DEF 14A 1 azzproxyfy08.htm AZZ PROXY STATEMENT FY2008 azzproxyfy08.htm


SECURITIES AND EXCHANGE COMMISSION
 
WASHINGTON, D.C. 20549
 

 
SCHEDULE 14A INFORMATION
 
PROXY STATEMENT PURSUANT TO SECTION 14(a)
 
OF THE SECURITIES EXCHANGE ACT OF 1934
 

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ý           Definitive Proxy Statement
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AZZ INCORPORATED
(Name of Registrant as Specified in Its Charter)
 
AZZ Logo

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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(3)
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(4)
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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.
 
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(4)           Date Filed:
   
 

 
 

 


 
 

 
AZZ incorporated
University Centre I, Suite 200
1300 South University Drive
Fort Worth, Texas 76107

June 1, 2008

Dear Shareholder:

The Board of Directors and Management cordially invite you to attend our Annual Meeting of Shareholders to be held at 10:00 a.m., local time, on Tuesday, July 8, 2008, at the City Club, President’s Room, D.R. Horton Tower, 301 Commerce, Fort Worth, Texas 76102.  The formal Notice of the Annual Meeting of Shareholders and Proxy Statement are attached.  Please read them carefully.

It is important that your shares be voted at the meeting in accordance with your preference.  Please complete the proxy card located in the envelope’s address window by indicating your vote on the issues presented and sign, date and return the proxy card in the prepaid envelope provided.  If you are able to attend the meeting and wish to vote in person, you may withdraw your proxy at that time.

Sincerely,



David H. Dingus
President and Chief Executive Officer

 
 

 

 
AZZ incorporated
University Centre I, Suite 200
1300 South University Drive
Fort Worth, Texas 76107

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

To Be Held July 8, 2008

Our Annual Meeting of Shareholders (the “Annual Meeting”) will be held on Tuesday, July 8, 2008, at 10:00 a.m., local time, at the City Club, President’s Room, D.R. Horton Tower, 301 Commerce Street, Fort Worth, Texas 76102 for the following purposes:

 
to elect three directors to hold office, each for a term of three years;

 
to approve the amendments to the 2005 Long Term Incentive Plan described in the accompanying Proxy Statement;

 
to approve the adoption of the Employee Stock Purchase Plan described in the accompanying Proxy Statement; and

 
(4)
to transact any other business as may properly come before the Annual Meeting or any adjournment.

Only shareholders of record at the close of business on May 12, 2008, will be entitled to vote at the Annual Meeting.  A copy of our Annual Report to Shareholders for the year ended February 29, 2008, is enclosed with this Notice and Proxy Statement, but it does not form a part of our soliciting material.

To ensure that your vote will be counted, please complete, sign and date the enclosed proxy card and return it promptly in the enclosed prepaid envelope, whether or not you plan to attend the Annual Meeting.  You may revoke your proxy in the manner described in the accompanying Proxy Statement at any time before it has been voted at the Annual Meeting.

By Order of the Board of Directors,



Dana L. Perry,
Secretary

June 1, 2008
Fort Worth, Texas






PLEASE PROMPTLY SUBMIT YOUR PROXY BY MAIL
WHETHER OR NOT YOU INTEND
TO BE PRESENT AT THE ANNUAL MEETING.

 
 

 

 
AZZ incorporated
University Centre I, Suite 200
1300 South University Drive
Fort Worth, Texas 76107
_______________

PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS

To Be Held July 8, 2008

The board of directors of AZZ incorporated is soliciting proxies for the 2008 Annual Meeting of Shareholders (the “Annual Meeting”).  You are receiving this proxy statement because you own shares of AZZ common stock that entitle you to vote at the meeting.  By use of a proxy, you can vote on the matters to be decided at the meeting without actually attending the meeting in person.  Simply complete, sign, date and return the enclosed proxy card in the envelope provided, and your shares will be voted at the meeting in accordance with your instructions.  If no instructions are given on your proxy card with respect to a matter to be voted on, your shares will be voted in accordance with the recommendation of the board of directors contained in this proxy statement.  Submitting your proxy by mail will not affect your right to attend the meeting and vote in person.

If you submit your proxy but later decide to change or revoke the instructions you provided, you may do so at any time before the proxies are voted at the meeting by notifying our corporate secretary in writing at University Centre I, Suite 200, 1300 South University Drive, Fort Worth, Texas 76107 that you wish to revoke your proxy, by delivering a subsequent proxy relating to the same shares, or by attending the Annual Meeting and voting in person.  Please note, however, that attendance at the Annual Meeting will not, in and of itself, result in your proxy being revoked.

AZZ will begin sending this proxy statement and the enclosed proxy card to our shareholders on or about June 1, 2008.



ELECTION OF DIRECTORS

Our bylaws, as amended to date, provide that the board of directors will consist of twelve members, classified into three classes, each class consisting of four directors, the members of which will serve three-year staggered terms.  We currently have nine directors, and there are three vacancies.  The six directors previously elected to serve until the 2009 and 2010 Annual Meeting of Shareholders will continue to serve out those terms.

The board of directors has nominated the three directors who were elected at the 2005 Annual Meeting of Shareholders, each of whose term expires at this year’s Annual Meeting, for election to a three-year term expiring at the 2011 Annual Meeting.  In order to be elected, a nominee for director must receive a plurality of the votes properly cast at the meeting in person or by proxy.  Therefore, the three nominees who receive the most votes will be elected, provided that a quorum is present at the meeting.

Each of the nominees has consented to serve if elected.  If for any unforeseen reason a nominee would be unable to serve if elected, the persons named in the accompanying proxy may exercise their discretion to vote for a substitute nominee selected by the board of directors.  However, the board has no reason to anticipate that any of the nominees will not be able to serve, if elected.  After the Annual Meeting, the board will have one vacancy among the group of directors whose term expires at the 2009 Annual Meeting, one vacancy among the group of directors whose term expires at the 2010 Annual Meeting and one vacancy among the group of directors whose term expires at the 2011 Annual Meeting.


 
 

 

Nominees for Terms Continuing to 2011

Martin C. Bowen, 64, has been a director of AZZ since 1993.  Mr. Bowen has been vice president and chief financial officer of Fine Line, a privately held investment holding company, for over five years.  Mr. Bowen is a director of Encore Acquisition Company, a publicly held company engaged in the acquisition, development and production of oil and natural gas reserves.

Sam Rosen, 72, has been a director of AZZ since 1996.  Mr. Rosen has been a partner in the law firm of Shannon, Gracey, Ratliff & Miller, L.L.P. since 1966, and is a director of GAINSCO, INC., a publicly held insurance holding company.

Kevern R. Joyce, 61, has been a director since 1997. Mr. Joyce was President and CEO of Cap Rock Energy Corporation, a privately owned electric utility, from June 2006 until February 2007.  Mr. Joyce was senior advisor to ZTEK Corporation from 2003 to 2006.  Mr. Joyce was president, chief executive officer and chairman of Texas New Mexico Power Company from 1994 to 2001, and senior advisor to that company until 2003.

Directors for Terms Expiring 2010

Dr. H. Kirk Downey, 65, has been a director of AZZ since 1992.  Dr. Downey currently is an independent business consultant and investor.  Dr. Downey served as professor of management, dean and associate provost for academic affairs at Texas Christian University from 1983 to 2000.  Dr. Downey is also chairman and a member of the board of trustees of LKCM Funds and LKCM Aquinas Funds, a publicly held family of mutual funds.

Daniel R. Feehan, 57, has been a director of AZZ since 2000.  Mr. Feehan has served as president and chief executive officer of Cash America International, Inc., a publicly held provider of specialty financial services, since 2000.  Prior to that, he served as president and chief operating officer of Cash America.  Mr. Feehan is also a director of Cash America and RadioShack Corporation, a publicly held company in the retail consumer electronic goods and services business.

Peter A. Hegedus, 67, joined AZZ’s Board in September 2006.  Mr. Hegedus is a member of the Supervisory Board of ABB Hungary, a specialty electrical equipment manufacturer, and prior to that served as the Country Manager-ABB Hungary and President of ABB Kft., a position he held since 1995, where he was responsible for all activities of the global ABB organization in Hungary.

Directors With Terms Expiring 2009

David H. Dingus, 60, has been a director of AZZ since 1999.  Mr. Dingus has served as AZZ’s president and chief executive officer since 2001, and served as president and chief operating officer from 1998 to 2001.

Dana L. Perry, 59, has been a director of AZZ since 1992.  Mr. Perry has served as AZZ’s senior vice president of finance, chief financial officer and secretary since January 2005, and, prior to that, served as vice president of finance, chief financial officer and assistant secretary.

Daniel E. Berce, 54, has been a director of AZZ since 2000.  Mr. Berce has been president and chief executive officer of AmeriCredit Corp., a publicly held national automobile consumer finance company, since August 2005 and served as president of AmeriCredit Corp. from April 2003 to August 2005 and as vice chairman and chief financial officer of AmeriCredit prior to that.  He serves on the boards of directors of AmeriCredit Corp. and Cash America International, Inc., a publicly held provider of specialty financial services.



The Board of Directors Recommends That You Vote “FOR” Each of the Nominees Listed Above Under the Heading “Nominees For Terms Continuing To 2011” For Terms Continuing Until the 2011 Annual Meeting.

 
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MATTERS RELATING TO CORPORATE GOVERNANCE, BOARD STRUCTURE,
DIRECTOR COMPENSATION AND STOCK OWNERSHIP

Corporate Governance

The board of directors believes very strongly that good corporate governance is a prerequisite to achieving business success.  The board of directors has adopted formal, written Corporate Governance Guidelines designed to strengthen our corporate governance.  In 2003, the board amended those guidelines to meet new requirements of the U.S. Securities and Exchange Commission ("SEC") and The New York Stock Exchange ("NYSE").  Among other things, the enhanced guidelines contain standards for determining whether a director is independent.  The board also adopted a Code of Ethics applicable to all of our directors, officers and employees, and charters for each of the board’s committees.  The nominating and corporate governance committee is responsible for overseeing and reviewing the Corporate Governance Guidelines and Code of Ethics at least annually, and recommending any proposed changes to the full board for its approval.  The AZZ incorporated Corporate Governance Guidelines, Code of Ethics and charters for the audit, compensation and nominating and corporate governance committees are available on our web site at www.azz.com, under the heading "Investor Relations — Corporate Governance".

Director Independence

It is our policy that the board of directors will at all times consist of a majority of independent directors.  In addition, all members of the audit committee, compensation committee and nominating and corporate governance committee must be independent.  To be considered independent, a director must satisfy the independence requirements established by the NYSE and the SEC.  The board will consider and apply all facts and circumstances relating to a director in determining whether that director is independent.  The board has determined that all of the current members of the board of directors are independent except for directors David H. Dingus and Dana L. Perry.

Directors’ Attendance at Board and Committee Meetings and at the Annual Meeting of Shareholders

Our board of directors met five times during fiscal year 2008.  Each director attended at least 75% of the total number of board meetings and meetings of the board committee or committees on which he served during fiscal 2008.  Although we have no formal policy on the matter, all directors are encouraged to attend, and, typically have attended, our Annual Meeting of Shareholders.  All of our directors except Messrs. Bowen, Feehan, Joyce and Rosen attended the 2007 Annual Meeting of Shareholders.

Board Committees

There are three standing committees of the board of directors.  They are the nominating and corporate governance committee, the audit committee and the compensation committee.  A brief description of each committee’s function, the number of meetings held last fiscal year and the names of the directors who are members of the committees follows.

Nominating and Corporate Governance Committee.  The nominating and corporate governance committee is responsible for considering and making recommendations to the board regarding nominees for election to the board and the membership of the various board committees.  The committee is also responsible for recommendations to the board compensation of our directors and is responsible for establishing and overseeing the AZZ incorporated Corporate Governance Guidelines and the AZZ incorporated Code of Ethics described earlier in this proxy statement, as well as the Director Nomination Process which is set forth below.  The nominating and corporate governance committee met on six occasions during the last fiscal year.  Committee members are Directors Downey (chairman), Rosen and Bowen.

Audit Committee.  The audit committee provides assistance to the board in overseeing AZZ’s accounting, auditing, financial reporting and systems of internal controls regarding finance and accounting.  As part of its duties, the audit committee is directly responsible for the appointment, compensation, retention and oversight of our independent auditors.  The committee also reviews our quarterly and year-end financial statements.  The audit committee held five meetings during the last fiscal year.  During the last fiscal year, audit committee members were Directors Feehan (chairman), Berce, and Joyce.  The board of directors has determined that each member of the audit committee is an audit committee financial expert, as defined by the SEC, and has accounting or related financial management expertise within the meaning of NYSE listing standards.
 
 
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Compensation Committee.  The compensation committee establishes, amends and oversees AZZ’s incentive-based compensation plans and sets compensation for our chief executive officer, our other executive officers and other senior management.  It also oversees the administration of other compensation and benefit plans and recommends to the board changes in or the establishment of compensation and benefit plans for our employees.  The committee held five meetings during the last fiscal year.  Compensation committee members are Directors Downey (chairman), Berce, Hegedus and Joyce.

Meetings of Independent Directors without Management Present

To empower our independent directors to serve as a more effective check on management, our independent directors meet at regularly scheduled executive sessions without members of AZZ’s management present.  The independent directors met without management present four times during the last fiscal year. Executive sessions ordinarily are held in conjunction with quarterly scheduled board meetings.  Dr. Downey, as our independent chairman of the board, presides over these meetings.

 
DIRECTOR COMPENSATION
 
The Company uses a combination of cash and stock-based incentive compensation to attract and retain qualified candidates to serve on the board. In setting director compensation, the Company considers the significant amount of time that directors expend in fulfilling their duties to the Company as well as the skill-level required by the Company of members of the board.

Fees Paid to Directors (Cash Compensation paid to Board Members)

Each director who was not an AZZ employee received the following cash compensation for services to the board during fiscal year 2008:

•      a fee of $18,000;

•      $1,500 for each quarterly meeting of the board of directors he attended;

•      $500 for each special meeting of the board of directors he attended; and

 
$1000 for each nominating and corporate governance committee or compensation committee meeting he attended as a member and $1,500 for each audit committee meeting.

The chairman of the compensation committee and of the nominating committee and corporate governance committee of the board of directors each received additional cash compensation of $1,500 during fiscal 2008, the chairman of the audit committee received additional cash compensation of $3,000 during fiscal 2008, and Director Downey received additional cash compensation of $69,200 for serving as independent chairman of our board of directors.

Under our 1999 Independent Director Share Ownership Plan, each continuing independent director was granted 500 shares of common stock following each annual meeting of the shareholders, beginning with the 1999 Annual Meeting and continuing until the 2004 Annual Meeting, at which time the number of shares granted increased to 1,000.

Additionally, stock appreciation rights ("SARs") have been granted from time to time to our non-employee directors.  During fiscal 2008, 2,960 SARs, adjusted to reflect a two-for-one stock split effected in the form of a stock dividend on May 4, 2007,  were granted to each non-employee director.

 
4

 

Director Summary Compensation Table

The table below summarizes the compensation paid by the Company to non-employee directors for the fiscal year ended February 29, 2008.

Name (1)
 
Fees
Earned or
Paid in Cash
($)
 
Stock
Awards
($)(2)
 
Option/
SARs
Awards
($)(3)
 
Non-Equity Incentive Plan Compensation
 
Change in
Pension Value
and Deferred
Compensation
Earnings
($)
 
All Other
Compensation
($)
 
Total
($)
 
                                         
Dr. Kirk H. Downey
 
$
90,700
 
$
25,000
 
$
16,382
     
   
 
$
132,082
 
                                         
Daniel R. Feehan
 
$
 36,500
 
$
25,000
 
$
9,953
     
   
 
$
71,453
 
                                         
Martin C. Bowen
 
$
 32,000
 
$
25,000
 
$
16,382
     
   
 
$
73,382
 
                                         
Robert H. Johnson(4)
 
$
 21,000
   
-0-
 
$
16,382
     
   
 
$
37,382
 
                                         
Daniel E. Berce
 
$
 40,000
 
$
25,000
 
$
9,953
     
   
 
$
74,953
 
                                         
Sam Rosen
 
$
 32,000
 
$
25,000
 
$
16,382
     
   
 
$
73,382
 
                                         
Kevern R. Joyce
 
$
 34,000
 
$
25,000
 
$
16,382
     
   
 
$
75,382
 
                                         
R. J. Schumacher(4)
 
$
 19,000
   
-0-
 
$
16,382
     
   
 
$
35,382
 
                                         
Peter A. Hegedus
 
$
28,000
 
$
25,000
 
$
5,461
     
   
 
$
58,461
 
                                         
Non-Executive Director Group
 
$
333,200
 
$
175,000
 
$
123,659
               
$
631,859
 
___________
(1)
David H. Dingus, the Company’s Chief Executive Officer and Dana L. Perry, the Company’s Senior Vice President, Chief Financial Officer and Secretary, are not included in this table, as they are employees of the Company and thus receive no compensation for their services as Directors. The compensation received by Messrs. Dingus and Perry as employees of the Company is shown in the Summary Compensation Table on page 16.
 
(2)
Reflects the dollar amount recognized for financial statement reporting purposes for the fiscal year ended February 29, 2008 in accordance with FAS 123(R).
 
(3)
Reflects the dollar amount recognized for financial statement reporting purposes for the fiscal year ended February 29, 2008 in accordance with FAS 123(R).  During fiscal 2008, 2,960 SARs, adjusted to reflect a two-for-one stock split effected in the form of a stock dividend on May 4, 2007,  were granted to each non-employee director.

(4)
Directors Johnson and Schumacher retired and did not stand for re-election  as directors at the 2007 Annual meeting.


COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During the fiscal year ended February 29, 2008, the compensation committee was composed of Directors Downey (chairman), Joyce, Hegedus and Berce, none of whom is an employee of AZZ.

 
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No member of the compensation committee (i) was an officer or employee of the Company or a subsidiary of the Company during fiscal 2008, (ii) was formerly an officer or employee of the Company or a subsidiary of the Company or (iii) has any relationship required to be disclosed pursuant to Item 404 of Regulation S-K.

During fiscal 2008, none of the Company's executive officers served as (a) a member of a compensation committee of another company, one of whose executive officers served on the Company’s compensation committee, (b) a director of another company, one of whose executive officers served on the Company's compensation committee, or (c) a member of a compensation committee of another company, one of whose executive officers served as one of the Company's directors.


CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

During the fiscal year ended February 29, 2008, we did not enter into any transactions with any of our officers, directors or shareholders owning 5% or more of our common stock in which the amount involved exceeded $120,000.  In addition, we are not currently planning to enter into any such transaction or series of similar transactions.


PROCEDURES FOR COMMUNICATING WITH DIRECTORS

The board of directors has established a process by which shareholders can send communications to board members.  Interested parties would use the same method as shareholders to communicate directly with the presiding director or with non-mangement directors as a group. Shareholders and interested parties can send written communications to one or more members of our board, addressed to:

Dr. H. Kirk Downey
Chairman, Nominating and Corporate Governance Committee
AZZ incorporated
University Centre 1, Suite 200
1300 South University Drive
Fort Worth, Texas  76107

Generally, we distribute communications to the board or to the individual director or directors, as appropriate, depending on the subject matter and facts and circumstances outlined in the communication.  We will not distribute communications that are not related to the duties and responsibilities of the board, including:

•       spam;

•       junkmail and mass mailings;

•       product or service complaints;

•       product or service inquiries;

•       new product or service suggestions;

•       resumés and other forms of job inquiries;

•       surveys; and

•       business solicitations or advertisements.

In addition, we will not distribute unsuitable material to our directors, including material that is unduly hostile, threatening or illegal, although any communication that is filtered out is available to any independent director upon request.
 
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DIRECTOR NOMINATION PROCESS

Board Member Qualification Criteria.

The nominating and corporate governance committee has adopted Board Member Qualification Criteria, which set forth the attributes and qualifications considered by the committee in evaluating nominees for director.  The primary qualities and characteristics the committee looks for in nominees for director are:

•       management and leadership experience;

•       relevant knowledge and diversity of background and experience; and

•       personal and professional ethics, integrity and professionalism.

The committee also believes that the board should be composed of individuals who have achieved a high level of distinction in business, law, education or public service and who possess one or more of the following specific qualities or skills:

•       financial expertise;

•       general knowledge of the electrical and industrial products industry and/or galvanizing services;

•       legal or accounting experience; and

•       CEO, CFO or other senior management experience.

Internal Process for Identifying Candidates.

Members of the nominating and corporate governance committee or other AZZ directors or executive officers may, from time to time, identify potential candidates for nomination to our board.  All proposed nominees, including candidates recommended for nomination by shareholders in accordance with the procedures described below, will be evaluated in light of the Board Member Qualification Criteria and the projected needs of the board at the time.  The committee may retain a search firm to assist in identifying potential candidates for nomination to the board of directors.  The search firm’s responsibilities may include identifying and evaluating candidates believed to possess the qualities and characteristics set forth in the Board Member Qualification Criteria, as well as providing background information on potential nominees and interviewing and screening nominees if requested to do so by the committee.

Shareholder Recommendations for Directors

The committee will consider candidates recommended by shareholders for election to our board.  A shareholder who wishes to recommend a candidate for evaluation by the committee should forward the candidate’s name, business or residence address, principal occupation or employment and a description of the candidate’s qualifications to the Chairman of the Nominating and Corporate Governance Committee, care of the Corporate Secretary, AZZ incorporated, University Centre I, Suite 200, 1300 South University Drive, Fort Worth, Texas  76107.

In order for a candidate proposed by a shareholder to be considered by the committee for inclusion as a board nominee at the 2009 Annual Meeting, the candidate must meet the Board Member Qualification Criteria described above and must be expressly interested and willing to serve as an AZZ director.  In addition, the corporate secretary must receive the request for consideration and all required information no later than 5:00 p.m., local time, on March 14, 2009.  Proposals should be sent via registered, certified or express mail.  The corporate secretary will send properly submitted shareholder recommendations to the chairman of the committee.  Individuals recommended to the committee by shareholders in accordance with these procedures will be evaluated by the committee in the same manner as individuals who are recommended through other means.

 
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Shareholder Nominations of Directors

Section 8 of Article III of our by-laws also permits a shareholder to propose a candidate at an annual meeting of shareholders who is not otherwise nominated by the board of directors through the process described above if the shareholder complies with the advance notice, information and consent provisions contained in the by-laws.  To comply with the advance notice provision of the by-laws, a shareholder who wishes to nominate a director at the 2009 Annual Meeting must provide AZZ written notice no earlier than April 27, 2009 and no later than May 22, 2009. You may contact our corporate secretary to obtain the specific information that must be provided with the advance notice.

Nominees for Election at the 2008 Annual Meeting

No nominee for election to the board of directors at our 2008 Annual Meeting of Shareholders was recommended by shareholders or groups of shareholders owning more than 5% of our common stock.

Security Ownership of Management

The following table indicates the ownership on April 30, 2008, of AZZ’s common stock (which is our only class of stock outstanding) by each director and nominee, each executive officer named in the Summary Compensation Table, and all directors and executive officers as a group:

 
 
Name of Beneficial Owner
 
Amount and Nature of Beneficial
Ownership(1)(2)
 
 
Acquirable
Within 60 Days
 
 
Percent of
Class
Daniel E. Berce
 
21,683
 
-0-
 
*
Martin C. Bowen
 
11,883
 
-0-
 
*
David H. Dingus
 
96,000
 
91,450
 
1.5%
Dr. H. Kirk Downey
 
4,683
 
-0-
 
*
Daniel R. Feehan
 
11,683
 
-0-
 
*
Peter A. Hegedus
 
683
 
-0-
 
*
Robert H. Johnson (4)
 
-0-
 
-0-
 
*
Kevern R. Joyce
 
33,436
 
8,000
 
*
Dana L. Perry
 
230,320
 
-0-
 
1.9%
John V. Petro
 
-0-
 
-0-
 
*
Sam Rosen
 
20,725
 
8,000
 
*
R.J. Schumacher (4)
 
-0-
 
-0-
 
*
C.H. Watson
 
-0-
 
-0-
 
*
Fred L. Wright
 
-0-
 
 
-0-
 
*
Tim E. Pendley
 
-0-
 
4,902
 
*
All Current Directors and Executive Officers as a Group (4)
 
 
431,496
 
 
112,352
 
 
4.3%
__________
*Indicates ownership of less than 1%

(1)  
Except as otherwise indicated, each person named in the table has sole investment and voting power with respect to all shares of common stock shown to be beneficially owned by such person.  Beneficial ownership has been determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended.  The percent of voting stock held is based upon 12,136,384 shares outstanding as of April 30, 2008, except for persons who hold options that may be exercised within 60 days of April 30, 2008.

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(2)  
The percentage of voting stock held by persons who hold options that may be exercised within 60 days is based upon the same 12,136,384 shares outstanding on April 30, 2008 plus the number of shares that may be acquired by that person through exercise of options exercisable within 60 days of that date.

(3)  
Adjusted to reflect a two-for-one stock split, effected in the form of a stock dividend on May 4, 2007.

(4)  
Directors Johnson and Schumacher retired and did not stand for reelection as directors at the 2007 Annual Meeting.


Security Ownership of Certain Beneficial Owners

The following table indicates the ownership by each person who is known by us to own beneficially, as of April 30, 2008, five percent or more of our common stock:

Name and Address of
Beneficial Owner
 
Amount and Nature of Beneficial Ownership
 
 
Percent of Class
         
FMR Corp.
82 Devonshire Street
Boston, Massachusetts 02109
 
1,088,200(1)
 
8.9%
         
Tontine Partners
31 West 52nd Street, 17th Floor
New York, NY  10019
 
1,068,600 (2)
 
8.8%
 
         
Keeley Asset Management Corp.
401 South LaSalle Street
Chicago, IL  60605
 
765,000(3)
 
6.3%
__________

(1)
Based on information set forth in a Schedule 13G filed on February 14, 2008, Fidelity Management & Research Company (“Fidelity”), a wholly-owned subsidiary of FMR Corp. and an investment adviser registered under Section 203 of the Investment Advisers Act of 1940, is the beneficial owner of 1,088,200 shares of the common stock outstanding of AZZ as a result of acting as investment adviser to various investment companies registered under Section 8 of the Investment Company Act of 1940. The ownership of one investment company, Fidelity Low Priced Stock Fund, amounted to 1,088,200 shares of AZZ common stock outstanding. Edward C. Johnson 3d and FMR Corp., through its control of Fidelity, and the Funds, each has sole power to dispose of the 1,088,200 shares owned by the Funds. Members of the family of Edward C. Johnson 3d, Chairman of FMR Corp., are the predominant owners, directly or through trusts, of Series B shares of common stock of FMR Corp., representing 49% of the voting power of FMR Corp. The Johnson family group and all other Series B shareholders have entered into a shareholders’ voting agreement under which all Series B shares will be voted in accordance with the majority vote of Series B shares.  Neither FMR Corp. nor Edward C. Johnson 3d, Chairman of FMR Corp., has the sole power to vote or direct the voting of the shares owned directly by the Fidelity Funds, which power resides with the Funds’ Boards of Trustees. Fidelity carries out the voting of the shares under written guidelines established by the Funds’ Boards of Trustees.

(2)
Based on information set forth in a Schedule 13G filed on February 1, 2008, Tontine Partners, an investment advisor registered under Section 203 of the Investment Advisors Act of 1940, furnishes investment advice to four investment companies registered under the Investment Company Act of 1940,

 
9

 

and serves as investment manager to certain other commingled group trusts and separate accounts.  These investment companies, trusts and accounts are referred to in this note as the “Funds.”  In its role as investment advisor or manager, Tontine Partners possesses voting and/or investment power over the securities of the Issuer described in the Schedule 13G that are owned by the Funds, and may be deemed to be the beneficial owner of the shares of the Issuer held by the Funds.  Tontine Partners disclaims beneficial ownership of the securities.  In addition, the Schedule 13G specifically provides that its filing should not be construed as an admission that the reporting person or any of its affiliates is the beneficial owner of any securities covered by the Schedule 13G for any purposes other than Section 13(d) of the Securities Exchange Act of 1934.

(3)
Based on information set forth in a Schedule 13G filed on February 1, 2008, Keeley Asset Management Corp., an investment advisor registered under Section 203 of the Investment Advisors Act of 1940, furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, and serves as investment manager to certain other commingled group trusts and separate accounts.  These investment companies, trusts and accounts are referred to in this note as the “Funds.”  In its role as investment advisor or manager, Keeley Asset Management possesses voting and/or investment power over the securities of the Issuer described in the Schedule 13G that are owned by the Funds, and may be deemed to be the beneficial owner of the shares of the Issuer held by the Funds.  Keeley Asset Management disclaims beneficial ownership of the securities.  In addition, the Schedule 13G specifically provides that its filing should not be construed as an admission that the reporting person or any of its affiliates is the beneficial owner of any securities covered by the Schedule 13G for any purposes other than Section 13(d) of the Securities Exchange Act of 1934.


SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers, and persons who own more than 10% of a registered class of our equity securities, to file with the SEC and the NYSE reports disclosing their ownership and changes in ownership of our common stock or other equity securities.  Our officers, directors and greater than 10% shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.  To our knowledge, all Section 16(a) filing requirements applicable to our officers, directors and greater than 10% beneficial owners during the last fiscal year were observed.


EXECUTIVE COMPENSATION

Compensation Discussion and Analysis
 
Compensation Program Overview
 
The Compensation Committee (the “Committee”) of the Board has responsibility for establishing, implementing and continually monitoring adherence to the Company’s compensation philosophy. The Committee ensures that the total compensation paid to the Company’s management team is fair, reasonable and competitive. Generally, the types of compensation and benefits provided to members of the management team, including the named executive officers, are similar to those provided to other executive officers.
 
The individuals who served as the Company’s Chief Executive Officer and Chief Financial Officer during fiscal 2008, as well as the other individuals included in the Summary Compensation Table on page 16, are referred to as the “named executive officers” throughout this proxy statement.
 
Compensation Philosophy and Objectives
 
The Committee believes that the most effective executive compensation program is one that is designed to reward the achievement of specific annual, long-term and strategic goals by the Company, and which aligns executives’ interests with those of the shareholders by rewarding performance to achieve goals set by the Company, with the ultimate objective of improving shareholder value. The Committee evaluates both performance and compensation to ensure that the Company maintains its ability to attract and retain superior employees in key positions and that compensation provided to key employees remains competitive relative to the compensation paid to similarly situated executives of publicly traded companies with similar characteristics. To that end, the Committee believes executive compensation packages provided by the Company to its executives, including the named executive officers, should include both cash and equity-based compensation that reward performance as measured against established goals.
 
 
10

 
Role of Executive Officers in Compensation Decisions
 
The Committee makes all compensation decisions including equity awards for the management team (which includes the named executive officers).
 
The Chief Executive Officer annually reviews the performance of each member of the management team (other than his own, which is reviewed by the Committee). The conclusions reached and recommendations based on these reviews, including with respect to salary adjustments and annual award amounts, are presented to the Committee. The Committee can exercise its discretion in modifying any recommended adjustments or awards to executives made by the Chief Executive Officer.
 
Setting Executive Compensation
 
Based on the foregoing objectives, the Committee has structured the Company’s annual and long-term incentive-based cash and non-cash executive compensation to motivate executives to achieve the business goals set by the Company and reward the executives for achieving such goals. In furtherance of this, the Committee has the authority under its charter to periodically engage an outside human resources consulting firm to conduct a review of its total compensation program for the Chief Executive Officer as well as for other key executives. The human resources consulting firm provides the Committee with relevant market data and alternatives to consider when making compensation decisions for the Chief Executive Officer and on the recommendations being made by the Company’s Chief Executive Officer for executives other than the Chief Executive Officer. The Committee did not use a human resources consulting firm during fiscal 2008.
 
In making compensation decisions, the Committee compares each element of total compensation against a group of publicly-traded manufacturing companies. This group of companies, which is periodically reviewed and updated by the Committee, consists of companies against which the Committee believes the Company competes for talent and for shareholder investment.

The Committee strives to develop compensation packages for our executives made up of a balanced combination of base salary, annual incentive awards, and long term compensation. The compensation of our executive officers, including the employment agreements with our Chief Executive Officer and Chief Financial Officer, each address these forms of compensation. In setting executives’ compensation, our committee reviews the total remuneration that each respective officer potentially could receive over the next several years, under scenarios contemplating the executive’s continued employment or retirement during the period.
 
Fiscal Year 2008 Executive Compensation Components
 
 
For the fiscal year ended February 29, 2008, the principal components of compensation for named executive officers were:

 
 
base salary;
 
 
 
performance-based incentive compensation;
 
 
 
long-term incentive compensation; and
 
 
 
perquisites and other personal benefits.
 
11

 
Base Salary

The Company provides named executive officers and other employees with base salary to compensate them for services rendered during the fiscal year. Base salary ranges for named executive officers are determined for each executive based on his or her position and responsibility by using market data. Base salary ranges are designed so that salary opportunities for a given position will be between 75% and 125% of the midpoint of the base salary established for each range.
 
During its review of base salaries for executives, the Committee primarily considers:

   
 
market data periodically provided by our outside consultants;
 
 
 
internal review of the executive’s compensation, both individually and relative to other executive officers; and
 
 
 
individual performance of the executive.
 
Salary levels are typically considered annually as part of the Company’s performance review process as well as upon a promotion or other change in job responsibility.

Performance-Based Incentive Compensation

Annual Incentive Compensation

The Senior Management Bonus Plan is an annual cash incentive program. The Senior Management Bonus Plan provides guidelines for the calculation of annual non-equity incentive based compensation, subject to Committee oversight and modification. At its January meeting each year, the Committee considers whether a Senior Management Bonus Plan should be established for the succeeding year and, if so, approves the group of employees eligible to participate in the Senior Management Bonus Plan for that year. The Senior Management Bonus Plan includes various incentive levels based on the participant’s accountability and impact on Company operations, with target award opportunities that are established as a percentage of base salary. These targets range from 30% to 60% of base salary for the Company’s named executive officers.  The maximum award is reached by the named executives by achieving an average performance level of 125% of their performance targets. Award payments under the Senior Management Bonus Plan may not exceed 120% of base salary for Mr. Dingus, 80% of base salary for Messrs. Perry, Pendley, Wright, and Petro, and 60% of base salary for Mr. Watson.
 
Each participant in the plan is assigned one or more quantitative goals taken from AZZ’s operating plan for the current fiscal year. Their success in reaching those goals determines the size of the annual cash incentive award received by each participant. For Messrs. Dingus and Perry, whose responsibilities are Company-wide, 70% of the award is based upon the Company’s diluted earnings per share and, in the case of Mr. Dingus, 30% of the award is based on the achievement of qualitative goals set by the Committee for his individual performance during the year and, in the case of Mr. Perry, 30% of the award is based on the achievement of qualitative goals set by Mr. Dingus for Mr. Perry’s individual performance during the year. The determining factors for Messrs. Pendley, Wright, Petro, and Watson, whose responsibilities relate, in the case of Mr. Pendley and Mr. Wright, to AZZ’s Galvanizing Service Segment and, in the case of Mr. Petro, to the Electrical and Industrial Products Segment, and in the case of Mr. Watson to the Electrical Products Group of our Electrical and Industrial Products Segment, include not only diluted earnings per share but also revenue, operating income or return on assets for their respective segments.
 
In February of each year, the Committee sets minimum, target and maximum levels for each component of the Senior Management Bonus Plan. Payments of awards under the Senior Management Bonus Plan are based upon the achievement of such objectives for the current year. Named executive officers participating in the Senior Management Bonus Plan receive:
 

 
 
no payment for the Senior Management Bonus Plan award unless the participant achieves the minimum performance level;
 
 
12


 
 
 
a payment of at least 50% but less than 100% of the Senior Management Bonus Plan award if the participant achieves or exceeds the minimum performance level but does not achieve the target performance level;
       
 
 
a payment of at least 100% but less than the maximum Senior Management Bonus Plan award if the participant achieves or exceeds the target performance level but does not attain the maximum performance level; and
       
 
 
a payment of the maximum Senior Management Bonus Plan award if the participant achieves or exceeds the maximum performance level.
 
Upon completion of the fiscal year, the Committee assesses the performance of the Company for each of the Senior Management Bonus Plan targets comparing the actual fiscal year results to the pre-determined minimum, target, and maximum levels for each objective and an overall percentage amount is calculated.
 
Awards made to named executive officers under the Senior Management Bonus Plan for performance in 2008 are reflected in column (g) of the Summary Compensation Table on page 16.
 
 
Long-Term Incentive Compensation

Stock Appreciation Rights Program

The Stock Appreciation Rights Program assists the Company to:
 
 
 
 
enhance the link between the creation of shareholder value and long-term executive incentive compensation;
       
 
 
provide an opportunity for increased equity ownership by executives; and
       
 
 
maintain competitive levels of total compensation.
 
The compensation packages of our executive officers include long-term compensation in the form of stock appreciation rights. During fiscal year 2008, rights were granted under the AZZ incorporated 2005 Long-Term Incentive Plan, which are to be settled in shares of AZZ incorporated common stock. Each stock appreciation right has a base value equal to the average of the closing price of one share of AZZ common stock on the New York Stock Exchange for those days on which it trades during the period of thirty-calendar days immediately following the grant date. The stock appreciation rights vest and are exercisable in full on the third anniversary of the grant date and are exercisable for a period of 60 days following the vesting date. During the 60 day period, the participant may exercise the stock appreciation rights with respect to all of the common shares by delivering written notice of exercise to the Committee. The exercise price shall be determined on the date of delivery of such notice, but no later than the 60th day after vesting. On the same terms and conditions described above, on March 1, 2008, the committee awarded 27,686 stock appreciation rights to certain directors, officers and employees of the Company under the proposed Amended and Restated 2005 Long Term Incentive Plan.  Each of the stock appreciation rights awarded under the Amended and Restated 2005 Long Term Incentive Plan is subject to shareholder approval of such plan.  For additional information, please see "Proposal 2 – Amendments to 2005 Long term Incentive Plan".
 
Stock appreciation rights award levels are determined based on market data, vary among participants based on their positions within the Company, and are granted at the Committee’s regularly scheduled January meeting.
 

 
13

 

 
Perquisites and Other Personal Benefits
 
The Company provides named executive officers with perquisites and other employee benefits that the Company and the Committee believe are reasonable and consistent with its overall compensation program to better enable the Company to attract and retain superior employees for key positions. The Committee periodically reviews the levels of perquisites and other personal benefits provided to named executive officers.
 
Attributed costs of the personal benefits described above for the named executive officers for the fiscal year ended February 29, 2008, are included in column (i) of the “Summary Compensation Table” on page 16.

The Company has entered into employment agreements with two of our key executives, Messrs. Dingus and Perry. Additionally, the Company has entered into Change of Control Severance Agreements with certain key employees, including the named executive officers. The Change of Control Severance Agreements are designed to promote stability and continuity of senior management. Information regarding applicable payments under such agreements for the named executive officers is provided under the heading “Potential Payment Upon Termination or Change of Control” on page 23.
 
Retirement and Other Benefits
 
We do not maintain a defined-benefit retirement program.  Instead, all Company employees, including named executive officers, are eligible to participate in the Company’s 401(k) and Profit Sharing Plan known as the AZZ incorporated Employee Benefit Plan and Trust.
 
401(k).  The Company maintains a 401(k) plan for all employees.  The 401(k) plan is a tax-qualified savings plan pursuant to which all Company employees, including the named executive officers, can contribute a portion of their annual salary on a pre-tax basis up to certain limits prescribed by the Internal Revenue Service.  The Company will match 50% of the first 6% of pay that an employee contributes. All employee contributions to the 401(k) plan are fully vested upon contribution. Company matching contributions vest over the first five years of an employee’s service with the Company, and are fully vested for employees who have five or more years of service.  Employees may select from among several mutual funds when investing their 401(k) account funds.
 
Profit Sharing.  In addition to the 401(k) matching contributions, the Company may make a profit sharing contribution that all Company employees who have satisfied a one year eligibility waiting period, including named executive officers, are eligible to receive.  In the event a contribution is made, each Company employee, including named executives, will receive a portion of the contribution as determined by the following formula:
 
Participant Eligible Compensation
--------------------------------------------------- X  Profit Sharing Contribution
Eligible Compensation All Participants
 
This amount is allocated to the participant’s account and is invested in one or more mutual funds as determined by the participant.
 
The profit sharing contribution made by the Company is subject to the same vesting rules as the matching 401(k) funds.
 

 
14

 

Tax and Accounting Implications
 
Deductibility of Executive Compensation
 
As part of its role, the Committee reviews and considers the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code, which provides that the Company may not deduct compensation of more than $1,000,000 that is paid to certain individuals. The Company believes that compensation paid under the management incentive plans is generally fully deductible for federal income tax purposes. However, in certain situations, the Committee may approve compensation that will not meet these requirements in order to ensure competitive levels of total compensation for its executive officers.
 
Accounting for Stock-Based Compensation

Beginning on March 1, 2006, the Company began accounting for stock-based payments under its Stock Option Program and Stock Appreciation Rights Program in accordance with the requirements of FASB Statement 123(R).


COMPENSATION COMMITTEE REPORT
 
The Compensation Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management, and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.
 
 
THE COMPENSATION COMMITTEE
 
 
Dr. H. Kirk Downey, Chairman
 
Kevern R. Joyce
 
Daniel E. Berce
 
Peter A. Hegedus
  


 
15

 

SUMMARY COMPENSATION TABLE

 
The table below summarizes the total compensation paid or earned by each of the named executive officers for the fiscal year ended February 29, 2008. The Company has entered into employment agreements with two of the named executive officers, Messrs. Dingus and Perry. When setting total compensation for each of the named executive officers, the Compensation Committee reviews tally sheets which show the executive’s current compensation, including equity and non-equity based compensation.

Name and
Principal Position
(a)
 
Year
(b)
 
Salary
($)
(c)
 
Bonus
($)
(d)
 
Stock
Awards
($)
(e)
 
Option
/SARs
Awards
($)(1)
(f)
 
Non-Equity
Incentive
Plan
Compensation
($)
(g)
 
Change in
Pension Value
and Nonquali-
fied Deferred
Compensation
Earnings
($)
(h)
 
All Other
Compensation
($)(2)
(i)
 
Total 
($)
(j)
David H. Dingus
 
2008
 
$
421,500
   
   
 
$
195,407
 
$
385,926
 
 
$
32,842
 
$
1,035,675
President & Chief
Executive Officer
 
2007
 
$
390,000
   
   
 
$
57,578
 
$
338,542
 
 
$
24,656
 
$
810,776
                                                   
Dana L. Perry
 
2008
 
$
236,000
   
   
 
$
50,363
 
$
179,950
 
 
$
31,445
 
$
497,758
Senior Vice President & Chief Financial Officer
 
2007
 
$
218,400
   
   
 
$
41,428
 
$
158,924
 
 
$
18,260
 
$
437,012
                                                   
Fred L. Wright, Jr. (3)
 
2008
 
$
60,924
   
   
   
-0-
 
$
19,600
 
 
$
3,456
 
$
83,980
Senior Vice President Galvanizing Services
 
2007
 
$
198,000
   
   
 
$
39,327
 
$
156,800
 
 
$
21,031
 
$
415,158
                                                   
John V. Petro
 
2008
 
$
214,000
   
   
 
$
47,817
 
$
171,200
 
 
$
33,378
 
$
466,395
Senior Vice President, Electrical and Industrial Products Segment
 
2007
 
$
198,000
   
   
 
$
39,327
 
$
156,800
 
 
$
18,495
 
$
412,622
                                                   
Clement H. Watson
 
2008
 
$
190,000
   
   
 
$
29,048
 
$
114,000
 
 
$
30,211
 
$
363,259
Vice President of Sales Electrical Products Group
 
2007
 
$
175,000
   
   
 
$
9,832
 
$
105,000
 
 
$
17,633
 
$
307,465
                                                   
Tim E. Pendley (4)
 
2008
 
$
181,000
   
   
 
$
29,048
 
$
144,800
 
 
$
30,254
 
$
355,102
Vice President Galvanizing Services
 
2007
 
$
122,500
   
   
 
$
9,832
 
$
73,500
 
 
$
22,617
 
$
228,449
                                                   
__________
(1)
The amounts in column (f) reflect the dollar amount recognized for financial statement reporting purposes for the fiscal year ended February 29, 2008, in accordance with FAS 123(R) of awards pursuant to the Stock Appreciation Rights Program. Assumptions used in the calculation of this amount are included in footnote 1 to the Company’s audited financial statements for the fiscal year ended February 29, 2008, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on May 12, 2008.
   
(2)
The amount shown in column (i) reflects for each named executive officer:
 
 
 
Matching contributions allocated by the Company to each of the named executive officers pursuant to the AZZ incorporated Employee Benefit Plan and Trust (which is more fully described on page 14 under the heading “Retirement and Other Benefits”);
 
 
 
The value attributable to group health and life insurance benefits which are provided to all employees, including the named executive officers, and
       
 
 
The amount attributable to each such perquisite or benefit for each named executive officer does not exceed the greater of $25,000 or 10% of the total amount of perquisites received by such named executive officer.

 
16

 


(3)
Mr. Wright retired as Senior Vice President  Galvanizing Segment on June 1, 2007.

(4)
Mr. Pendley assumed all responsibilities of the Galvanizing Segment upon the retirement of Mr. Wright on June 1, 2007.


GRANTS OF PLAN BASED AWARDS

The following table provides information about equity awards made to each of the named executive officers under our Long Term Incentive Plan during fiscal 2008.

                   
All Other
Stock
Awards:
All Other
Option/SARs Awards:
 
Grant
Date
Fair
Value
     
Estimated Future Payouts Under Non- Equity Incentive Plan Awards
Estimated Future Payouts
Under Equity Incentive
Plan Awards
Number
of
Shares
of
Stock
Number
of
Securities
Underlying
Options/
Exercise
or Base
Price of
Option/
SARs
of
Stock
and
Option/
SARs
Name
Grant
Date
 
Threshold
($)
 
Target
($)
Maximum
($)
Threshold
(#)
Target
(#)
Maximum
(#)
or Units
(#)
SARs
(#)(1)
Awards
($/sh)(1)
Awards
($)(2)
David H. Dingus                       
3/1/07
   
 
 
39,300
$ 19.89
$
217,500
                             
                             
Dana L. Perry                       
3/1/07
   
 
 
9,100
$ 19.89
$
50,363
                             
                             
Fred L. Wright (3)
3/1/07
   
 
 
-0-
-0-
 
-0-
                             
                             
John V. Petro                       
3/1/07
   
 
 
8,640
$ 19.89
$
47,817
                             
                             
Clement H. Watson
3/1/07
   
 
 
8,640
$ 19.89
$
47,817
                             
                             
Tim E. Pendley                       
3/1/07
   
 
 
8,640
$ 19.89
$
47,817
                             
                             
Executive Group                       
                     
74,320
 
$
411,314
                               
Non-Executive Officer Employee Group
                     
-
   
-
__________
(1)
Adjusted to reflect a two-for-one stock split, effected in the form of a stock dividend on May 4, 2007.

(2)
Amounts set forth in the Grant Date Fair Value of Stock or Options/SARs Awards column represent the aggregate grant date fair value computed in accordance with FAS123(R) based on the assumptions set forth in Note 1 to the Company’s financial statements contained in the Company’s annual report on Form 10-K for the fiscal year ended February 29, 2008.
 
(3)
Mr. Wright retired as Senior Vice President Galvanizing Segment on June 1, 2007.

 
17

 

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

The following table provides information on the holdings of stock options and stock appreciation rights by each of the named executive officers as of February 29, 2008.  Each option grant and stock appreciation right is shown separately for each named executive officer.

 
Option/SARs Awards (1)
Stock Awards
Name
Number of
Securities
Underlying
Unexercised
Options/SARs (#)
Exercisable (2)
Number of
Securities
Underlying
Unexercised
Options/SARs (#)
Unexercisable
(2)
Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
 
Option/
SARs
Exercise
Price ($)
Option/
SARs
Expiration
Date
Number of
Shares or
Units of
Stock That
Have Not
Vested
Market
Value of
Shares or
Units of
Stock
That
Have Not
Vested
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units
or Other
Rights
That
Have
Not
Vested
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That Have
Not Vested
                         
David H. Dingus
76,730(3)
 
 
$
  8.37
 
03/27/12
 
14,720(3)
     
$
  5.55
 
03/03/13
       
 
61,400(4)
   
$
  7.98
 
04/27/08
       
   
61,400(5)
   
$
 11.55
 
04/07/09
       
   
39,300(5)
   
$
 19.89
 
03/01/10
       
                         
Dana L. Perry
 
14,200(4)
 
$
  7.98
 
01/27/08
   
14,200(5)
   
$
 11.55
 
04/07/09
       
   
9,100(5)
   
$
 19.89
 
03/01/10
       
                         
Fred L. Wright(6)
 
   
 
                         
John V. Petro
 
13,480(4)
 
$
  7.98
 
04/27/08
   
13,480(5)
   
$
11.55
 
04/07/09
       
 
8,640(5)
   
$
19.89
 
03/01/10
       
                         
Clement H. Watson
 
13,480(4)
 
$
  7.98
 
04/27/08
   
13,480(5)
   
$
11.55
 
04/07/09
       
   
8,640(5)
   
$
19.89
 
03/01/10
       
                         
Tim E. Pendley
946
 
 
$
  8.80
 
03/27/12
 
3,956
     
$
  4.22
 
04/02/13
       
   
13,480(4)
   
$
  7.98
 
04/27/08
       
   
13,480(5)
   
$
 11.55
 
04/07/09
       
   
8,640(5)
   
$
19.89
 
03/01/10
       
__________

(1)
Adjusted to reflect a two-for-one stock split, effected in the form of a stock dividend on May 4, 2007.

(2)
All options listed above vest at a rate of 25% per year over the first four years of the ten-year option term.
All SARs listed above vest upon expiration date of the SAR.
(3)
Represents stock option awards.
(4)
Represents cash settled stock appreciation awards.
(5)
Represents equity settled stock appreciation awards.
(6)
Mr. Wright retired as Senior Vice President Galvanizing Segment on June 1, 2007.


 
18

 

OPTION EXERCISES AND STOCK VESTED

 
The following table provides information for each of the named executive officers on the aggregate stock option exercises during Fiscal 2008, including the number of shares acquired on exercise and the value realized.
 
   
 
Option Awards
   
Stock Awards
 
Name
 
Number of Shares
 Acquired On Exercise 
(#)(1)
   
Value Realized 
on Exercise
($)
   
Number of Shares
 Acquired on Vesting
(#)
   
Value Realized on
Vesting
($)
 
David H. Dingus                                        
    147,302     $ 3,016,943              
                                 
Dana L. Perry                                        
    64,436     $ 1,341,049              
                                 
Fred L. Wright(2)                                        
    37,398     $ 620,143              
                                 
John V. Petro                                        
    23,050     $ 572,591              
                                 
Clem H. Watson                                        
    37,398     $ 897,217              
                                 
Tim E. Pendley                                        
    5,604     $ 76,439              
__________

(1)
Adjusted to reflect a two-for-one stock split, effected in the form of a stock dividend on May 4, 2007.
   
(2)
Mr. Wright retired as Senior Vice President Galvanizing Segment on June 1, 2007.

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
 
Payments Made Upon Resignation, Termination, Death or Disability

Dingus Employment Agreement and Management Incentive Plan.  In the event that Mr. Dingus’ employment is terminated, prior to a change of control, due to disability or death or for Cause, Mr. Dingus, or his estate, shall be entitled to receive (i) all earned but unpaid base salary, (ii) payment for all earned but unused vacation time, and (iii) reimbursement for business expenses incurred prior to the date of termination.  He, or his estate, shall also receive a bonus prorated to the last completed full month of service prior to termination.  If the Company terminates Mr. Dingus’ employment without Cause, he shall be entitled to receive (i) a cash amount equal to his base pay from the date of his termination to the end of the term of his employment agreement but in no event less than his base pay for a 24 month period plus any amounts to which he is entitled under any compensation plan of the Company and (ii) a bonus prorated to the last completed full month of service prior to termination. Mr. Dingus also received Stock Options and Stock Appreciation Rights under the terms of this Agreement. These Stock Options and Stock Appreciation Rights shall vest and become exercisable upon Mr. Dingus’ termination as described in each separate Stock Option Agreement and Stock Appreciation Rights Agreement.

In Mr. Dingus’ Agreement, “Cause” is defined as (1) Mr. Dingus being convicted of a crime involving moral turpitude or a crime providing for a term of imprisonment in a federal or state penitentiary or (2) Mr. Dingus commits any willful malfeasance or gross negligence in the discharge of his  duties to the Company or any of its subsidiaries, having a material adverse effect on the Company or any of its subsidiaries, their business or reputations or (3)  Mr. Dingus fails to correct within five days after written notice, any specific failure in performance of the duties of his position with the Company.

19

 
Mr. Dingus’ Employment Agreement contains provisions requiring him to hold in strict confidence and not to disclose any Confidential Information, as defined therein, to any person except those engaged by the Company to further the business of the Company, without the prior written consent of the Company.  Mr. Dingus is also prohibited from using the Confidential Information for any purpose other than the pursuit of the business of the Company without the prior written consent of the Company.  These obligations of confidentiality and non-use shall remain in effect during Mr. Dingus’ employment and indefinitely thereafter.

Mr. Dingus’ Employment Agreement also contains provisions requiring him not to, without the prior written consent of the Company, solicit for employment any person who was employed by the Company at the time of Mr. Dingus’ termination of employment with the Company.  After his termination of employment with the Company, if Mr. Dingus is approached by an employee of the Company concerning prospective employment he will inform such employee that he cannot discuss matters further with such employee without the consent of the Company.  This non-solicitation provision shall remain in effect during the course of Mr. Dingus’ employment with the Company and for a period of 12 months after termination of such employment at any time and for any reason.

Mr. Dingus’ Employment Agreement also contains a provision requiring that for a period of twelve months following his termination he may not directly or indirectly solicit any person, who at the time of his termination was a client, customer, vendor, consultant, or agent of the Company to cease doing business in whole or in part with the Company.  If such a client, customer, vendor, consultant, or agent should contact him about ceasing to do business with the Company he will inform such person that he cannot discuss the matter further without the consent of the Company.

Perry Employment Agreement and Management Incentive Plan.  Mr. Perry’s Employment Agreement and Management Incentive Plan contain provisions identical to those described above with respect to Mr. Dingus’ Employment Agreement and Management Incentive Plan.

Payments made upon a Change In Control

Dingus Change Of Control Agreement. If Mr. Dingus remains in the service of the Company for a period of one year following a change in control of the Company, (i) he shall be entitled to a payment equal to 2.99 times his “base amount,” as defined in Section 280G(b)(3) of the Internal Revenue Code and (ii) all Options and Stock Appreciation Rights shall fully vest and become exercisable.

If Mr. Dingus is terminated during a period in which a potential change in control is in effect or before one year following a change in control as a result of (i) his death (ii) his total disability (iii) his termination by the Company for any reason other than cause or (iv) voluntary termination by him for good reason, (a) the Company shall pay him, in addition to the amount indicated above his full base salary through his date of termination plus any amounts to which he is entitled under any compensation agreement at the time such payments are due, and (b) all Stock Options and Stock Appreciation Rights shall fully vest and become immediately exercisable.

If Mr. Dingus’ employment is terminated before one year following a change in control of the Company (i) by Mr. Dingus for any reason whatsoever other than as a result of his death, total disability or for Good Reason or (ii) by the Company for Cause, the Company shall pay him his full base salary through the date of termination plus any amounts to which he is entitled under any compensation plan of the Company at the time such payments are made, but he will not be entitled to the payment of 2.99 times his “base amount.”

The Company shall also reimburse Mr. Dingus all legal fees and expenses he might incur in seeking to obtain or enforce any right or benefit provided by the Change of Control Agreement. 

“Cause” as used in this Change of Control Agreement has the same meaning as “Cause” contained in the “Dingus Employment Agreement” as shown above.

“Good Reason” is defined, as used in this Change of Control Agreement, as follows:

20

 
(A) The assignment of duties to Mr. Dingus inconsistent with his present status as President and Chief Executive Officer of the Company (or such other title or titles as he may be holding immediately prior to the change in control of the Company) or a substantial adverse alteration in the nature or status of his responsibilities from those in effect immediately prior to the change in control of the Company;

(B) A reduction by the Company in his annual base salary in effect on the date of the change in control of the Company;

(C) The relocation of the Company’s principal executive offices to a location outside of Tarrant County, Texas (or, if different, the metropolitan area in which such offices are located immediately prior to the change in control of the Company) or the Company’s requiring Mr. Dingus to be based anywhere other than a site less than thirty (30) miles from the site where he is now principally based except for (i) required travel on Company business to an extent substantially consistent with his present business travel obligations and (ii) proposed relocations of which he has already been informed in writing on or prior to the date of the Agreement or to which he may thereafter consent;

(D) The failure by the Company, without his consent, to pay to Mr. Dingus any portion of his current compensation, after the same shall have become due and payable and within seven (7) days after receipt by the Company of written notice from Mr. Dingus specifying that such compensation is due and has not been paid;

(E) The failure by the Company to continue in effect any compensation plan in which he participates immediately prior to the change in control of the Company which is material to his total compensation, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue his participation therein on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of his participation relative to other participants, as existed at the time of the change in control of the Company;

(F) The failure of the Company to continue to provide Mr. Dingus with benefits substantially similar to those enjoyed by him under the AZZ incorporated Employee Benefit Plan & Trust or under any of the Company’s other deferred compensation plans, life insurance, medical, health and accident, or disability plans in which he was participating at the time of the change in control of the Company, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive him of any material fringe benefit enjoyed by him at the time of the change in control of the Company, or the failure by the Company to provide him with the number of paid vacation days to which he is entitled on the basis of any employment contract with him or years of service with the Company in accordance with the Company’s normal vacation policy for officers in effect at the time of the change in control of the Company;

(G) The failure of the Company to obtain a satisfactory agreement from any successor to assume and agree to perform this Change of Control Agreement; or

(H) Any purported termination of his employment by the Company other than because of total disability, death or for Cause.  With respect to clauses (A), (B), (E), (F), (G) or (H) of the immediately preceding sentence, such clauses shall not constitute Good Reason unless the circumstances described in such clauses are not fully corrected within 15 days of the Company’s receipt of notice from Mr. Dingus that such circumstances exist.

Perry Change Of Control Agreement. Mr. Perry’s Change of Control Agreement contains provisions identical to those described above for Mr. Dingus with respect to Mr. Dingus’ Change of Control Agreement, provided that with respect to clause (A) in the definition of “Good Reason” above, Mr. Perry’s Change of Control Agreement references his status as “Senior Vice President and Chief Financial Officer” rather than “President and Chief Executive Officer.”

Executive Change-In-Control Severance Agreements. The Executive Change-in-Control Severance Agreements with Mr. Pendley, Mr. Petro, and Mr. Watson, provide:

21

·  
If such executive’s employment is terminated within one year following a change in control of the Company for Cause or by such executive for other than Good Reason, the Company shall pay him his full base salary through the date of termination plus all other amounts to which he is entitled under any compensation or benefit plan of the Company at the time such payments are due and the Company shall have no further obligation to him under this Change in Control Agreement.

·  
If such executive’s employment is terminated before one year following a change in control (i) by the Company other than for Cause or disability, or (ii) by such executive for Good Reason, he shall be entitled to his base salary through the date of termination plus any other amounts to which he (a) is entitled to under any compensation plan of the Company at the time such payments are due; (b) a severance payment in an amount equal to two times his base amount, as defined in Section 280G(b)(3) of the Internal Revenue Code, and all Stock Options and Stock Appreciation Rights held by such executive shall fully vest and become immediately exercisable and (c) the Company will reimburse such executive for all legal fees and expenses incurred by him in seeking to obtain or enforce any right or benefit provided by the Change in Control Agreement.

·  
“Cause” as used in such Executive Change-in-Control Severance Agreements has the same meaning as contained in the “Dingus Employment Agreement.”

·  
“Good Reason” as used in such Executive Change-in-Control Severance Agreements means

(A) the assignment of duties to him inconsistent with his present status or position with the Company (or such other title or titles as he may be holding immediately prior to the change in control of the Company) or a substantial adverse alteration in the nature or status of his responsibilities from those in effect immediately prior to the change in control of the Company;

(B) a reduction by the Company in his annual base salary in effect on the date of the change in control of the Company;

(C) the relocation of the Company’s principal executive offices to a location requiring him to be based anywhere other than a site less than thirty (30) miles from the site where he is now principally based except for (i) required travel on Company business to an extent substantially consistent with his present business travel obligations and (ii) proposed relocations of which he has already been informed in writing on or prior to the date of the Agreement or to which he may thereafter consent;

(D) the failure by the Company, without his consent, to pay to him any portion of his current compensation, after the same shall have become due and payable and within seven (7) days after receipt by the Company of written notice from him specifying that such compensation is due and has not been paid;

(E) the failure by the Company to continue in effect any compensation plan in which he participates immediately prior to the change in control of the Company which is material to his total compensation, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue his participation therein on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of his participation relative to other participants, as existed at the time of the change in control of the Company;

(F) the failure of the Company to continue to provide him with benefits substantially similar to those enjoyed by him under the AZZ incorporated Employee Benefit Plan & Trust or under any of the Company’s other deferred compensation plans, life insurance, medical, health and accident, or disability plans in which he was participating at the time of the change in control of the Company, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive him of any material fringe benefit enjoyed by him at the time of the change in control of the Company, or the failure by the Company to provide him with the number of paid vacation days to which he is entitled on the basis of any employment contract with him or years of service with the Company in accordance with the Company’s normal vacation policy for employees in effect at the time of the change in control of the Company;

 
22

 

(G) the failure of the Company to obtain a satisfactory agreement from any successor to assume and agree to perform this Change-in-Control Severance Agreement; or

(H) any purported termination of his employment by the Company other than because of total disability, death or for Cause.  With respect to clauses (A), (B), (E), (F), (G), or (H) of the immediately preceding sentence, such clauses shall not constitute Good Reason unless the circumstances described in such clauses are not fully corrected within 15 days of the Company’s receipt of notice from such executive that such circumstances exist.



Except for Mr. Wright who retired as Senior Vice President Galvanizing Segment on June 1, 2007, the following table reflects the amount of compensation to each of the named executive officers of the Company in the event of termination of such executive’s employment. The amount of compensation payable to each named executive officer upon voluntary termination, involuntary not-for-cause termination, for cause termination, termination following a change of control and in the event of disability or death of the executive is shown below. The amounts shown assume that such termination was effective as of February 29, 2008 and that the named executive officers had met requirements under our incentive compensation plans that the executive be employed as of year end to receive benefits related to the year, and thus includes amounts earned through such time and are estimates of the amounts which would be paid out to the executives upon their termination. The actual amounts to be paid out can only be determined at the time of such executive’s separation from the Company.  As of February 29, 2008, each executive had received all of the base salary earned during fiscal 2008, and no portion of the base salary was unpaid at that date.

DAVID H. DINGUS
 
TRIGGERING EVENT
 
             
   
Termination of Employment Before Change in Control
   
Termination of Employment Within
One Year After Change in Control
 
   
Death/ Disability
   
Termination for Cause
   
Termination Without Cause
   
Death/ Disability
   
Termination for Cause
   
Termination Without Cause
   
Voluntary For Good Reason
   
Voluntary Without Good Reason
 
                                                         
Severance
             
$
1,264,500
(2)
 
$
2,309,369
(1)
       
$
2,309,369
(1)
 
$
2,309,369
(1)
     
                                                                 
Short-Term Cash Incentive
 
$
385,926
   
$
385,926
   
$
385,926
   
$
385,926
   
$
385,926
   
$
385,926
   
$
385,926
   
$
385,926
 
                                                                 
Stock Options
 
$
2,515,882
(3)
 
$
2,515,882
(3)
 
$
2,515,882
(3)
 
$
0
(4)
 
$
2,515,882
(3)
 
$
0
(4)
 
$
0
(4)
 
$
2,515,882
(3)
                                                                 
Stock Appreciation Rights
 
$
3,760,763
           
$
3,760,763
   
$
3,760,763
           
$
3,760,763
   
$
3,760,763
         
 
__________

(1)  
This amount is 2.99 times the average base amount, defined as base salary plus short-term incentive payments, for Mr. Dingus for the fiscal years 2006, 2007 and 2008.

(2)  
This amount is Mr. Dingus’s base salary for a period of three years. Mr. Dingus’s Employment Agreement with the Company provides that if he is terminated without cause, he will be entitled to his base salary for the period from the date of termination to the end of the term of the Employment Agreement. Because Mr. Dingus received no notice from the Company of a termination of the Employment Agreement, Mr. Dingus's Employment Agreement term is for the period from March 1, 2008 through March 1, 2011.

(3)  
This amount is the total value of vested options held by the named executive officer as of February 29, 2008.

(4)  
This amount is the total value of all options held by the named executive officer as of February 29, 2008 following the application of the accelerated vesting provision contained in the Change in Control Agreement.

 
23

 


DANA L. PERRY
 
TRIGGERING EVENT
 
         
   
Termination of Employment Before Change in Control
   
Termination of Employment Within
One Year After Change in Control
 
   
Death/ Disability
   
Termination for Cause
   
Termination Without Cause
   
Death/ Disability
   
Termination for Cause
   
Termination Without Cause
   
Voluntary For Good Reason
   
Voluntary Without Good Reason
 
                                                         
Severance
             
$
708,000
(2)
 
$
1,189,894
(1)
       
$
1,189,894
(1)
 
$
1,189,894
(1)
     
                                                                 
Short-Term Cash Incentive
 
$
179,950
   
$
179,950
   
$
179,950
   
$
179,950
   
$
179,950
   
$
179,950
   
$
179,950
   
$
179,950
 
                                                                 
Stock Options
 
$
0
(3)
 
$
0
(3)
 
$
0
(3)
 
$
0
(4)
 
$
0
(3)
 
$
0
(4)
 
$
0
(4)
 
$
0
(3)
                                                                 
Stock Appreciation Rights
 
$
869,925
           
$
869,925
   
$
869,925
           
$
869,925
   
$
869,925
         
 
__________

(1)  
This amount is 2.99 times the average base amount, defined as base salary plus short-term incentive payments, for Mr. Perry for the fiscal years 2006, 2007 and 2008.

(2)  
This amount is Mr. Perry’s base salary for a period of three years. Mr. Perry’s Employment Agreement with the Company provides that if he is terminated without cause, he will be entitled to his base salary for the period from the date of termination to the end of the term of the Employment Agreement. Because Mr. Perry received no notice from the Company of a termination of the Employment Agreement, Mr. Perry's Employment Agreement term is for the period from March 1, 2008 through March 1, 2011.

(3)  
This amount is the total value of vested options held by the named executive officer as of February 29, 2008.

(4)  
This amount is the total value of all options held by the named executive officer as of February 29, 2008 following the application of the accelerated vesting provision contained in the Change in Control Agreement.

JOHN V. PETRO
 
TRIGGERING EVENT
 
         
   
Termination of Employment Before Change in Control
   
Termination of Employment Within
One Year After Change in Control
 
   
Death/ Disability
   
Termination for Cause
   
Termination Without Cause
   
Death/ Disability
   
Termination for Cause
   
Termination Without Cause
   
Voluntary For Good Reason
   
Voluntary Without Good Reason
 
                                                         
Severance
                     
$
731,787
(1)
       
$
731,787
(1)
 
$
731,787
(1)
     
                                                                 
Short-Term Cash Incentive
 
$
171,200
   
$
171,200
   
$
171,200
   
$
171,200
   
$
171,200
   
$
171,200
   
$
171,200
   
$
171,200
 
                                                                 
Stock Options
 
$
0
(2)
 
$
0
(2)
 
$
0
(2)
 
$
0
(3)
 
$
0
(2)
 
$
0
(3)
 
$
0
(3)
 
$
0
(2)
                                                                 
Stock Appreciation Rights
 
$
825,838
           
$
825,838
   
$
825,838
           
$
825,838
   
$
825,838
         
 
__________

(1)  
This amount is two times the average base amount, defined as base salary plus short-term incentive payments, for Mr. Petro for the fiscal years 2006, 2007 and 2008.

(2)  
This amount is the total value of vested options held by the listed executive officer as of February 29, 2008.

(3)  
This amount is the total value of all options held by the listed executive officer as of February 29, 2008 following the application of the accelerated vesting provision contained in the Change in Control Agreement.

 
24

 

CLEMENT H. WATSON
 
TRIGGERING EVENT
 
         
   
Termination of Employment Before Change in Control
   
Termination of Employment Within
One Year After Change in Control
 
   
Death/ Disability
   
Termination for Cause
   
Termination Without Cause
   
Death/ Disability
   
Termination for Cause
   
Termination Without Cause
   
Voluntary For Good Reason
   
Voluntary Without Good Reason
 
                                                         
Severance
                     
$
581,104
(1)
       
$
581,104
(1)
 
$
581,104
(1)
     
                                                                 
Short-Term Cash Incentive
 
$
114,000
   
$
114,000
   
$
114,000
   
$
114,000
   
$
114,000
   
$
114,000
   
$
114,000
   
$
114,000
 
                                                                 
Stock Options
 
$
0
(2)
 
$
0
(2)
 
$
0
(2)
 
$
0
(3)
 
$
0
(2)
 
$
0
(3)
 
$
0
(3)
 
$
0
(2)
                                                                 
Stock Appreciation Rights
 
$
825,838
           
$
825,838
   
$
825,838
           
$
825,838
   
$
825,838
         
 
__________

(1)  
This amount is two times the average base amount, defined as base salary plus short-term incentive payments, for Mr. Watson for the fiscal years 2006, 2007 and 2008.

(2)  
This amount is the total value of vested options held by the listed executive officer as of February 29, 2008.

(3)  
This amount is the total value of all options held by the listed executive officer as of February 29, 2008 following the application of the accelerated vesting provision contained in the Change in Control Agreement.

TIM E. PENDLEY
 
TRIGGERING EVENT
 
         
   
Termination of Employment Before Change in Control
   
Termination of Employment Within
One Year After Change in Control
 
   
Death/ Disability
   
Termination for Cause
   
Termination Without Cause
   
Death/ Disability
   
Termination for Cause
   
Termination Without Cause
   
Voluntary For Good Reason
   
Voluntary Without Good Reason
 
                                                         
Severance
                     
$
554,653
(1)
       
$
554,653
(1)
 
$
554,653
(1)
     
                                                                 
Short-Term Cash Incentive
 
$
144,800
   
$
144,800
   
$
144,800
   
$
144,800
   
$
144,800
   
$
144,800
   
$
144,800
   
$
144,800
 
                                                                 
Stock Options
 
$
148,630
(2)
 
$
148,630
(2)
 
$
148,630
(2)
 
$
0
(3)
 
$
148,630
(2)
 
$
0
(3)
 
$
0
(3)
 
$
148,630
(2)
                                                                 
Stock Appreciation Rights
 
$
825,838
           
$
825,838
   
$
825,838
           
$
825,838
   
$
825,838
         
 
__________

(1)  
This amount is two times the average base amount, defined as base salary plus short-term incentive payments, for Mr. Pendley for the fiscal years 2006, 2007 and 2008.

(2)  
This amount is the total value of vested options held by the listed executive officer as of February 29, 2008.

(3)  
This amount is the total value of all options held by the listed executive officer as of February 29, 2008 following the application of the accelerated vesting provision contained in the Change in Control Agreement.

 
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AUDIT COMMITTEE REPORT

The audit committee during fiscal 2008 was composed of Directors Feehan (chairman), Berce, and Joyce (and for a portion of fiscal 2008, Directors Schumacher and Johnson, each of who retired as directors after the 2007 Annual Meeting).  The board has determined that all members are independent as that term is defined in The New York Stock Exchange listing standards and Section 10A(m)(3) of the Securities Exchange Act of 1934 and that each member qualifies as an audit committee financial expert as defined in the SEC rules adopted under the Sarbanes-Oxley Act of 2002.

The audit committee has sole authority for the appointment and replacement of the independent auditor and is directly responsible for the compensation and oversight of the work of the independent auditor.  The independent auditor reports directly to the audit committee.  The audit committee reviews with the auditors the plan and scope of the annual audit.  It reviews with management and the independent auditor the annual audited financial statements and recommends to the board whether they should be included in AZZ’s annual report.  It similarly reviews quarterly financial reports and all earnings press releases.  The audit committee also has general oversight of AZZ’s accounting, financial reporting and internal audit function.  Management is responsible for the preparation, presentation and integrity of AZZ’s financial statements, accounting and financial reporting principles, internal controls and procedures designed to ensure compliance with accounting standards, applicable laws and regulations.  BDO Seidman LLP (“BDO Seidman”), our independent registered public accounting firm, is responsible for performing an independent audit of the consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States).

The audit committee members are not professional auditors, and their functions are not intended to duplicate or to certify the activities of management and BDO Seidman.  The audit committee serves an oversight role, providing advice, counsel and direction to management and BDO Seidman on the basis of information it receives, discussions with management and BDO Seidman, and the experience of the audit committee’s members in business, financial and accounting matters.

The audit committee operates under a written charter, which was adopted in revised form by the board of directors on June 20, 2007.  A copy of the full text of the charter is available on AZZ’s website at www.azz.com.  The audit committee reviews and assesses the adequacy of its charter on an annual basis.

The audit committee has:

 
 
reviewed and discussed the audited consolidated financial statements with management;
       
 
 
discussed with BDO Seidman the matters, if any, required to be discussed by SAS 61 (Codification of Statements on Auditing Standards, AU § 380), as amended; and
       
 
 
received the written disclosures from BDO Seidman required by Independence Standards Board Standard No. 1 (Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees), as amended.

Based on the review and discussions referred to in the preceding paragraph, the audit committee recommended to the board of directors that the audited consolidated financial statements be included in AZZ’s Annual Report on Form 10-K for its fiscal year ended February 29, 2008.

Audit Committee:

Daniel R. Feehan, Chairman
Daniel E. Berce
Kevern Joyce


 
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Notwithstanding anything to the contrary set forth in any of AZZ’s previous filings under the Securities Act of 1933 or the Securities Exchange Act of 1934 that might incorporate future filings, including this proxy statement, in whole or in part, the compensation committee discussion and analysis and the audit committee report shall not be incorporated by reference into any such filings.


AMENDMENTS TO 2005 LONG TERM INCENTIVE PLAN

Our 2005 Long-Term Incentive Plan was approved at the 2005 Annual Shareholder’s Meeting. The plan currently allows for granting of stock options (including incentive stock options and nonqualified stock options), stock appreciation rights, restricted stock awards, stock unit awards, and performance awards on up to 500,000 shares of our common stock (adjusted up from 250,000 shares of our common stock due to the two-for-one stock split effected in the form of a stock dividend on May 4, 2007).  If approved by the shareholders, the 2005 Long Term Incentive Plan will be amended (1) to provide that the maximum number of shares of common stock authorized for issuance under the plan shall be increased to 1,000,000 shares, (2) to provide that, in the event that the Company issues shares of common stock in connection with the exercise of stock appreciation rights, only the shares of common stock actually issued as payment in connection with the exercise of such stock appreciation right shall be treated as issued under the plan, (3) to provide that, in the event that the Company distributes cash in lieu of issuing shares of common stock as payment upon the exercise of a stock appreciation right, the corresponding number of shares of common stock related to the stock appreciation right (or portion thereof) being exercised shall again be available for issue and (4) to change the name of the 2005 Long Term Incentive Plan to the “Amended and Restated 2005 Long Term Incentive Plan.”  The following summary of the Amended and Restated 2005 Long Term Incentive Plan is not intended to be complete, and you are encouraged to read the complete text of the plan, attached hereto as Appendix A, prior to voting.

Purpose

The purpose of the Amended and Restated 2005 Long Term Incentive Plan is to promote the Company’s growth and general prosperity by enabling us to grant to our employees and directors awards of stock options, stock appreciation rights, restricted stock, stock unit awards and performance awards. The Amended and Restated 2005 Long Term Incentive Plan is designed to assist the Company and its subsidiaries in attracting and retaining superior personnel for positions of substantial responsibility, to provide employees and directors with an additional incentive to contribute to the success of the Company and to align employees’ and directors’ long-term financial interests with those of our other shareholders.

Available Shares

Pursuant to the 2005 Long Term Incentive Plan, the maximum number of shares of common stock that may currently be issued under such plan (or with respect to which awards may be granted) is 500,000 shares (adjusted up from 250,000 shares of our common stock due to the two-for-one stock split effected in the form of a stock dividend on May 4, 2007). Under the 2005 Long Term Incentive Plan, the maximum number of shares of common stock that may currently be granted to any one person during any calendar year is 100,000 shares. Giving effect to currently outstanding grants under the 2005 Long Term Incentive Plan, as of February 29, 2008, a total of 102,114 shares were available for further grants or issuance under the plan.  Stock appreciation rights covering an aggregate of 27,686 shares have been issued subject to shareholder approval of the Amended and Restated 2005 Long Term Incentive Plan. In this Proposal 2, the board of directors is seeking shareholder approval to amend the plan to increase the maximum number of shares issuable under the plan.  Under the Amended and Restated 2005 Long Term Incentive Plan, the maximum number of shares of common stock that may be issued under the plan (or with respect to which awards may be granted) is 1,000,000 shares and the maximum number of shares of common stock that may be granted to any one person during any calendar year is 100,000 shares. Shares issued under the Amended and Restated 2005 Long Term Incentive Plan may be either authorized and unissued shares of common stock or shares of common stock issued and later acquired by the Company. Any shares of common stock subject to a stock option that are not issued prior to the time the award expires, or any restricted stock that is forfeited, will again be available for award under the Amended and Restated 2005 Long Term Incentive Plan.
 
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Pursuant to the 2005 Long Term Incentive Plan, each share of common stock related to a stock appreciation right granted under the plan is currently counted against the maximum number of shares of common stock issuable under the plan, regardless of whether the Company delivers cash or common stock as payment upon exercise of such stock appreciation right.  In this Proposal  2, the board of directors is also seeking shareholder approval to amend the 2005 Long Term Incentive Plan to clarify the proper method of calculating how the exercise of stock appreciation rights affects the number of shares of common stock available for issuance under the plan.  Under the Amended and Restated 2005 Long Term Incentive Plan, upon the exercise of a stock appreciation right, only the number of shares of common stock actually issued in connection with the exercise of such stock appreciation right (and not the corresponding number of shares of common stock related to the stock appreciation right (or portion thereof) being exercised) shall be treated as issued under the plan and, for the purpose of the limitation set forth in Section 1.6 of the plan on the number of shares of common stock issuable under the plan, the remaining number of shares of common stock related to such exercised stock appreciation right (or portion thereof) shall again be available for issuance under the plan.  In the event that the Company distributes cash in lieu of issuing shares of common stock as payment upon the exercise of a stock appreciation right, the corresponding number of shares of common stock related to the stock appreciation right (or portion thereof) being exercised shall again be available for issuance under the Amended and Restated 2005 Long Term Incentive Plan.

Persons Eligible To Participate

All of our employees and directors are eligible to participate in the Amended and Restated 2005 Long Term Incentive Plan; currently, we have nine directors and approximately 1,700 employees. Subject to the provisions of the Amended and Restated 2005 Long Term Incentive Plan, the compensation committee may grant awards in its sole discretion. Awards of incentive stock options, however, may be granted only to persons who are employees of the Company or of an affiliate whose employees qualify, under federal income tax law, to receive incentive stock options.

Administration

The compensation committee has broad powers under the Amended and Restated 2005 Long Term Incentive Plan to, among other things, administer and interpret the plan, establish guidelines for the plan’s operation, select persons to whom awards are to be made under the plan, determine the types and sizes of awards to be granted under the plan and determine other terms and conditions of an award. In addition, except as the plan otherwise provides, the committee also has the power to waive restrictions or limitations on the exercisability of awards and to accelerate and extend existing awards. The compensation committee also has the power to modify or amend the terms of existing awards.

Types of Awards

The Amended and Restated 2005 Long Term Incentive Plan provides for the grant of any or all of the following types of awards:

 
 
stock options (including incentive stock options and nonqualified stock options);
       
 
 
stock appreciation rights:
       
 
 
restricted stock awards;
       
 
 
stock unit awards; and
       
 
 
Performance awards.


 
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Stock Options. Under the Amended and Restated 2005 Long Term Incentive Plan, the committee may grant awards in the form of options to purchase shares of common stock. Options may be in the form of incentive stock options or nonqualified stock options. The committee will, with regard to each stock option, determine the number of shares subject to the option, the term of the option (which, for both incentive and nonqualified stock options, may not exceed ten years), the exercise price per share of stock subject to the option (which, for both incentive and nonqualified stock options, must not be less than the fair market value of the shares of common stock at the time of grant), the vesting schedule (which will be over a four year term, unless the committee determines otherwise), and the other material terms of the option. Any option granted in the form of an incentive stock option must satisfy the applicable requirements of Section 422 of the Internal Revenue Code of 1986, as amended.

The option price upon exercise shall be paid by the optionee, as the committee may in each case determine:

 
 
in cash;
       
 
 
by certified or cashier’s check;
       
 
 
in shares of our common stock held for at least six months;
       
 
 
by delivery of a copy of irrevocable instructions from the optionee to a broker or dealer, reasonably acceptable to the committee, to sell shares of common stock purchased upon exercise of the option or to pledge them as collateral for a loan from a third party and promptly to deliver to the Company the amount of sale or loan proceeds necessary to pay such purchase price; or
       
 
 
in any other form of valid consideration permitted by the committee in its discretion.

Restricted Stock Awards. The Amended and Restated 2005 Long Term Incentive Plan authorizes the committee to grant awards in the form of restricted shares of the Company’s common stock. The awards may be in amounts and subject to terms and conditions the committee may determine, provided that the shares will be restricted for a period of not more than ten years. During this period, the sale, assignment, transfer, pledge or other encumbrance of the shares is restricted, and the shares are subject to forfeiture to the Company in the event the awardee ends his position as an employee or director of the Company or one of our subsidiaries before the period of restriction expires. However, if an awardee’s employment or service ends due to his death, permanent disability or retirement, or termination without cause, or constructive termination after a change in control (as defined in the Amended and Restated 2005 Long Term Incentive Plan), his shares are not forfeited.

Stock Appreciation Rights. The Amended and Restated 2005 Long Term Incentive Plan also authorizes the committee to grant awards in the form of stock appreciation rights. A stock appreciation right represents the right to receive payment in cash, the Company’s common stock or a combination of cash and common stock in an amount equal to the excess of the fair market value (as defined in the Amended and Restated 2005 Long Term Incentive Plan) of a specified number of shares of our common stock at the time the right is exercised over the exercise price of such right at the time it was granted (which may not be less than 100% of the fair market value (as defined in the Amended and Restated 2005 Long Term Incentive Plan) of the same number of shares of our common stock at the time the right was granted). The committee may determine fair market value based on the average reported sales price for common stock over a period specified by the committee or the reported sales price as of a specified date. The committee has the authority to designate the terms and conditions of stock appreciation rights granted under the Amended and Restated 2005 Long Term Incentive Plan, which terms may differ from one grant to another, although rights may not expire more than ten years from the date of grant. All the Company’s employees and directors are eligible to receive stock appreciation rights, and, as a condition to receiving an award, each awardee must enter a written stock appreciation rights agreement with our Company.  Subject to shareholder approval of the Amended and Restated 2005 Long term Incentive Plan, on March 1, 2008 the committee awarded 27,686 stock appreciation rights to certain directors, officers and employees of the Company.

Stock Unit Awards. The committee may also grant stock unit awards under the Amended and Restated 2005 Long Term Incentive Plan. Awards of stock units are denominated in shares of common stock, but may be paid either in shares of common stock or cash, as the committee determines. The committee has the authority to designate the terms and conditions of stock unit awards granted under the Amended and Restated 2005 Long Term Incentive Plan, which terms may differ from one grant to another, although awards may not expire more than ten years from the date of grant. All the Company’s employees and directors are eligible to receive these awards, and, as a condition to receiving an award, each awardee must enter a written stock unit award agreement with our Company.

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Performance Awards. The Amended and Restated 2005 Long Term Incentive Plan also authorizes the committee to grant performance awards. These awards are divided into two categories:

 
 
performance shares, which include the right to receive shares of our common stock, restricted stock or cash of equal value (or any combination of these as determined by the committee); and/or
       
 
 
performance units, which include the right to receive a fixed cash payment, shares of our common stock or restricted stock (or any combination of these as determined by the committee).

The committee can grant performance awards for no cash consideration or for any other consideration required by law or specified at the time of the grant. Each performance award will have its own terms and conditions (determined and modified at the committee’s discretion), which can include provisions establishing the performance period, the performance criteria to be achieved during a performance period and the maximum and minimum settlement values. These awards may be valued according to the fair market value of our shares or any method chosen by the committee. Performance awards may be paid in cash, shares of our common stock (including restricted stock) and/or other consideration. Achievement of the performance objective can constitute consideration as well. These awards may be paid in a single payment or in installments and can be paid at a specified date or upon attaining the performance objective, all at the committee’s discretion. All of the Company’s employees and directors are eligible to receive these awards, and, as a condition to receiving an award, each awardee must enter a written performance award agreement with our company.

Awards Granted to Certain Individuals and Groups

The number of awards that an employee or director may receive under the Amended and Restated 2005 Long Term Incentive Plan is at the discretion of the committee and therefore cannot be determined in advance.  The information required to be provided by Item 10(a)(2)(iii) of Schedule 14A is set forth collectively in the Director Summary Compensation Table and the table regarding Grants of Plan Based Awards, in each case as set forth herein.

Termination of Awards

Awards of options granted under the Amended and Restated 2005 Long Term Incentive Plan may terminate early upon the death, disability, or termination of awardee’s employment. If an awardee’s employment is terminated for cause, the awardee’s awards (other than restricted stock that has already vested) will automatically expire on the termination date.

Compliance With Securities Laws

No awards may be granted under the Amended and Restated 2005 Long Term Incentive Plan unless we comply with applicable securities laws and list our shares of common stock granted by awards with the New York Stock Exchange. With regard to any shares that we grant under the Amended and Restated 2005 Long Term Incentive Plan through options or restricted stock, the Company’s management plans to register these shares under the federal securities laws and list them with the New York Stock Exchange.

Transferability

Awards granted under the Amended and Restated 2005 Long Term Incentive Plan (other than restricted stock that has fully vested) cannot be transferred except by will or the laws of descent and distribution, or with respect to nonqualified stock options, by the terms of a qualified domestic relations order. Incentive stock options awarded under the Amended and Restated 2005 Long Term Incentive Plan may be exercised during the life of an optionee only by the optionee or his legally authorized representative. The committee, in its discretion, may permit nonqualified stock options to be transferred to members of the awardee’s immediate family, trusts for the benefit of immediate family members, and partnerships in which immediate family members are the only partners, but only if there is no consideration for the transfer.

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Acceleration of Awards

The committee may accelerate the exercisability or other vesting of any award at any time. Awards granted under the Amended and Restated 2005 Long Term Incentive Plan will vest in full immediately if the Company experiences an actual or a threatened change in control (as determined by the committee in its sole discretion).

Term

The Amended and Restated 2005 Long Term Incentive Plan terminates on May 9, 2015. No award will be granted under the Amended and Restated 2005 Long Term Incentive Plan after that date.

Summary of Certain Material Federal Income Tax Consequences of Awards

The following is a limited discussion of certain of the material federal income tax consequences of awards under the Amended and Restated 2005 Long Term Incentive Plan. No attempt has been made to comment on all relevant tax matters related to the Amended and Restated 2005 Long Term Incentive Plan or those dependent upon the particular circumstances of a recipient of an award. The summary is based on current provisions of the Internal Revenue Code of 1986, as amended, (the "Code") regulations thereunder, administrative rulings and court decisions, all of which are subject to change (possibly retroactively). The summary does not address state, local, or foreign income tax considerations, federal income tax considerations of non-U.S. persons or federal gift and estate considerations.

Incentive Stock Options. The Company generally will not be entitled to a compensation deduction for federal income tax purposes with respect to the grant or exercise of an incentive stock option or upon the disposition of common stock received upon exercise of an incentive stock option. No taxable income will generally be realized by an optionee upon the grant or exercise of an incentive stock option (other than alternative minimum tax consequences, if any), and an optionee will generally recognize long-term or short-term capital gain upon disposition of common stock received upon exercise of an incentive stock option, depending upon the length of time the optionee has held the common stock before disposition. If, however, an optionee disposes of common stock acquired upon exercise of an incentive stock option when the shares have not been held by the optionee for more than one year after their issuance and two years after the date of grant of the incentive stock option, the optionee will realize ordinary income and the Company will be entitled to a compensation deduction, subject to certain limitations, with respect to the lesser of (i) the excess of the fair market value of the shares on the date of exercise over the option exercise price and (ii) the excess of the amount realized on the disposition of the shares and the optionee’s adjusted basis in the shares. Certain special rules apply if an incentive stock option is exercised by tendering our stock.

Nonqualified Stock Options. The Company will generally be entitled to a compensation deduction with respect to nonqualified stock options granted under the Amended and Restated 2005 Long Term Incentive Plan upon their exercise and in an amount equal to the excess of the fair market value of the common stock issued upon exercise over the exercise price if any. Such excess will generally constitute ordinary compensation income to the optionee for the year of exercise. Any appreciation or depreciation in the fair market value of those shares after the exercise date of the option will generally result in capital gain or loss to the option holder at the time he or she disposes of those shares, subject to short-term or long-term characterization depending on the holding period of the shares.

Restricted Stock Grants. The Company will generally be entitled to a compensation deduction with respect to restricted stock grants under the Amended and Restated 2005 Long Term Incentive Plan when the shares are “substantially vested” and in an amount equal to any excess of the fair market value of the shares at the time of vesting over any amounts paid for the shares. Such excess will generally constitute ordinary compensation income to the holder for the year in which the shares become “substantially vested.” The shares will become “substantially vested” as of the first date (the “vesting date”) the holder’s interest in the shares is no longer subject to a substantial risk of forfeiture or such shares are transferable free of any substantial risk of forfeiture. Dividends paid with respect to restricted stock prior to the lapse of restrictions applicable to such stock will be taxable as compensation income. A holder may, however, elect, pursuant to Section 83(b) of the Code, to report any excess of the fair market value of the shares on the date of grant over the amount paid, if any, for the shares as ordinary income for the taxable year of the grant. If such an election is made, dividends will not be treated as compensation income but rather as dividend income. In such case, the Company’s corresponding deduction is limited to such amount and required to be taken only in the taxable year of the grant. To be effective, the Section 83(b) election must be filed with the Internal Revenue Service within 30 days after the date the shares are transferred to the holder.

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Stock Appreciation Rights, Stock Unit Awards and Performance Awards. The Company will generally be entitled to a compensation deduction with respect to stock appreciation rights, Stock Unit Awards and Performance Awards granted under the Amended and Restated 2005 Long Term Incentive Plan in an amount equal to the fair market value of the cash, shares or other property delivered at exercise, receipt or vesting and which amount shall be treated as ordinary income to the holder at such time (less any amount paid for the award). See the discussion of Section 162(m) of the Code below.

Code Section 162(m). Notwithstanding the foregoing, Section 162(m) of the Code denies the Company a deduction with respect to the aggregate compensation of certain covered employees to the extent a covered employee’s aggregate compensation for any taxable year exceeds $1,000,000. Covered employees include the Company’s chief executive officer and its four other highest compensated officers for the applicable taxable year. Compensation resulting from the grant, exercise or disposition of awards is potentially subject to the Code Section 162(m) limitation. Certain “qualified performance based compensation” (“QPBC”) is excepted from the Section 162(m) limitation, however. Incentive stock options granted under the Amended and Restated 2005 Long Term Incentive Plan should qualify for the QPBC exception. Additionally, nonqualified stock options, Stock Appreciation Rights, and Performance Awards granted under the Amended and Restated 2005 Long Term Incentive Plan should so qualify, since their exercise prices are required by the Amended and Restated 2005 Long Term Incentive Plan to be at least equal to the fair market value of the underlying common stock on the date of grant. Restricted Stock Grants and Stock Unit Awards that may be subject to the attainment of performance measures but that do not meet the requirements of Section 162(m) of the Code will not qualify as QPBC and, in such event, would be subject to Section 162(m) deduction restrictions. When applicable, the Company presently intends to use its best efforts to limit awards to those qualifying for the QPBC exception. Nevertheless, the Company may issue awards that do not so qualify. In such case, all or part of the compensation deduction otherwise available to the Company will be denied and the Company’s after-tax cost of the Award will increase.

Internal Revenue Code Section 409A. Section 409A of the Code imposes new constraints on nonqualified deferred compensation, and some awards under the Amended and Restated 2005 Long-Term Incentive Plan may be subject to these new rules. Failure to comply with the new rules under Section 409A may result in the early taxation of deferred compensation and the imposition of a 20% penalty. Notwithstanding anything in the Amended and Restated 2005 Long-Term Incentive Plan to the contrary, if any provision or award under the plan would result in the imposition of an applicable tax under Section 409A and related regulations and pronouncements, that plan provision or award may be reformed to avoid imposition of the applicable tax and no action taken to comply with Section 409A shall be deemed to adversely affect the participant’s rights to an award.

Shareholder Approval

The Amended and Restated 2005 Long Term Incentive Plan is subject to shareholder approval at the Annual Meeting. Without this shareholder approval, no additional awards will be granted under the 2005 Long Term Incentive Plan, but awards outstanding under the plan will continue in accordance with their terms. If the Amended and Restated 2005 Long Term Incentive Plan is not approved by the shareholders, the stock appreciation rights awards that the compensation committee has awarded under the plan that are contingent upon shareholder approval of the plan shall be null and void. The affirmative vote of the holders of a majority of the total number of shares voting “FOR” or “AGAINST” the plan at the meeting, assuming a quorum is present, is required for approval of the plan.

The Board of Directors recommends you vote “FOR” approval of the amendments to the 2005 Long Term Incentive Plan described above.


 
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ADOPTION OF EMPLOYEE STOCK PURCHASE PLAN

In May 2008, the board of directors authorized the adoption of the AZZ incorporated Employee Stock Purchase Plan (the “Purchase Plan”) and reserved 500,000 shares of the Company’s common stock for issuance thereunder, subject to the approval of the shareholders of the Company.  No options have yet been granted under the Purchase Plan. The purpose of the Purchase Plan is to provide employees (including officers) of the Company and certain of its majority owned subsidiaries with an opportunity to purchase common stock from the Company through payroll deductions.  The essential features of the Purchase Plan are outlined below.  The description that follows, however, is only a summary and is qualified in its entirety by reference to the full text of the Purchase Plan, which is attached as Appendix B to this Proxy Statement.

Offering Period

Offerings under the Purchase Plan have a duration of twenty-four months and commence on the Monday immediately following the completion of the first payroll period ending in September and March of each year, unless otherwise specified by the board of directors.  Each offering period is composed of four six-month exercise periods.  The board of directors has the power to alter the duration of an offering period with respect to future offerings if announced at least fifteen days prior to the scheduled beginning of the first offering period to be affected.

Grant and Exercise of Option

On the first day of an offering period (the “Enrollment Date”), the participant is granted an option to purchase on each exercise date during such offering period up to a number of whole shares of the common stock determined by dividing 10% of the participant's Compensation (as defined in the Purchase Plan) by the lower of (i) 85% of the fair market value of a share of the common stock on the Enrollment Date or (ii) 85% of the fair market value of a share of common stock on the exercise date.  The number of shares subject to such option shall be reduced, if necessary, to maintain the limitations with respect to a participant's ownership of stock and/or options to purchase stock possessing 5% or more of the total combined voting power or value of all classes of stock of  the Company or any subsidiary, and to restrict a participant's right to purchase stock under the Purchase Plan to the maximum amount allowed under the Code which is currently $25,000 in fair market value of such stock (determined at the time the option is granted), for each calendar year in which such option is outstanding at any time.  Unless the employee's participation is discontinued, his option for the purchase of shares of common stock will be exercised automatically at the end of each six month exercise period within the offering period at the applicable price.  To the extent an employee's payroll deductions exceed the amount required to purchase the shares subject to option, such excess amount shall be held in such participant's account for the next exercise period, unless such participant has withdrawn from the offering period or unless such offering period has terminated with such exercise date, in which case such amount shall be returned to the employee without interest.

Shares Available Under the Purchase Plan

The total number of shares of common stock that are issuable under the Purchase Plan is 500,000 shares.

Eligibility and Participation

Any employee who is employed by the Company or its participating majority owned subsidiaries for at least twenty hours per week (customarily) and more than ninety days prior to such employee’s election to participate in the Purchase Plan is eligible to participate in offerings under the Purchase Plan.  Employees become participants in the Purchase Plan by delivering to the Company a subscription agreement authorizing payroll deductions within the specified period of time prior to the commencement of each offering period.  Currently, the Company and its majority owned subsidiaries have approximately 1,700 employees eligible to participate in the Purchase Plan.  The board of directors has the sole discretion to designate majority owned subsidiaries of the Company for participation in the Purchase Plan, and the board of directors may amend this designation at any time in its sole discretion.

 
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No employee is permitted to purchase shares under the Purchase Plan if such employee owns five percent (5%) or more of the total combined voting power or value of all classes of shares of stock of the Company (including shares that may be purchased under the Purchase Plan or pursuant to any other options).  In addition, no employee is entitled to purchase more than the maximum amount of shares allowed under the Code which is currently $25,000 worth of shares (based on the fair market value of the shares at the time the option is granted) in any calendar year.

Purchase Price

The price at which shares of common stock are sold under the Purchase Plan is eighty-five percent (85%) of the fair market value per share of common stock at either the beginning of the offering period or at  the end of each six-month exercise period, whichever is lower.

Payroll Deductions

The purchase price of the shares of comm