondeferred executive compensation is below the level at
which this tax limitation would apply.
K. E. Sheehan, Chairman
R. E. Frazer
E. Green
R. L. Molen
J. F. Schorr
14
17
COMPANY STOCK
PERFORMANCE GRAPH
The following chart compares the cumulative total return, assuming monthly
reinvestment of dividends, of the Company's Common Stock for the five year
period beginning December 31, 19901991 against (i) the Standard & Poor's
Machinery-Diversified Index (which is comprised of companies also in the heavy
duty capital equipment industry) and (ii) the Standard & Poor's 500 Index (which
is a broad equity market index).
TOTAL RETURN TO SHAREHOLDERS
REINVESTED DIVIDENDS
MEASUREMENT PERIOD S&P Machin-
Measurement Period ery-Diversi-
(Fiscal Year Covered) The CompanyMACHINERY-
(FISCAL YEAR COVERED) THE COMPANY S&P 500 fiedDIVERSIFIED
19901991 100.00 100.00 100.00
1991 127.70 130.47 118.88
1992 139.28 140.41 121.30109.06 107.62 102.04
1993 135.54 154.56 179.60106.14 118.46 151.09
1994 157.41 156.60 174.83123.26 120.03 147.07
1995 211.49 215.45 215.75165.61 165.13 181.50
1996 195.86 203.05 226.22
15
18
EMPLOYMENT AGREEMENTS
The Company is a party to contracts with Messrs. Jordan, Hines, Daily,
Shedlarski and Vernon and certain other officers and key employees of the
Company providing for, among other things, the payment of severance benefits in
the event that the individual's employment with the Company is terminated under
specified circumstances within two years after a change in control of the
Company. The severance benefits under each contractthe contracts with the named individuals
include, among other things, payment of the following: (i) twicethree times the sum
of the individual's base annual salary plusand the average amount awarded to the
individual under any incentive compensation plan or arrangement for the two
preceding years; (ii) the value of any outstanding Stock Options held by the
individual under any Stock Option plan of the Company, determined in accordance
with a formula set forth in the contract; (iii) a supplemental pension payment
equivalent to the additional benefit which would be earned for two additional
years of service; and (iv) all legal fees and expenses incurred by the individual as
a result of his termination of employment.employment; and (v) full reimbursement (on a
"grossed-up basis") of certain excise tax liabilities arising from the benefit
payments and any such reimbursement, if applicable. The term of each such
contract continues until December 31, 1996,2001, subject to extension beyond that
date by agreement of the parties.
The Company has also entered into a supplemental pension agreement with Mr.
Jordan under which Mr. Jordan is entitled to a nonqualified pension supplement
upon retirement. The supplement is computed by calculating the amount necessary
for Mr. Jordan to receive the same total pension benefit at attainment of age 60
that he would receive under the Company's existing qualified and nonqualified
pension plans at age 65.
In connection with the Company's acquisition of Durametallic on November
30,in 1995, the
Company assumed liability for the following agreements already consummated
between Mr. Ware and Durametallic: (i) a "Consulting Agreement" dated April 12,
1991 (the "Consulting Agreement"); (ii) a "Senior Executive Death Benefit
Agreement," also dated April 12, 1991 (the "Death Benefit Agreement") and (iii)
an "Executive Severance Agreement"Agreement," dated January 6, 1994 (the "Severance
Agreement"). Under the Consulting Agreement, Mr. Ware agreed to provide
consulting services to Durametallic for ten years following his retirement
(which is scheduled to beginoccurred on April 12, 1996) in return for compensation of $110,000 per
year. Under the Death Benefit Agreement, Durametallic is obligated to pay Mr.
Ware's designated beneficiary or estate $100,000 per year if he dies while
employed by Durametallic or while acting as a consultant for Durametallic for a
period ending on the tenth anniversary of his retirement as an employee. Mr.
Ware isbecame entitled to receive approximately $985,000 in 1996 from Durametallic
under the Severance Agreement, (or its equivalent
present value in installment payments), since the Company's acquisition of Durametallic
triggered Mr. Ware's payment rights under the Severance Agreement upon his
retirement. The Company separately entered into another personal services
agreement ("Services Agreement") with Mr. Ware on September 11, 1995
(which was contingent upon the now fulfilled condition that the Company's
acquisition of Durametallic be completed).in 1995. Under the Services
Agreement, the Company agreed to provide Mr. Ware with an executive "split
dollar" life insurance policy in the amount of $5,000,000 in return for Mr. Ware
providing certain additional executive services directly to the CEO of the
Company in connection with the management of Durametallic after the acquisition.
He also agreed under the Services Agreement to remain as Chairman of
Durametallic for up to three years after his retirement as CEO of Durametallic,
at the Company's election, as additional consideration for this life insurance
benefit.
Prior to his retirement as Chairman in April, 1996, the Company reimbursed
Mr. Haddick for certain office expenses.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Set forth in the following table is information about the only partiesparty known
by the Company to be a beneficial owner of more than five percent (5%) of the
outstanding shares of Common Stock. This information is based upon filings made
with the Securities and Exchange Commission and the Company by such parties.party.
NUMBER OF
SHARES
BENEFICIALLY PERCENTAGE
NAME AND ADDRESS OWNED OF THE CLASS
- ---------------------------------------------------------------------- ------------ ------------
FMR Corp. (a)
82 Devonshire Street
Boston, Massachusetts 02109......................................... 2,485,950 10.2%
RCM Capital Management (b)
Four Embarcadero Center, Suite 3000
San Francisco, California 94111..................................... 1,810,300 7.4%3,123,050 13.3%
- ---------------
(a) FMR Corp. ("Fidelity") has represented that such shares were acquired by
itself and its affiliated entities in the ordinary course of its investment
business and were not acquired for the purpose of and do not have the effect
of changing or influencing control of the Company. Fidelity has further
represented that Fidelity has sole voting power over 588,900744,300 shares and sole
dispositivedepositive power over 2,485,9503,123,050 shares.
(b) RCM Capital Management ("RCM")CHANGE OF NAME TO "DURCO INTERNATIONAL INC."
The Board recommends that shareholders approve the change of the Company's
name to "Durco International Inc."
The Board believes that "Durco International Inc." better characterizes the
business operations of the Company than its current name. The Company has
represented that such shares were
acquired by itselfsuccessfully used the trade name "Durco" for many years in marketing its
centrifugal pump and quarter turn valve lines. Many of the Company's customers
already informally refer to the Company as "Durco" as a result. The proposed
name change would thus better link the Company to its affiliated entitieswidely respected product
lines in the ordinary courseview of many customers. This change would also cause shareholders,
the investment community and these customers to more consistently use the same
name in referring to the Company.
The current name, "Duriron," arose from the Company's origin in 1912 as a
foundry, with the Company's first product being a "durable iron." The Company
has changed significantly over the years. External foundry sales are now a very
small percentage of total Company sales.
The Board also has noted that the name "Duriron" is difficult to pronounce
for many non-English speaking customers. This has become an increasing concern
as the Company's international sales have grown to about 40% of its investment businessconsolidated
revenues. The Board also believes that "Durco International" better reflects
this very significant contribution of international operations to the Company.
In fact, many of the Company's foreign subsidiaries already use the "Durco"
trade name in their own corporate names.
The change of the Company's name to "Durco International Inc." requires an
amendment to the Company's Certificate of Incorporation. This amendment must be
approved by a majority vote of the shareholders entitled to vote at the Annual
Meeting. Because of the affirmative vote requirement, abstentions and were not acquired for the purpose of and do notbroker
non-votes have the same effect as a vote against the amendment.
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THE BOARD URGES SHAREHOLDERS TO VOTE IN FAVOR OF THE CHANGE OF THE
COMPANY'S NAME TO "DURCO INTERNATIONAL INC."
APPROVAL OF 1997 STOCK OPTION PLAN
The Board recommends that shareholders approve the 1997 Stock Option Plan
(the "Plan"). The Board believes that the stock-based compensation available
through the Plan will permit the Board to help link the interests of changingmanagement
and the shareholders in increasing the market value of the Common Stock.
Under the Plan, 1.5 million shares of Common Stock, $1.25 par value, are
reserved for issuance during the ten year term of the Plan. This reservation
equals about 6.4% of the currently outstanding Common Stock.
The Board has not approved nor sought shareholder approval of a similar
stock option plan since 1989. There are currently insufficient remaining
ungranted options under the Company's 1989 Stock Option Plan to allow the
continuance of the Company's current annual option granting practices.
The Plan permits the Compensation Committee (the "Committee") of the Board
to authorize the granting of stock options to officers, directors and key
employees of the Company. The Committee has discretion under the Plan to
designate the recipients, terms, quantity and timing of any stock options
granted under the Plan. The Committee can grant either incentive stock options
or influencingnonqualified stock options, in its discretion. No option may be granted under
the Plan at an option price per share which, when combined with the value of any
consideration provided by the grantee, is less than 50% of the market value of
the underlying shares on the date of grant. In the case of incentive stock
options, the option price per share must not be less than market value on the
date of grant. Unless otherwise specifically determined by the Committee, (i) no
option may be exercised more than ten years after the date of grant, and (ii) no
option my be exercised within the first year after the date of grant. The
granted stock options may contain stock appreciation rights or limited rights
(which accelerate vesting in the event of a change of control of the Company).
Option recipients may pay the option exercise price in either cash or through
delivery of shares with a then current market value equal to the option price.
The persons eligible to participate in the Plan are the directors, officers
and key employees of the Company. RCMAs of March 1, 1997, there were ten
non-employee directors and ten officers of the Company. Approximately one
hundred key employees are considered eligible for the Plan, although the
Committee has traditionally authorized grants to a fewer number. The Committee
intends to restrict participation in the Plan to those individuals who have the
ability to significantly contribute to the future results of the Company.
Under current federal tax law, the option recipient recognizes no taxable
income and the Company no tax deduction upon the granting of a stock option
under the Plan.
The subsequent federal income tax consequences for the Company and the
option recipient differ whether the granted option is an incentive stock option
("ISO") or a nonqualified stock option ("NSO"). If the option is an ISO, the
recipient realizes no taxable income upon exercise of the stock option (although
the transaction may trigger certain alternative minimum tax liability for the
recipient). The Company correspondingly realizes no tax deduction. If the
recipient resells the underlying shares within one year after exercise, he or
she incurs ordinary income tax liability on the difference between the exercise
price and the resale price. The Company simultaneously is entitled to a tax
deduction in the same amount. If the resale occurs more than
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21
one year later, the recipient receives capital gains tax treatment on this
difference. The Company receives no tax benefit from this later resale.
If the option is granted as an NSO, the recipient at option exercise incurs
ordinary income tax liability on the difference between market value of the
underlying shares at exercise and the option price. The recipient then receives
a new tax basis in the underlying shares equal to this exercise price. The
Company receives a corresponding tax deduction in an amount equal to the taxable
income incurred by the recipient at exercise. Option recipients may elect to
defer until, employment termination, the receipt of income and the delivery of
the underlying shares upon exercise of an NSO through compliance with applicable
Plan procedures. The Company's corresponding tax deduction is then identically
delayed.
The foregoing is a summary only, and the actual tax consequences of the
granting and exercise of stock options are more complex than the summary stated
above.
The number of options to be received by any recipient under the Plan is not
now determinable, but no person may be granted options covering more than
300,000 shares during the life of the Plan. For information about the Company's
granting of options during 1996, please see page 8 of this Proxy Statement.
For further represented that RCM has sole voting power over 1,586,300 sharesinformation about the terms and sole dispositive power over 1,810,300 shares.conditions of the Plan, please
review the copy of the Plan's text which is attached to this Proxy Statement as
Exhibit A.
Approval of the Plan requires an affirmative vote of the holders of a
majority of the Common Stock entitled to vote at the Annual Meeting. Because of
the affirmative vote requirement, abstentions and broker non-votes have the same
effect as a vote against the Plan.
THE BOARD URGES SHAREHOLDERS TO VOTE "FOR" THE APPROVAL OF THE 1997 STOCK
OPTION PLAN.
APPOINTMENT OF INDEPENDENT AUDITORS
At the recommendation of the Audit/Finance Committee, the Board has
appointed Ernst & Young LLP as independent auditors for the Company for the year
1996,1997, subject to approval by the shareholders. Unless otherwise directed by the
giver of the Proxy, it is intended that the persons acting under the
accompanying Proxy vote the shares represented thereby in favor of approval of
such appointment.
Ernst & Young LLP has performed an audit of the Company's financial
statements annually since 1956. It is anticipated that representatives of Ernst
& Young LLP will be present at the Annual Meeting to respond to appropriate
questions and to make a statement if such representatives so desire.
Under New York law, this approval of the appointment of Ernst & Young LLP
requires a majority of votes cast on the proposal at the Annual Meeting.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE APPOINTMENT OF ERNST & YOUNG
LLP AS INDEPENDENT AUDITORS FOR THE COMPANY FOR 1996.
171997.
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OTHER BUSINESS
The Board of Directors does not know of any other matters of business which
may be brought before the Annual Meeting. However, it is intended that, as to
any such other matters or business, a vote may be cast pursuant to the
accompanying Proxy in accordance with the judgment of the person or persons
voting such Proxy.
SHAREHOLDERS' PROPOSALS
A proposal by a shareholder intended for inclusion in the Company's Proxy
Statement and form of Proxy for the 19971998 Annual Meeting of Shareholders must be
received by the Company at 3100 Research Boulevard, Dayton, Ohio 45420,
Attention: Secretary, on or before November 14, 199613, 1997 in order to be eligible for
such inclusion. The 19971998 Annual Meeting of Shareholders is tentatively scheduled
to be held on April 24, 1997,23, 1998, with such date being subject to change.
SOLICITATION OF PROXIES
The cost of preparing, assembling and mailing this Proxy Statement and the
accompanying form of Proxy will be borne by the Company. Banks, brokerage houses
and other custodians, nominees and fiduciaries will be requested to forward
Proxy materials to their principals and to obtain authorization for the
execution of Proxies. Directors, officers and regular employees of the Company
may solicit Proxies personally from some shareholders if Proxies are not
received promptly. The Company will reimburse banks, brokerage houses and other
custodians, nominees and fiduciaries for their out-of-pocket expenses in
handling Proxy materials.
THE DURIRON COMPANY, INC.
By RONALD F. SHUFF
Secretary
1820
2123
EXHIBIT A
THE DURIRON COMPANY, INC.
P1997 STOCK OPTION PLAN
SECTION 1. PURPOSES.
The purposes of this 1997 Stock Option Plan (the "Plan") are (i) to provide
incentives to directors, officers and other key employees of the Company upon
whose judgment, initiative and efforts the long-term growth and success of the
Company is largely dependent; (ii) to assist the Company in attracting and
retaining directors and key employees of proven ability; and (iii) to increase
the identity of interests of such directors and key employees with those of the
Company's shareholders.
SECTION 2. DEFINITIONS.
For purposes of the Plan:
(a) "Acquisition Transaction" means a transaction of the type
described in Section 8(b)(ii).
(b) "Affiliate" means a person controlling, controlled by or under
common control with the Company.
(c) "Board of Directors" means the board of directors of the Company.
(d) "Change in Composition of the Board" means an event of the type
described in Section 8(b)(iv).
(e) "Change in Control" means a transaction of the type described in
Section 8(b)(iii).
(f) "Committee" means the Compensation Committee of the Board of
Directors.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
(h) "Company" means The Duriron Company, Inc., a New York corporation,
and its successors in interest.
(i) "Current Market Value" means the mean of the representative
closing bid and asked quotations in the over-the-counter market on the date
the value of a Share is to be determined, as reported by the National
Association of Securities Dealers, Inc. through NASDAQ or, if no quotations
are reported for such date, the next preceding date for which quotations
are reported; or in the event the Shares are listed on any exchange or on
the NASDAQ National Market System, the last sale price on such exchange or
in the over-the-counter market as reported by the National Association of
Securities Dealers, Inc. through NASDAQ on the date the value of a Share is
to be determined or, if there are no sales on such date, the next preceding
date for which a sale is reported.
(j) "Designation of Beneficiary" means the written designation by the
Holder of the person or entity to receive the Holder's options and any
related Stock Appreciation Rights and Limited Rights upon the Holder's
death, which designation shall be on such form as prescribed by the
Committee and filed with the Chief Financial Officer or Treasurer of the
Company (or such other person as the Committee may designate).
(k) "Director Option" means the type of stock option described in
Section 9.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
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(m) "Fair Market Value" means the average of the means of the
representative closing bid and asked quotations in the over-the-counter
market during the period beginning twenty-one days prior to and ending on
the date the value of a Share is to be determined, as reported by the
National Association of Securities Dealers, Inc. through NASDAQ or, in the
event the Shares are listed on any exchange or on the NASDAQ National
Market System, the average of the last sale prices of the Shares on such
exchange or in the over-the-counter market as reported by the National
Association of Securities Dealers, Inc. through NASDAQ during such period.
(n) "Family Members" means children, stepchildren, grandchildren,
parents, stepparents, grandparents, spouse, siblings (including
half-brother and -sisters), nephews, nieces and in-laws.
(o) "Grantee" means the person who received the option and any related
Stock Appreciation Right and/or Limited Right from the Company.
(p) "Holder" means the person(s) or entity who owns the option and any
related Stock Appreciation Right and/or Limited Right, whether the Grantee,
Transferee, heir or other beneficiary.
(q) "Incentive Stock Option" means an option granted under the Plan
which qualifies as an incentive stock option under Section 422 of the Code.
(r) "Limited Right" means a right granted under Section 8(a) of the
Plan.
(s) "Nonqualified Option" means an option granted and described under
the Plan which does not qualify as an Incentive Stock Option under Section
422 of the Code and which is not a Director Option.
(t) "Qualified Domestic Relations Order" means a qualified domestic
relations order as defined in the Code or Title I of the Employee
Retirement Income Security Act, or the rules thereunder.
(u) "Share" or "Shares" means the shares of Common Stock, $1.25 par
value, of the Company.
(v) "Stock Appreciation Right" means a right granted and described
under Section 8(d) of the Plan.
(w) "Subsidiary" means any entity 50% or more of the voting control of
which is owned, directly or indirectly, by the Company.
(x) "Tender Offer" means a tender offer or a request or invitation for
tenders or an exchange offer subject to regulation under Section 14(d) of
the Exchange Act, and the rules and regulations thereunder, as the same may
be amended, modified or superseded from time to time.
(y) "Transferee" means the person who received the option and any
related Stock Appreciation Right and/or Limited Right from the Grantee
during the Grantee's lifetime in accordance with this Plan.
SECTION 3. SHARES SUBJECT TO THE PLAN.
(a) Subject to adjustment as provided in Section 11, the maximum
number of Shares that may be issued and/or delivered under the Plan upon
the exercise of options is 1,500,000. Such Shares may be either authorized
and unissued or treasury Shares, if any. Any Shares subject to an option,
which for any reason has (i) terminated, (ii) expired or (iii) has been
canceled prior to being fully exercised or being
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25
canceled through payment of either a Limited Right or Stock Appreciation
Right, may again be subject to option under the Plan.
(b) Subject to adjustment as provided in Section 11, the maximum
number of Limited Rights or Stock Appreciation Rights which may be
exercised under the Plan is 1,500,000. In any case, any Limited Rights or
Stock Appreciation Rights granted under the Plan which for any reason (i)
terminate, (ii) expire or (iii) are canceled prior to being fully exercised
may again be granted under the Plan, provided that the option to which
Limited Rights or Stock Appreciation Rights relate has not been exercised.
(c) The maximum number of Shares subject to options that may be
granted to any employee during the term of the Plan shall be 300,000
Shares. The maximum number of Stock Appreciation Rights that may be granted
to any employee during the term of the Plan shall be 300,000. The maximum
number of Limited Rights that may be granted to any employee during the
term of the Plan shall be 300,000. Each of the foregoing amounts shall be
subject to adjustment as provided in Section 11.
(d) Subject to adjustment as provided in Section 11, the aggregate
maximum number of Limited Rights, Stock Appreciation Rights and options
exercised hereunder shall not exceed 1,500,000.
SECTION 4. ADMINISTRATION.
The Plan shall be administered by the Committee which shall be comprised in
a manner that satisfies all applicable legal requirements, including satisfying
the Non-Employee Director standard set forth in Rule 16b-3 promulgated under the
Exchange Act, if applicable. In addition, as applicable, the Committee will be
constituted in a manner consistent with the "outside director" standard set
forth in the regulations under Section 162(m) of the Code.
The Committee shall have and exercise all the power and authority granted
to it under the Plan. Subject to Section 9 and other applicable provisions of
the Plan, the Committee shall in its sole discretion determine the persons to
whom, and the times at which, Incentive Stock Options, Nonqualified Options,
Director Options, Stock Appreciation Rights and Limited Rights shall be granted;
the number of Shares to be subject to each option; the option price per Share;
and the term of each option. In making such determinations, the Committee may
take into consideration each employee's present and/or potential contribution to
the success of the Company and its Subsidiaries and any other factors which the
Committee may deem relevant and proper. Subject to the provisions of the Plan,
the Committee shall also interpret the Plan; prescribe, amend and rescind rules
and regulations relating to the Plan; correct defects, supply omissions and
reconcile any inconsistencies in the Plan; and make all other determinations
necessary or advisable for the administration of the Plan. Such determinations
of the Committee shall be conclusive. A majority of the Committee shall
constitute a quorum for meetings of the Committee, and the act of a majority of
the Committee at a meeting, or an act reduced to or approved in writing by all
members of the Committee, shall be the act of the Committee.
SECTION 5. ELIGIBILITY.
From time to time during the term of the Plan, the Committee may grant one
or more Incentive Stock Options and/or Nonqualified Options to any person who is
then an officer or other key employee or director of
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26
the Company or a Subsidiary. Any grant of an option, Stock Appreciation Right or
Limited Right made to a director shall not be effective until it is ratified by
the Board of Directors.
SECTION 6. TERMS AND CONDITIONS OF OPTIONS.
(a) Written Agreement. The terms of each option granted under the
Plan shall be set forth in a written agreement, the form of which shall be
approved by the Committee.
(b) Terms and Conditions of General Application. The following terms
and provisions shall apply to all options (other than Director Options to
which the provisions of Section 9 shall be applicable) granted under the
Plan.
(1) No option may be granted under the Plan at an option price per
Share which, when combined with the value of any consideration provided
by the Grantee of the option, is less than 50% of the Current Market
Value of the underlying Shares on the date of grant.
(2) Unless otherwise specifically determined by the Committee, no
option may be exercised more than ten years after the date of grant.
(3) Except as otherwise provided in the Plan, no option shall be
exercisable within one year after the date of grant. At the time an
option is granted, the Committee may provide that after such one year
period, the option may be exercised with respect to all Shares thereto,
or may be exercised with respect to only a specified number of Shares
over a specified period or periods.
(4) Except as otherwise provided in the Plan, an option may be
exercised only if the Grantee thereof has been continuously employed by
the Company or a Subsidiary since the date of grant. Whether authorized
leave of absence or absence for military or governmental service shall
constitute a termination of employment shall be determined by the
Committee, after consideration of the provisions of Section 1.421-7(h)
of the regulations issued under the Code, if appropriate.
(5) At the time an option is granted, or at such other time as the
Committee may determine, the Committee may provide that, if the Grantee
of the option ceases to be employed by the Company or a Subsidiary for
any reason (including retirement or disability) other than death, the
option will continue to be exercisable by the Holder for such additional
period (not to exceed the remaining term of such option) after such
termination of employment as the Committee may provide.
(6) At the time an option is granted, the Committee may provide
that, if the Grantee of the option dies while employed by the Company or
a Subsidiary or while entitled to the benefits of any additional
exercise period established by the Committee with respect to such option
in accordance with Section 6(b)(5), then the option will continue to be
exercisable by the person or persons (including the Holder's estate) to
whom the Holder's rights with respect to such option shall have passed
by Designation of Beneficiary, or if none, by will or by the laws of
descent and distribution for such additional period after death (not to
exceed the remaining term of such option) as the Committee may provide.
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27
(7) At the time an option is granted, the Committee may provide for
any restrictions or limitations on the transferability of the Shares
issuable upon the exercise of such options as it may deem appropriate.
(c) Additional Provisions Applicable to Incentive Stock Options. The
following additional terms and provisions shall apply to Incentive Stock
Options granted under the Plan, notwithstanding any provision of Section
6(b) to the contrary:
(1) No Incentive Stock Option may be granted at an option price per
Share which is less than the Current Market Value of the Share on the
date of grant.
(2) No Incentive Stock Option shall be granted to an officer or
other employee who possesses directly or indirectly (within the meaning
of Section 424(d) of the Code) at the time of grant more than 10% of the
voting power of all classes of Shares of the Company or of any parent
corporation or any Subsidiary of the Company unless (i) the option price
is at least 110% of the Current Market Value of the Shares subject to
the option on the date the option is granted and (ii) the option is not
exercisable after the expiration of five years from the date of grant.
(3) The aggregate Current Market Value (determined as of the time
an Incentive Stock Option is granted) of Shares with respect to which
Incentive Stock Options are exercisable for the first time by any
individual in any calendar year (under the Plan and all other plans of
the Company and any Subsidiary) shall not exceed $100,000, or such other
maximum amount permitted by the Code.
(d) Waiver of Terms. The Committee may waive or modify at any time,
either before or after the granting of an option, any condition or
restriction with respect to the exercise of such option imposed by or
pursuant to this Section 6 (or Section 9 in the case of Director Options)
in such circumstances as the Committee may, in its discretion, deem
appropriate (including, without limitation, in the event the Grantee
retires with the approval of the Company, or in the event of a proposed
Acquisition Transaction, a Change in Control, Tender Offer for Shares, or
other similar transaction involving the Company).
(e) Acceleration Upon Certain Events. In the event of (i) a Tender
Offer (other than an offer by the Company) for Shares, if the offeror
acquires Shares pursuant thereto, (ii) an Acquisition Transaction, (iii) a
Change in Control or (iv) a Change in Composition of the Board, all
outstanding options granted hereunder shall become exercisable in full
(whether or not otherwise exercisable), effective on the date of the first
purchase of Shares (or acceptance of Shares for purchase) pursuant to the
Tender Offer, or the date of shareholder approval of the Acquisition
Transaction, or the date of filing of the Schedule 13D reflecting the
Change in Control (or, if not made, the date upon which such filing becomes
delinquent), or the date of the Change in Composition of the Board, as the
case may be (the occurrence of any such event is hereinafter referred to as
an "Acceleration").
SECTION 7. EXERCISE OF OPTIONS.
(a) Notice of Exercise. The Holder of an option granted under the
Plan may exercise all or part of such option by giving written notice of
exercise and making payment of the option price as provided in Section
7(b); provided, however, that an option may not be exercised for a fraction
of a Share. No Holder of an option nor such Holder's legal representatives,
legatees or distributees will be, or will be
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28
deemed to be, a holder of any Shares covered by such option unless and
until certificates for such Shares are issued in accordance with the Plan.
(b) Payment of Option Price. The option price for Shares with respect
to which an option is exercised shall be paid in full at the time such
notice is given. An option shall be deemed exercised on the date the
Company's Chief Financial Officer or its Treasurer (or such other person as
the Committee may designate) receives written notice of exercise, together
with full payment for the Shares purchased. The option price shall be paid
to the Company either in cash or in Shares having a Current Market Value
equal to the option price (or a combination of cash and Shares such that
the sum of the Current Market Value of the Shares plus the cash equals the
option price). Payment of the option price in Shares can be made by the
delivery of Shares already-owned by the Holder or by the retention of
Shares by the Company from Shares that would otherwise be issued to the
Holder upon the exercise of the option.
(c) Payment in Cancellation of Option. The Committee shall have the
authority in its sole discretion to authorize the payment to the Holder of
an option granted under the Plan (with consent of such Holder or, in the
event of an Acceleration of options, without such consent), in exchange for
the cancellation of all or a part of such Holder's option, of cash equal to
the excess of the aggregate Fair Market Value on the date of such
cancellation of the Shares with respect to which the option is being
canceled over the aggregate option price of such Shares; provided, however,
that if an Acceleration of options granted hereunder has occurred, for
purposes of this subparagraph, "Fair Market Value" on the date of such
cancellation shall be calculated in the same manner as the "exercise value"
of a Limited Right would be calculated under Section 8(c) with respect to
such date (whether or not any Limited Rights are actually outstanding).
Notwithstanding the foregoing, in the case of a Director Option, such
payment in exchange for cancellation of the option shall be made only in
the event of an Acceleration of Options.
(d) Special Payment Provisions for Nonqualified Options; Withholding
Taxes. Upon the exercise of a Nonqualified Option, the Company, at the
discretion of the Committee, may pay the exercising party a cash lump sum
which is equivalent to the net tax savings to the Company, as determined by
the Committee, arising from the tax deduction available to the Company
through such exercise, where applicable, under the Code. Additionally, the
Grantee of a Nonqualified Option may elect to have the Company retain from
the Shares to be issued upon his exercise of such option Shares having a
Current Market Value on the date of exercise equal to all or any part of
the federal, state and local withholding tax payments (whether mandatory or
permissive) to be made by the Grantee with respect to the exercise of the
option (up to a maximum amount determined by the Grantee's top marginal tax
rate) in lieu of making such payments in cash.
(e) Attestation Procedure. If a Holder desires to pay the option
price upon the exercise of an option with already-owned Shares, the Holder
may either physically deliver already-owned Shares or may follow the
attestation procedure set forth in this Section 7(e) (the "Attestation
Procedure") to be deemed to have delivered such already-owned Shares. To
follow the Attestation Procedure, the Holder shall submit to the Company's
Chief Financial Officer or its Treasurer (or such other person as is
designated by the Committee) a signed statement at the time of exercise of
an option that (i) sets forth the number of Shares already-owned by the
Holder that are to be used in payment of the option price (the "Payment
Shares"), (ii) confirms that the Holder is the owner of the Payment Shares,
and (iii) if the Payment Shares are registered in the Holder's name, sets
forth the certificate number(s) of the
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Payment Shares. The Payment Shares shall be treated as having been
delivered to the Company by the Holder on the date of exercise, and the
Company shall issue to the Holder a certificate for the number of Shares
subject to the option exercise less the number of Payment Shares. The
Committee shall have the authority to amend the foregoing Attestation
Procedure from time to time.
SECTION 8. LIMITED RIGHTS AND STOCK APPRECIATION RIGHTS.
(a) Grant of Limited Rights. The Committee may grant Limited Rights
with respect to any option granted under the Plan either at the time the
option is granted or at any time thereafter prior to the exercise,
cancellation, termination or expiration of such option. The number of
Limited Rights covered by any such grant shall not exceed, but may be less
than, the number of Shares covered by the related option. The term of any
Limited Right shall be the same as the term of the option to which it
relates. The right of a Holder to exercise a Limited Right shall be
canceled if and to the extent a related option is exercised or canceled,
and the right of a Holder to exercise an option shall be canceled if and to
the extent a related Limited Right is exercised.
(b) Events Permitting Exercise of Limited Rights. A Limited Right
shall be exercisable only if and to the extent that the related option is
exercisable; provided, however, that notwithstanding the foregoing, a
Limited Right issued in connection with an ISO shall not be exercisable
unless the Current Market Value of a Share on the date of exercise exceeds
the exercise price of a Share subject to the related option. A Limited
Right which is otherwise exercisable may be exercised only during the
following periods:
(i) during a period of 30 days following the date of expiration of
a Tender Offer (other than an offer by the Company) for Shares, if the
offeror acquires Shares pursuant to such Tender Offer;
(ii) during a period of 30 days following the date of approval by
the shareholders of the Company of a definitive agreement: (x) for the
merger or consolidation of the Company into or with another corporation
not controlled by the Company immediately prior to such merger or
consolidation, if the Company will not be the surviving corporation or
will become a subsidiary of such other corporation or (y) for the sale
of all or substantially all of the assets of the Company (each of the
foregoing transactions is hereinafter referred to as an "Acquisition
Transaction");
(iii) during a period of 30 days following the date upon which the
Company is provided a copy of a Schedule 13D (filed pursuant to Section
13(d) of the Exchange Act and the rules and regulations promulgated
thereunder) indicating that any "person" or "group" (as such terms are
defined in Section 13(d)(3) of such act) has become the holder of 20% or
more of the outstanding voting Shares of the Company (the foregoing
transaction hereinafter referred to as a "Change of Control"); and
(iv) during a period of 30 days following a change in the
composition of the Board of Directors such that individuals who were
members of the Board of Directors on the date two years prior to such
change (or who were elected, or were nominated for election by the
Company's shareholders, with the affirmative vote of at least two-thirds
of the directors then still in office who were directors at the
beginning of such two year period) no longer constitute a majority of
the Board of Directors (such a change in composition is hereinafter
referred to as a "Change in Composition of the Board").
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(c) Exercise of Limited Rights. Upon exercise of a Limited Right, the
Holder thereof shall receive from the Company a cash payment equal to the
excess of: (x) the aggregate "exercise value" on the date of exercise
(determined as provided below) of that number of Shares as is equal to the
number of Limited Rights being exercised over (y) the aggregate exercise
price under the related option of that number of Shares as is equal to the
number of Limited Rights being exercised. A Holder shall exercise a Limited
Right by giving written notice of such exercise to the Company's Chief
Financial Officer or its Treasurer (or such other person as the Committee
may designate). A Limited Right shall be deemed exercised on the date any
such officer (or other person) receives such written notice.
The "exercise value" of a Limited Right on the date of exercise shall be:
(i) in the case of an exercise during a period described in Section
8(b)(i), the highest price per Share paid pursuant to any Tender Offer
which is in effect any time during the 60-day period prior to the date
on which the Limited Right is exercised;
(ii) in the case of an exercise during a period described in
Section 8(b)(ii), the greater of: (x) the highest Current Market Value
of a Share during the 30-day period prior to the date of shareholder
approval of the Acquisition Transaction, or (y) the highest fixed or
formula per Share price payable pursuant to the Acquisition Transaction
(if determinable on the date of exercise);
(iii) in the case of an exercise during a period described in
Section 8(b)(iii), the greater of: (x) the highest Current Market Value
of a Share during the 30-day period prior to the date the Company is
provided with a copy of the Schedule 13D, or (y) the highest acquisition
price of a Share shown on such Schedule 13D; and
(iv) in the case of an exercise during a period described in
Section 8(b)(iv), the highest Current Market Value of a Share during the
30-day period prior to the date of the Change in Composition of the
Board.
Notwithstanding the foregoing, in no event shall the exercise value of a
Limited Right issued in connection with an Incentive Stock Option exceed
the maximum permissible exercise value for such a right under the Code and
the regulations and interpretations issued pursuant thereto. Any securities
or property which form part or all of the consideration paid for Shares
pursuant to a Tender Offer or Acquisition Transaction shall be valued at
the higher of (1) the valuation placed on such securities or property by
the person making such Tender Offer or the other party to such Acquisition
Transaction, or (2) the value placed on such securities or property by the
Committee.
(d) Grant of Stock Appreciation Rights. The Committee may grant Stock
Appreciation Rights with respect to any option granted under the Plan
either at the time the option is granted or at any time thereafter prior to
the exercise, cancellation, termination or expiration of such option. The
aggregate number of Stock Appreciation Rights covered by any such grant
shall not exceed, but may be less than, the number of Shares covered by the
related option. The term of any Stock Appreciation Right shall be the same
as the term of the option to which it relates. The right of a Holder to
exercise a Stock Appreciation Right shall be canceled if and to the extent
a related option is exercised or canceled, and to the extent a related
Limited Right is exercised. In no event shall both a Stock Appreciation
Right and Limited Right both be paid in connection with an option to which
they both relate. The exercise, cancellation or termination of a Stock
Appreciation Right covering any Shares shall automatically
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terminate the Limited Right corresponding to such Shares with the converse
being equally true, and the right of a Holder to exercise an option shall
be canceled if and to the extent a related Stock Appreciation Right is
exercised.
(e) Events Permitting Exercise of Stock Appreciation Rights. A Stock
Appreciation Right shall be exercisable only if and to the extent that the
related option is exercisable; provided, however, that notwithstanding the
foregoing, a Stock Appreciation Right issued in connection with an
Incentive Stock Option shall not be exercisable unless the Current Market
Value of a Share on the date of exercise exceeds the exercise price of a
Share subject to the related option.
(f) Exercise of Stock Appreciation Rights. Upon exercise of a Stock
Appreciation Right, the Holder thereof shall receive from the Company a
cash payment equal to the excess of (x) the aggregate Current Market Value
on the date of exercise of that number of Shares as is equal to the number
of Stock Appreciation Rights being exercised over (y) the aggregate
exercise price under the related option of that number of Shares as is
equal to the number of Stock Appreciation Rights being exercised. A Holder
shall exercise a Stock Appreciation Right by giving written notice of such
exercise to the Company's Chief Financial Officer or its Treasurer or such
other person as the Committee may designate. A Stock Appreciation Right
shall be deemed exercised on the date any such officer (or other person)
receives such written notice. If a Stock Appreciation Right or its
corresponding option has not been exercised, canceled, terminated or
expired on the last day of the term of such Stock Appreciation Right, the
Holder of such Stock Appreciation Right will automatically receive a cash
payment from the Company in an amount, if any, that would be payable if the
Stock Appreciation Right is exercised on such date.
Notwithstanding the foregoing, in no event shall the exercise value of a
Stock Appreciation Right issued in connection with an Incentive Stock
Option exceed the maximum permissible exercise value for such a right under
the Code and the regulations and interpretations issued pursuant thereto.
SECTION 9. DIRECTOR OPTIONS.
(a) All non-employee directors of the Company shall be eligible to
receive grants of stock options hereunder ("Director Options"), except to
the extent that any such grant would, in the opinion of legal counsel of
the Company, result in liability under Section 16 of the Exchange Act or
under other law or regulation applicable to the participation of directors
in the Plan.
(b) All Director Options granted hereunder shall be options that do
not qualify as Incentive Stock Options.
(c) The option price of a Director Option shall be the Current Market
Value. The option price for Shares with respect to which a Director Option
is exercised shall be paid in full at the time notice of exercise of the
option is given to the Company's Chief Financial Officer or its Treasurer
(or such other person as the Committee may designate). The option price
shall be paid to the Company either in cash or in Shares having a Current
Market Value equal to the option price (or a combination of cash and Shares
such that the sum of the Current Market Value of the Shares plus the cash
equals the option price). Payment of the option price in Shares can be made
by the delivery of Shares already-owned by the Holder or by the retention
of Shares by the Company from Shares that would otherwise be issued to the
Holder upon the exercise of the option. In any case in which payment of the
option price is to be made by
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delivery of already-owned Shares, the Attestation Procedure set forth in
Section 7(e) may be used, subject to the limitations described in such
Section.
(d) Subject to the limitations hereinafter set forth, a Director
Option granted hereunder shall extend for a term of ten years. The exercise
of Stock Appreciation Rights relating to any Director Option is subject to
Section 8(e).
(e) All rights of a director in any Director Option shall expire at
the end of the option's normal term, provided that any director who ceases
to be a director and then engages in any action which is competitive to or
detrimental to the best interests of the Company shall forfeit such option,
upon decision to that effect by the Committee. In the event a director
ceases to be a director for any reason, all rights of such Director Option
shall continue until the director's death, subject to the foregoing and
following provisions.
(f) Any Director Option granted to a director under the Plan and
outstanding on the date of the Holder's death may be exercised by the
person or persons (including the Holder's estate) to whom the Holder's
rights with respect to the Director Option shall have passed by Designation
of Beneficiary; or if none, by the laws of descent and distribution or
pursuant to a Qualified Domestic Relations Order at any time prior to the
specified expiration date of such Director Option or the first anniversary
of the Grantee's death, whichever is the first to occur. Upon the
occurrence of the earlier event, the Director Option shall then terminate.
(g) Director Options may include Stock Appreciation Rights and shall
include Limited Rights. The number of Limited Rights included in any such
Director Option shall equal the number of Shares covered by such option.
(h) Director Options shall otherwise be subject to the terms and
conditions of Nonqualified Options (and Limited Rights) stated in this
Plan.
SECTION 10. NON-TRANSFERABILITY.
(a) General Rule. Except as otherwise provided in this Section 10,
options, Stock Appreciation Rights and Limited Rights may not be sold,
pledged, assigned, hypothecated, or transferred other than by Designation
of Beneficiary, or if none, by will or the laws of descent and distribution
upon the Holder's death, and may be exercised during the lifetime of the
Grantee only by such Grantee or by his guardian or legal representative.
All grants under the Plan, with the exception of Incentive Stock Options
and any Stock Appreciation Rights and Limited Rights relating thereto, may
be transferred pursuant to a Qualified Domestic Relations Order.
(b) Permitted Transfers. Subject to this Section 10 and except as the
Committee may otherwise prescribe from time to time, the Committee may act
to permit the transfer or assignment of an option (together with any
related Stock Appreciation Right and/or Limited Right) by a Grantee for no
consideration to the Grantee's Family Members, trusts for the sole benefit
of the Grantee's Family Members or partnerships whose only partners are
Family Members of the Grantee; provided, however, that any such permitted
transfer or assignment shall not apply to an option that is an Incentive
Stock Option (but only if nontransferability is necessary in order for the
option to qualify as an Incentive Stock Option) and to any Stock
Appreciation Rights or Limited Rights related to an Incentive Stock Option.
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Any permitted transfer or assignment of an option and any Stock
Appreciation Right and/or Limited Right related thereto shall only be
effective upon receipt by the Chief Financial Officer or Treasurer of the
Company (or such other person as the Committee may designate) of an
instrument acceptable in form and substance to the Committee that effects
the transfer or assignment and that contains an agreement by the Transferee
to accept and comply with all the terms and conditions of the stock option
award and this Plan. A Transferee shall possess all the same rights and
obligations as the Grantee under the Plan, except that the Transferee can
subsequently transfer such option and any related Stock Appreciation Rights
and/or Limited Rights only by (i) Designation of Beneficiary or, if none,
then by will or the laws of descent and distribution, or (ii) a transfer to
a beneficiary or partner if the Transferee is a trust or partnership,
respectively.
Unless the Committee otherwise prescribes, upon the exercise of a
Nonqualified Option or its related Stock Appreciation Rights or Limited
Rights by a Transferee, when and as permitted in accordance with this
Section 10, the Grantee is required to satisfy the applicable withholding
tax obligations by paying cash to the Company with respect to any income
recognized by the Grantee upon the exercise of such option by the
Transferee. If the Grantee does not satisfy the applicable withholding tax
obligations on the exercise date of the option or related Stock
Appreciation Right or Limited Right, the Company shall, in the case of the
exercise of an option, retain from the Shares to be issued to the
Transferee upon the exercise of the option a number of Shares having a
Current Market Value on the exercise date equal to the mandatory
withholding tax payable by the Grantee or, in the case of the exercise of a
Stock Appreciation Right or Limited Right, deduct from the cash to be
delivered to the Transferee such amount as is equal to the mandatory
withholding taxes payable by the Grantee.
SECTION 11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
In the event of a change in outstanding Shares by reason of a Share
dividend, recapitalization, merger, consolidation, split-up, combination or
exchange of Shares, extraordinary dividend paid as part of a restructuring plan,
or the like, the maximum number of Shares subject to option during the existence
of the Plan, the number of Stock Appreciation Rights and Limited Rights which
may be granted under the Plan, the number of options, Stock Appreciation Rights
and Limited Rights that may be granted to each person under the Plan, the number
of Shares subject to, and the option price of, each outstanding option, the
number of Stock Appreciation Rights and Limited Rights outstanding, the Current
Market Value of a Share on the date a Stock Appreciation Right and/or a Limited
Right is granted, and the like shall be appropriately adjusted by the Company,
subject to review by the Committee if the Committee so elects. In the event the
Committee elects to review such adjustment, the Committee's determination shall
be conclusive.
SECTION 12. CONDITIONS UPON GRANTING AND EXERCISE OF OPTIONS, STOCK
APPRECIATION RIGHTS AND LIMITED RIGHTS AND ISSUANCE OF SHARES.
No option, Stock Appreciation Right or Limited Right shall be granted, and
no option, Stock Appreciation Right or Limited Right shall be exercised and
Shares shall not be issued or delivered upon the exercise of an option unless
the grant and exercise thereof, and the issuance and/or delivery of Shares
pursuant thereto, or the payment therefore, shall comply with all relevant
provisions of state and federal law, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and
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regulations promulgated thereunder, and the requirement of any stock exchange
upon which the Shares then may be listed. The Company shall use reasonable
efforts to comply with all such requirements.
SECTION 13. AMENDMENT AND TERMINATION OF PLAN.
(a) Amendment. Subject to the limitations hereinafter set forth, the
Committee may from time to time amend the Plan or any award granted under
the Plan, or any provision thereof, in such respects as the Committee may
deem advisable; provided, however, that any such amendment shall be
approved by the holders of Shares entitling them to exercise a majority of
the voting power of the Company if such approval is required under
applicable law; or:
(i) if such amendment would increase the aggregate number of Shares
which may be issued and/or delivered under the Plan;
(ii) if such amendment would modify the requirements as to
eligibility for participation in the Plan.
Any amendment to an option, Stock Appreciation Right or Limited Right
granted to a director shall be made or ratified by the Board of Directors.
(b) Termination. The Committee may at any time terminate the Plan.
(c) Effect of Amendment or Termination. No amendment or termination
of the Plan or any award granted under the Plan shall adversely affect any
option or Limited Right or Stock Appreciation Right previously granted
under the Plan without the consent of the Holder thereof.
SECTION 14. NOTICES.
Each notice relating to this Plan shall be in writing and delivered in
person or by mail to the proper address. Each notice to the Chief Financial
Officer or Treasurer of the Company shall be delivered or sent to his attention
at the principal business office of the Company. Each notice to the Committee
shall be delivered or sent to the principal business office of the Company and
addressed as follows: "Attention: Compensation Committee." Each notice to the
Holder shall be addressed to such person or persons at the Holder's address as
set forth in the records of the Company. Anyone to whom a notice may be given
under this Plan may designate a new address by written notice to the other party
to that effect.
SECTION 15. BENEFIT OF PLAN.
This Plan shall inure to the benefit of and be binding upon each successor
and assign of the Company. All rights and obligations imposed upon the Holder
and all rights granted to the Company under this Plan shall be binding upon such
Holder's heirs, legal representatives and permitted assigns.
SECTION 16. PRONOUNS AND PLURALS.
All pronouns shall be deemed to refer to the masculine, feminine, singular
or plural, as the identity of the person or persons may require.
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SECTION 17. SHAREHOLDER APPROVAL AND TERM OF PLAN.
The Plan shall become effective upon its approval by the affirmative vote
(either in person or by proxy) of the holders of a majority of the Shares at the
Company's 1997 Annual Meeting of Shareholders. No options shall be granted under
the Plan after December 31, 2006.
SECTION 18. ISSUANCE OF SHARE UNITS IN LIEU OF SHARES UPON EXERCISE OF NQSOS.
(a) Definitions. As used in this Section 18, the following terms have
the following meanings:
(1) "NQSO" means a Nonqualified Option or a Director Option.
(2) "Share Unit" has the meaning indicated in Section 18(b).
(3) "Qualifying Exercise" has the meaning indicated in section
18(d).
(4) "Unit Holder" means the person to whose account Share Units are
credited.
(5) "Representative" means the executor of the estate of the Unit
Holder or another legally constituted representative of the Unit Holder
or the Unit Holder's estate.
(b) Share Unit. A Share Unit represents the right to receive a Share
from the Company, with delivery of the Share to be made in accordance with
Section 18(g). The Company shall maintain on its records an account
reflecting the identity of each person to whom Share Units have been
credited and the number of Share Units from time to time credited to each
such person.
(c) Effect of Qualifying Exercise. In the event of a Qualifying
Exercise, (i) Shares, equal in number to the Shares delivered by the
Grantee in payment of the option price, shall be issued to the Grantee,
(ii) the balance of the Shares covered by the option exercise (the "Profit
Shares") shall not be issued, and (iii) the Grantee shall be credited with
such number of Share Units as equals the number of Profit Shares. In case
the Attestation Procedure is used, clause (i) above shall be inapplicable
and the Shares referred to therein shall not be issued.
(d) Qualifying Exercise. For the exercise of an option to be a
Qualifying Exercise, all of the following conditions must be satisfied:
(1) The option must be a NQSO and held by the Grantee.
(2) The Grantee must make an advance election in accordance with
Section 18(e) (while employed by the Company or a Subsidiary in the case
of a Nonqualified Option).
(3) The Grantee must make payment of the option price either (i) by
delivery to the Company of Shares having a Current Market Value on the
date of exercise equal to the option price (as permitted by Sections
7(b) and 9(c)), or (ii) by use of the Attestation Procedure (as
permitted by Sections 7(e) and 9(c)).
(4) The Grantee and the exercise of the option must comply with
other applicable requirements of the Plan.
(e) Advance Election. A Grantee of a NQSO who desires to be credited
with Share Units upon exercise of the NQSO must deliver to the Committee
(to the attention of either the Chief Financial
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Officer or Treasurer of the Company, or such other officer or person who
may be designated by the Committee) a written election to receive such
Share Units upon such exercise. Such election may be in the form of
Attachment A, although the Committee or its designee may elect to honor any
written election statement from an option holder which communicates
substantially the same election intention. Unless otherwise approved by the
Committee, such election must be delivered on or before the earlier of (i)
six months and one day preceding exercise of the option or (ii) the last
business day of the calendar year immediately preceding the calendar year
of the option exercise.
(f) Crediting of Additional Share Units. The number of Share Units
credited to a Unit Holder shall from time to time be increased (during the
period from initial crediting the Share Units to final payment of the Share
Units) by the crediting, on the payment date of each dividend on Shares of
the Company, of such number of additional Share Units (including any
fraction of a Unit) as equals the quotient resulting from dividing (i) the
Dividend Equivalent Amount (as defined below) by (ii) Current Market Value
as of the dividend payment date.
The Dividend Equivalent Amount is the amount resulting from multiplying (i)
the dividend per Share payable on the payment date by (ii) the number of
Share Units then credited to the account of option holder.
In the event of a change in outstanding Shares by reason of a Share
dividend, recapitalization, merger, consolidation, split up, combination or
exchange of Shares, extraordinary dividend paid as part of a restructuring
plan, or the like, the number of Share Units credited to the account of any
Unit Holder and the securities issuable upon payment of the Share Units
shall be appropriately adjusted by the Company, subject to review by the
Committee if the Committee so elects. In the event the Committee elects to
review such adjustment, the Committee's determination shall be conclusive.
(g) Payment of Share Units. Share Units shall be paid by delivery to
the Unit Holder (or his Representative) of one Share for each Share Unit
credited to the account of the Unit Holder. Delivery of such Shares shall
be made following termination of the Unit Holder's employment with the
Company and its Subsidiaries and shall be made in a single lump sum or in
annual installments, as provided below:
(1) Termination of Employment Other Than as a Result of Retirement
or Death. Except in the case of a Director Option, in the event a Unit
Holder ceases to be employed by the Company and its Subsidiaries for any
reason other than retirement or death, payment of any Share Units
credited to the Unit Holder's account will be made in a lump sum within
60 days after termination of the Unit Holder's employment.
(2) Retirement. In the event a Unit Holder retires under a
retirement plan of the Company or a Subsidiary, or, in the case of a
Director Option, upon termination of the Unit Holder's service as a
director, payment of any Share Units credited to the Unit Holder's
account will be made commencing within 60 days after such retirement or
termination in accordance with the method of payment elected by the Unit
Holder pursuant to Section 18(i) . If the election is a lump sum, all
Share Units will be paid to the Unit Holder within 60 days after
retirement or termination. If installments shall have been elected, the
number of Share Units credited to the Unit Holder's account as of the
date of retirement or termination shall be divided by the number of
annual installments elected, and the first installment shall be paid
within 60 days after retirement or termination. The second and all
subsequent installment payments shall be made between January 1
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and 15 of each subsequent year. Any additional Share Units credited to
the Unit Holder's account pursuant to Section 18(f) following the
retirement or termination shall be paid as part of the installment paid
in the calendar year immediately following the crediting of such
additional Share Units.
(3) Death. If any Share Units credited to a Unit Holder's account
remain unpaid at the Unit Holder's death, then payment of such Share
Units shall be made after the Unit Holder's death (i) to the Unit
Holder's beneficiary(ies) (designated as provided in Section 18(i)) in
accordance with the method of distribution elected by the Unit Holder
(either lump sum or installments, as provided above), or (ii) if the
Unit Holder has not designated a beneficiary or if the beneficiary
predeceases the Unit Holder, to the Unit Holder's estate in a lump sum.
Should a beneficiary die after the Unit Holder but before the entire
benefit has been disbursed, the balance of the Share Units shall be paid
to the beneficiary's estate in a lump sum.
(4) Emergency Distribution. In the event an emergency situation
occurs (as described below), the Unit Holder may request the Committee
to approve an immediate distribution to the Unit Holder of all or some
of the Share Units credited to the Unit Holder's account. Any such
distribution will be solely within the discretion of the Committee and
will be limited in an amount to that necessary to meet the emergency. As
used herein, an emergency situation means a bona fide unexpected
financial emergency that is caused by an event beyond the control of the
Unit Holder (e.g., a serious family illness or disaster) and would
result in severe financial hardship to the Unit Holder if early
distribution were not permitted.
(5) Fractional Shares. In any circumstance in which distribution
of a fraction of a Share would otherwise be made, an equivalent cash
distribution (based upon Current Market Value as of the third business
day preceding the payment) shall be made.
(6) Withholding Taxes. The payment of Share Units shall be subject
to the payment of all applicable withholding taxes by the Unit Holder.
(h) Acceleration of Payment. Notwithstanding the provisions of
Section 18(g), a Unit Holder shall have the right to demand and receive
immediate Payment of all Share Units credited to the Unit Holder's account
during any period during which Limited Rights may be exercised in
accordance with clauses (i), (ii), (iii) and (iv) of Section 8(b).
(i) Payment Election; Designation of Beneficiary. A Unit Holder's
election to receive payment of Share Units in a lump sum or installments
may be made in the form of Attachment A delivered as provided in Section
18(e), although the Committee may elect to honor any written election
statement which communicates substantially the same election intention. A
Unit Holder may make designation of the Holder's beneficiary(ies) on
Attachment A or by other written notice to the Committee. Once an election
with respect to the method of payment (lump sum or installments) has been
made, such election may not be changed except with the consent of the
Committee. In the absence of a valid election to receive payment of Share
Units in installments, such payment shall be made in a lump sum.
(j) Number of Shares Issued Under Plan. For purposes of determining
the number of Shares that have been issued and/or are available for
issuance under the Plan, the initial crediting of a Share Unit to the
account of a Unit Holder in accordance with Section 18(c) shall be counted
as the issuance of a
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Share under the Plan, but the crediting of additional Share Units in
accordance with Section 18(f) will not be so counted.
(k) Unsecured Account. Any Share Units credited to the account of a
Unit Holder represent only an unsecured promise of the Company to make
payment of the Share Units in accordance with the terms of the Plan,
irrespective of whether the Company makes use of any trust arrangement to
make payment of Share Units. Neither a Unit Holder nor any beneficiary of a
Unit Holder will have or acquire any right, title or interest in any asset
of the Company or any Subsidiary as a result of any Share Units credited to
a Unit Holder's account. At all times, a Unit Holder's rights with respect
to Share Units credited to the Unit Holder's account will be only those of
an unsecured creditor of the Company. The Company will not be obligated or
required in any manner to restrict the use of any of its assets as a result
of any Share Units credited to a Unit Holder's account.
(l) Securities Law Compliance. The Company's obligation to credit
Share Units to the account of any Unit Holder and to deliver Shares in
connection with the payment of Share Units shall at all times be subject to
compliance with any applicable federal or state securities laws.
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DETACH CARD
- --------------------------------------------------------------------------------
THE DURIRON COMPANY, INC.
PROXY FOR ANNUAL SHAREHOLDERS' MEETING --- APRIL 25, 1996
R24, 1997
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
O
X The undersigned hereby appoints JOHN S. HADDICKHUGH K. COBLE and WILLIAM M. Y JORDAN, or either oneand
each of them, attorneysattorney and proxies,proxy, with power of substitution and with all the
powers which the undersigned would possess if personally present, to vote all of
the shares of Common Stock of the undersigned in The Duriron Company, Inc. at
its 1997 Annual Meeting of its Shareholders to be held at 1:30 p.m.P.M. on Thursday,
April 25, 1996,24, 1997 at 2100 Factory Street, Kalamazoo, Michigan,Miami Valley Research Park, BDM Conference Center, 1900
Founders Drive, Dayton, Ohio, and at any adjournment thereof, as follows:
1. Election of three directors each for a three year term
and one directorterm:
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed below
INSTRUCTION: To withhold authority to vote for any individual nominee, strike a
one year term:line through the nominee's name below:
THREE YEAR TERM: John S. Haddick, Kevin E. Sheehan
and R. Elton White
ONE YEAR TERM:Diane C. Harris William M. Jordan James S. Ware
2. Approval of the change of the Company's name to "Durco International Inc."
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(CONTINUED, AND TO BE DATED AND SIGNED, ON OTHER SIDE)
40
DETACH CARD
- --------------------------------------------------------------------------------
PROXY NO. SHARES
(Continued from the other side)
3. Approval of the 1997 Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Approval of the appointment of Ernst & Young LLP as independent Auditors
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICESauditors of
the Company for 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY MARKING THE APPROPRIATE
BOXES, (SEE REVERSE SIDE)UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1, 2, 3 AND 4.
DATE: , BUT YOU NEED NOT MARK ANY BOXES IF YOU
WISH TO VOTE1997
------------------
-----------------------------
-----------------------------
SIGNATURE(S) OF
SHAREHOLDER(S)
PLEASE SIGN AS NAME(S) APPEAR
AT LEFT. EXECUTORS,
ADMINISTRATORS, TRUSTEES,
ETC., SHOULD INDICATE THE
CAPACITY IN ACCORDANCE WITH THE BOARD OF DIRECTORS'
RECOMMENDATIONS. THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN
AND RETURN THIS CARD.
SEE REVERSE
SIDE
22
\ X \ PLEASE MARK YOUR SHARES IN YOUR NAME
VOTES AS IN THIS
EXAMPLE.
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of / / / / 2. Approval of the / / / / / / 3. In their discretion, the
Directors appointment of Proxies are authorized
(see reverse) Ernst & Young LLP. to vote upon such other
business as may properly
come before the meeting.
For, except vote withheld from the THIS PROXY, WHEN PROPERLY
following nominee(s): EXECUTED, WILL BE VOTED
IN THE MANNER DIRECTED
---------------------------------------- HEREIN BY THE UNDERSIGNED
SHAREHOLDER(S). IF NO
DIRECTION IS GIVEN, THIS
PROXY WILL BE VOTED FOR
PROPOSALS 1 AND 2.
SIGNATURE(S) DATE
------------------------------------------------------ -------------
SIGNATURE(S) DATE
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NOTE: Please sign exactly as name appears hereon. Joint owners should each sign. When signing
as attorney, executor, administrator, trustee or guardian, please give full title as such.
WHICH THEY SIGN.